The Western world was increasingly facing a shortage of workers, which would lead to declining growth rates and potentially a loss in standard of living in many countries.
That was the dire prognosis of the latest Employment Outlook published on July 9 by the Organisation for Economic Co-operation and Development (OECD), an international NGO comprising 38 primarily Western countries.
The economists foresaw an “unprecedented” fall in economic activity. On average, economic growth in the West may drop by 40 per cent, bringing the average annual GDP growth rate down from 1.0 per cent to just 0.4 per cent.
In many European countries, the effects would be even more severe. Germany may grow by between 0.1 and 0.3 per cent per year only. The economies of Austria and Italy – countries with very generous pension systems – may even shrink, the report stated.
The authors of the 309-page document warned of a “demographic crunch”. The economic rise of the West in the past decades was based on a constant growth of the number of working people. Now that figure was under pressure from two sides.
On the one hand, fertility rates have collapsed throughout the developed world. In the OECD countries a woman had 3.4 children on average until the mid-1960s.
Now this value had come down to only 1.5 children with South Korea (0.7 children per woman) a sad record holder. In Germany, a woman will have an average 1.4 children over the course of her life, the report said.
On the other hand the “baby boomers” – people born during the years of high birth rates in the between 1946 and 1964 – were now retiring en masse.
On average in the OECD, the old-age dependency ratio, that of individuals aged 65 years and above to the working-age population, was expected to rise to 52 per cent by 2060, a tripling compared to 1980.
In some countries, it may even reach 70 per cent. Consequently, there were fewer and fewer workers available to generate the income necessary to support an ever increasing number of unproductive old people.
“The impact of ageing populations threatens the very engine of economic growth, which depends on human resources to produce output. The economy of OECD countries has entered a new era, where the challenge shifts from a shortage of jobs to a shortage of workers,” the report stated.
The OECD economists proposed several countermeasures. Efforts to raise the fertility rates ranked low on the list. Indeed, such initiatives have previously proven rather ineffective and would take too long anyway to meaningfully impact the numbers of workers, the authors said.
Rather, they proposed increased labour migration as a mitigating measure, paired with greater labour force participation of women and – most importantly – old people.
As retirees enjoyed ever better health and most jobs no longer required hard physical labour, making sure they remained economically productive “is key to boosting the workforce as well as reducing the burden of younger generations,” the report said.
“Profound demographic changes are making a significant slowdown in living standards growth a tangible risk – but not an inevitable one,” the OECD report authors concluded.
