Demographics are shifting: The number of people globally age 65 and older will soon eclipse the number who are five years old and younger, according to recent U.S. Census Bureau data. This shift is being met with economic anxiety in many quarters, with theories that an aging population is a threat to economic prosperity. Some argue that an older workforce will be less productive, lacking the dynamic skills of younger workers. Others speculate that an older population will create an excess of savings over investment, leading to slow growth and secular stagnation. Others say that a wave of retirees is likely to take important skills out of the marketplace.
Our recent research suggests that much of this panic may be overblown. In our empirical work, we find no evidence that countries with rapidly aging populations are experiencing slower growth. Many, such as Germany, are growing rapidly instead.
As our baseline measure for population aging, we studied gross domestic product (GDP) per capita from 1990 to 2015 — the period commonly viewed as the beginning of the adverse effects of aging in much of the advanced world. Within that period, we compared the change in the ratio of the population above age 50 to those between the ages of 20 and 49. We included 169 countries in the sample.
The results were surprising. Even when we control for initial GDP per capita, initial demographic composition, and differential trends by region, there is no evidence of a negative relationship between aging and GDP per capita. On the contrary, the relationship is significantly positive in many specifications.
Our findings raise new questions: What can explain these patterns in the data? What explains the vibrancy of many aging societies?
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Automation Technology Is Easing the Effects of Demographic Changes
The most plausible explanation is that this counterintuitive finding reflects the rapid adoption of automation technologies in countries with more pronounced demographic changes. In other words, technology not only might be able to offset potential negative effects of aging populations, it already is. The post-1990s saw the arrival of a range of labor-replacing technologies that help companies automate the production process. The most recent of these are robotics and artificial intelligence (AI).