In a clear warning, Piper Sandler identified slowing global population growth as “the most significant risk.” This change in demographic dynamics has serious implications for the stability and growth of the world economy.
A reduction in the population growth rate, especially among those of working age (15-64 years), is likely to cause significant economic challenges.
Reducing world population growth:
The world’s population growth rate has been declining since reaching its highest point in 1964. The number of people of working age reached its highest level in 1979 and since then its decline has played a major role in slowing economic growth around the world.
Piper Sandler says the world’s population is expected to peak around 2080, which is six years earlier than previously predicted.
Increase in the number of elderly and dependency ratios:
A critical issue identified is the increasing proportion of older individuals who are not working compared to the working age group. As the number of retirees increases relative to the number of workers, the financial responsibilities of the working group become heavier.
This change will put pressure on government pension programs, public health services and could lead to an increase in public debt if significant policy changes are not made. The United Nations estimates that the global proportion of elderly dependents will increase from 16% in 2024 to 32% in 2070.
Differences between regions:
The effects of slowing population growth will vary by location. Economically developed countries are likely to have more serious problems because of their high ratio of dependent elderly and large amounts of public debt.
Countries like Germany and Japan are known as places where the financial impact of an aging population will be particularly severe.
On the other hand, the United States is in a somewhat better situation, thanks to a lower percentage of elderly dependents and the possibility of increasing the working-age population through immigration.
Public debt and economic stability:
The growing percentage of elderly dependents is expected to cause an increase in the public debt. Developed countries, with their comprehensive social security systems, will come under severe financial pressure as they try to support a growing number of elderly people with fewer workers.
This situation could lead to an increase in public debt levels, which would pose a risk to the long-term stability of the economy.
Implications for politics and economics
Importance of political changes:
To address the economic risks arising from slowing population growth, it is important to implement policy changes.
The government should consider measures that improve work efficiency, promote higher birth rates and encourage work participation of older people. Without these changes, economic and financial challenges will worsen.
Immigration as a solution:
Immigration may represent an important step in reducing the number of people of working age in some areas. For example, the United States and Germany could overcome their demographic problems with well-thought-out immigration policies.
However, countries like Japan, with stricter immigration policies, will find it difficult to deal with demographic problems.
Emphasis on improving work efficiency:
With a shrinking workforce, it is important to focus on increasing work efficiency. Investments in technology, education and health care can help keep living standards stable despite a shrinking workforce.
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