Demographic transitions are particularly significant in this context. In the last several decades, the world population has undergone farreaching evolution. While trends vary across regions, these changes have touched almost all countries. The world population reached 8 billion in November 2022. It is projected to grow to around 8.5 billion by 2030, 9.7 billion by 2050, and could peak at around 10.4 billion in the 2080s. SubSaharan Africa is expected to contribute more than half of the anticipated global population increase by 2050, with the least developed economies growing the fastest.
As the world population ages, so does the workforce. The number of people aged 65 and over is expected to more than double, increasing from 761 million in 2021 to 1.6 billion by 2050. The number of those aged 80 and above is growing even more rapidly, rising from 155 million in 2021 to 459 million by 2050. Regions such as North Africa, Western Asia and Sub-Saharan Africa are expected to see the fastest growth in their older populations over the next three decades. Currently, Europe and North America have the highest proportion of older individuals.
For comparison, in 1980, about 15% of residents in Europe’s ten oldest populations (in order, starting with the oldest: Sweden, Germany, Austria, the United Kingdom, Norway, Belgium, Denmark, France, Switzerland and Luxembourg) were aged 65 or older. By 2021, this proportion jumped above 20% in all ten countries and is expected to reach around 30% by 2050. Although Japan had the world’s oldest population in 2021, it is anticipated that China, Hong Kong SAR and South Korea will surpass it before 2050. Consequently, the world’s oldest populations will shift geographically from Europe towards East and SouthEast Asia, with the latter expected to include five of the ten countries with the oldest populations by 2050.
An ageing population is challenging countries in many ways. Governments are increasing their budgets for social spending and healthcare. In economies where the working-age population is shrinking, the cost of labour could increase as a result of there being fewer available workers. Certain industries face skills shortages, increasing the wage premium for skilled labour.
At the same time, in countries with aging populations, the pressure on state pension systems is increasing. We have recently seen waves of intense discussions, if not protests, in countries such as France, Germany, Italy and Belgium over proposed pension reforms. France, in particular, faced a highly charged situation, with over a million people taking to the streets to protest the government’s proposal to raise the retirement age from 62 to 64.
The situation is particularly challenging in countries where the elderly population is increasing while the working-age population is shrinking. This demographic shift puts significant strain on pension systems quite simply because there are fewer workers contributing to pension pots and more retirees drawing from them.
One way to assess the balance between the working-age population and the elderly population is by calculating the old-age dependency ratio. This measures the number of elderly people relative to those of working age and its evolution, broadly speaking, depends on mortality rates, birth rates and migration.
In 2023, Japan had the highest old-age dependency ratio of 54.5%, meaning there were 54.5 individuals aged 65 and over for every 100 persons of working age. Other countries with high dependency ratios included Finland (43.1%), Germany (41.4%), Italy (40.9%), Greece (38.7%) and France (38.4%). In contrast, Latvia and Lithuania had the lowest ratios, at 3% and 3.6% respectively. On average, the ratio among all OECD countries was 33.1%. However, this average is expected to increase significantly by 2050, reaching 52.7%. Some countries are expecting to face dramatic increases, with the ratio in Japan jumping to 80.7% and exceeding 70% in Korea, Spain, Greece, Italy and Portugal.
Advances in healthcare, nutrition and living standards have led to longer life expectancy across many countries. Improved medical treatment, vaccines and healthcare services have significantly reduced mortality rates and extended the average lifespan. According to the United Nations Population Division, global life expectancy at birth for both sexes has increased from 46.5 years in the mid-1950s to 71.7 years in 2022 and is projected to reach 77.3 years by 2050. Between 1950 and 2000, life expectancy in Asia rose by more than 25 years, narrowing the gap with North America and Europe from over 20 years to less than 10 years. By 2050, Asia is expected to nearly match the Western world’s life expectancy, approaching 80 years. Africa, however, is the only region forecast to lag behind the rest of the world in life expectancy by 2050s.
We live longer but have fewer children. Economic development, higher educational attainment, increased labour force participation by women and the widespread use of contraception are among the factors contributing to lower birth rates across the world. In the 1960s, the average number of births per woman was around five. By 2021, this number had decreased to 2.3 births per woman. This decline is expected to continue, with the global birth rate forecast to fall to 2.1 births per woman by 2050. This happens to be exactly the ‘replacement level’ necessary for a population to replicate itself from one generation to the next.
Even though birth rates vary significantly across the regions at present, they are expected to drop noticeably in almost all regions by the 2050s. In Sub-Saharan Africa, birth rates have historically been the highest. In 1950, women in this region typically had around seven children, but by 2021, this number had dropped to just under five. Estimates suggest the rate will continue to decrease, potentially reaching about three children per woman by 2050.
In North Africa and Western Asia, a similar downward trend is evident. Back in 1950, women in these regions had on average nearly seven children, but by 2021, this had reduced to just under three. By midcentury, it is expected to fall even further, approaching 2.5 children per woman. Central and South Asia have also experienced a dramatic shift. From nearly six children per woman in 1950, the rate fell to just over two by 2021, with the prognosis being for a slight further decrease by 2050. Latin America and the Caribbean have seen their birth rates halve over the past seventy years. From nearly six children per woman in 1950, the rate had dropped to two by 2021 and is anticipated to dip slightly more by 2050.
Europe and North America already have some of the lowest fertility rates. European women had around 1.5 children on average in 2021, with similar figures expected to continue through to 2050. In North America, the rate was slightly higher, at 1.6, but as with Europe, it is expected to remain steady at that rate.
As the workforce ages and birthrates fall, demographics are set to undergo major changes in the coming decades across the world. This will put increased pressure on the labour market, making it harder to find talent, let alone attract and retain it.
How governments can manage to keep older workers in the workplace, whilst providing adequate opportunities for the younger generation to find ways into it, is a major challenge across the globe. A potentially even bigger one is to work out just how the younger generations will make enough to support the ever-growing older population. It will be vital for employers to keep a watch over these trends and the governmental initiatives they engender in the countries in which they operate