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Aging Will Reduce Economic Growth Worldwide in Coming Decades

Aging Will Reduce Economic Growth Worldwide in Coming Decades
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The world is getting older, fast. And as more people retire each year, fewer working-age people will be there to replace them. Bond rating agency Moody’s says that will lead to a decline in household savings; reducing global investments - which in turn, will lead to slower economic growth around the world. But experts say it’s not too late to mitigate the economic impact of the world’s aging populations.

In Japan - there are special playgrounds for the elderly.

In Italy - dance classes for seniors are part of the “good life.”

And in Germany - the rapid pace of retirements has become a bigger issue than unemployment.

They are the world’s "Super Aged" nations - the term for countries where at least 20 percent of the population is 65 years or older.

“The demographic transition is upon us now and its progressing, by historical standards, quite rapidly," said Elena Duggar, head of Moody's Sovereign Risk Division..

In five years - six more countries will join the ranks of the super-aged. And by 2030 - that number will rise to 34.

“That will translate into reductions in labor supply," Duggar said. "At the same time aging means that the household savings rates will go down, which will negatively impact on investment. Both trends put together would mean that aging will have a significant negative impact on global growth."

Business research group, the Conference Board - says aging could shave as much as one percent off global growth in the next 10 years. Ignoring the coming changes is risky says economist Fariborz Ghadar - author of "Global Tectonics - What Every Business Needs to Know."

“Economic growth rates will slow down, jobs will not be available for the young, there is going to be conflict both internally in certain countries, externally.

There’ll be backlash against immigrants and that’s not the kind of world we really want," said Ghadar.

But the solution may be as close as a nation's borders.

"See - the largest addition to the U.S. population is by immigration, it is not by number of children," said economics professor Kishore Kulkarni.

In the U.S. - the average birth rate is 1.9 children for every woman - an average bolstered by higher birth rates in immigrant families. Fariborz Ghadar says the trend is obvious when you consider that the birth rate for Hispanic families in the U.S. is 2.3 children.

“We are turning Hispanic. And in fact, what I normally tell my audiences, if you want somebody to take care of you when you’re 90 - you better speak Spanish," he said.

While consumer buying patterns will change as populations age, Kishore Kulkarni believes targeted career training and productivity gains through technology could offset the decline in workers.

"It is a misalignment of demand rather than a total and a drastic change in the demand. And it is a challenge which we can easily accept and tackle as it comes to us," he said.

Kulkarni adds that aging will be less of a challenge in countries where elders are seen as assets rather than liabilities. But nearly all the experts say young workers, in the future, will work longer and retire later than seniors today.