The birth of the old world

Writer Pinaki Das, Head of Thematic Research (Quintet Private Bank)

The aging of the global population represents an unprecedented challenge.

We’re all getting older. Over the last century, average global life expectancy has doubled to 73 years. The median age of the world’s population has also increased – from 20 in 1970 to 30 today. For the first time in human history, there are now more people over 60 than there are children under the age of five.

By 2050, the number of people older than 60 will double, while the 80+ population will triple. Social security systems risk buckling under such stress. Worker shortages could become widespread, leading to spiraling wage inflation that drives up the cost of products and services in a dismal cycle of increasing demand and shrinking supply – potentially decimating the global economy. 

Some might dismiss such concerns. We’ve heard this story before, they would argue, and the world has done just fine.

This time is different.

Developed nations such as Japan, Italy and Germany have long struggled to cope with aging populations. Today, however, every country in the world is experiencing growth in both the size and the percentage of its retirement-age population. By 2050, 80% of the global population aged 60+ will be living in developing nations. 

China for instance is home to more than 150 million people over the age of 65, more than the combined total populations of France and the UK. As has been well documented, China’s overall population is now declining – the first time that has happened since 1961, when widespread famine killed tens of millions – and it is rapidly aging. By 2050, 30% of the country’s population will be over 65, more than double the percentage today. Over the same period, its working-age population is expected to decrease by 23%.

Across much of the world, restrictive immigration policies are compounding the challenges posed by aging populations and associated labor shortages. In parallel, reshoring trends introduced in the wake of the pandemic – including in the EU, which is focused on creating a stronger regional manufacturing ecosystem – may succeed in protecting competitiveness but will also put further pressure on an already overstretched workforce. 

From the mid-1980s until the 2007 global financial crisis, the world experienced the “great moderation,” a period of sustained growth and low inflation. Similarly positive conditions returned followed the financial crisis until the 2020 pandemic. Today, amidst worldwide stagnation and increasingly serious demographic imbalances, some are asking: Is the long-term decline of the global economy an inevitability?

The short answer is no. Or at least not if policymakers recognize the urgent need to tackle a number of closely connected challenges. 

That includes by introducing serious public-pension reform, as well as training and education initiatives to increase total workforce participation. Easing immigration restrictions will likewise support global employment. Continued advancements in automation – coinciding with major strides in artificial intelligence, computing and robotics – will also help address worker shortages. Further innovation will allow more people to work later in their lives than is the case today, while incentivizing individual saving will mean that doing so will be a choice rather than a necessity. 

Meanwhile, China’s economic decline could help balance global supply chains and diversify risks. Other emerging markets – which can continue to access cheap labor and provide low-cost production – will clearly benefit, potentially supporting a return to “great moderation” conditions for at least another few decades. 

While massive investments in human capital and infrastructure, including long-term care, will unquestionably be required to sustain growth, all of this lies in the realm of the possible. But it remains to be seen if, as we all get older, we get wiser too.