The diagnosis of why societies are ageing is clear. The combination of lower fertility and increased longevity drives the change. The only surprise is that, at least for the next twenty -five years, 80% of the ageing of the population comes from reduced fertility. The other surprise is that the United Nations continues to insist that fertility decline will plateau.

The economic implications are clear. Our own prosperity depends on GDP per head. This in turn is driven by three factors. We need to know how many people are in each age group. The number in older age groups is growing. We then need to know the labour intensity in each group. How many people in each age group are participating in the workforce and how many hours they work. Finally, we need to know the productivity of those hours. The interplay is evident in Western Europe in the last 25 years. The age mix caused a decline of 0.3% in GDP per head. There were more older people. Labour intensity increased as more women and older people worked. This increased GDP per head by 0.4%. Finally, productivity improvements generated an increase in GDP by 0.8%.

The ageing population also increases the pressure on taxation. Increasing numbers of older people means increasing pension budgets. The ageing population puts increasing pressure on healthcare budgets. More and more people live with chronic diseases for longer.

The policy implications are defined. Governments all over the world are trying to improve fertility. This would, if successful, influence the age mix. Unfortunately not in the short run. It would be twenty five years before increased numbers of young workers arrived.

Governments should be encouraging labour participation. Women still do not participate in the workforce as much as men. This is particularly the case for older women. Individuals over 65 are living healthier, longer. They too need to be encouraged to work later in life.

The lure of AI is that it can solve the riddle of productivity.

Ageism as a Barrier To Growth

To succeed societies will have to rethink their attitudes towards age and ageing. Ageist stereotypes have not kept pace with healthy ageing. We may all become weak and decrepit but not until our late 70’s or 80’s. Attitudes towards older workers must change to generate economic growth. Societies that are less ageist today will have a headstart. Such societies focus more on group cohesion and harmony. These include countries such as Japan, India, Brazil and Korea. By comparison countries that are more individualistic will tend to be more ageist. These include the USA , Australia, South Africa, the UK , Ireland and Germany.

Sexism as a Barrier

The lack of equality operates in the home and at work. The division of childcare in the home can be a major determinant of how many children women choose to have. To have a successful career and a happy family life the social contract in the home has to change. Economic transfers to families do not seem to work. Hungary was at one point spending more money on encouraging babies than on its military. It did not change long run fertility.

Policies targeted at enabling women to have a successful career and children are more successful. That support starts within the family. According to the Generations and Gender Programme there are huge variations across countries. In Norway, Belgium and France men take the largest share of childcare compared to other countries. (Even in the best, Norway, men only account for 40% of effort). In Poland Lithuania and and Russia men do very little.

At work women who have children suffer in terms of income many years later. Women miss out on promotion whilst having children. When they return to work, they are more likely to work part time. Society and organizations have not enabled their careers. The World Economic Forum Global Gender Gap index places Nordic Countries in the top 10. Iceland, Norway and Finland taking the top three with the narrowest gap. The UK is ranked 15th, Spain 18th and the USA 43rd. Italy is one of the lowest ranked European countries at 85th alongside Hungary at 99th.

Racism As a Barrier

Migration could be one of the most direct drivers of GDP per head. Migrants tend to be young and healthy. In their first generation they will be more fertile. They would appear at first sight to be an ideal solution to growing GDP per head. Many countries in need of workers are attractive economically and socially to migrants. The social pressure against migration is however visible through the political system.

Some countries are still perceived as welcoming. In 2023, New Zealand, Sweden, Switzerland and Australia were the most attractive. This was amongst OECD countries and for highly skilled workers. The ranking is different for entrepreneurs with Canada, Sweden and Switzerland topping the list. The government is deliberately reducing the attractiveness of the USA.

The Dependency Ratio Problem

Having a greater and greater proportion of older people puts pressure on government budgets. The solution is clear. The age at which people are entitled to a state pension must rise with life expectancy. Ten European countries have already indexed pensionable age to life expectancy. These include Denmark where retirement age is expected to reach 70 by 2040. Italy, Greece, the Netherlands, Portugal and the UK all have indexed.

France has a problem. Francois Mitterrand reduced retirement age to 62. The state pension itself is one of the most generous in Europe. There is massive push back against a change. The result is that France has one of the lowest, post retirement, participation rates in Europe. 4.2% of people over 65 work compared to over 9% in the UK and 25% in Japan.

The Healthcare Problem

The policy is clear. Health systems must move from treating sick people to preventing people from getting sick. The macro and micro economic analysis shows this to be the only long run solution. Healthier older people reduces costs and increases the pool of potential workers. Unfortunately few countries are successfully making the transition. COVID distorted the numbers. Pre-COVID Germany had 7.9% of its healthcare budget dedicated to prevention. The EU average was only 5.5%. The UK was at 5.2%.

The Social Contract

Economic Growth requires redefinitions of many social contracts within our Societies, within Couples, and within Organizations. Politicians will need to find the way to make this happen, if they can.