The population in advanced countries is growing at low rates and aging at the same time. Combination of an aging population combined with low population growth rates can have important social and economic policy implications. This may have important effects on economic growth, heath care, pension system and the standard of living in advanced countries.
Population in OECD countries is expected to decrease. The population growth in 2010 in advanced countries was 0.72 per cent and 0.66 per cent in 2011 based on this report in 2011 the total fertility rate were 1.6% and 1.89% in Canada and the U.S. respectively.
When considering the dependent inhabitants, the youth population (under the age of 15) as a per number of total population in OECD countries is forecasted to decrease from 18.6 per cent in 2010 to 15.9 per cent in 2050, according to the OECD Fact book 2014 issue, both Canada (16.5 per cent to 15.6 per cent) and the U.S. (19.8 per cent to 18.0 per cent) are expected to show similar trends. Again, the elderly population (age 65 and over) of OECD countries is forecasted to increase from 14.7 per cent in 2010 to 25.3 per cent in 2050.
The same trend for both Canada (14.2 per cent to 24.6 per cent) and the U.S. (13.1 per cent to 20.9 per cent) during the same period. Therefore, the OECD countries are forecasted to have an aging population with Canada and the U.S. predicted to have lower rates than the OECD level.
An aging population with higher life expectation combined with a shrinking working population may have negative effects on the pension system of the OECD countries. When fewer workers support an aging population that has high life expectancy, it puts increased burden on the workers to support the pension system of the OECD countries. While the pension system may be under stress due to this potential problem, the aging population may have access to other types of income to support themselves like housing and financial wealth, which may ameliorate the potential pension crisis faced by the OECD countries. Again, a shrinking working age population and low population growth would mean that there would be fewer workers and consumers, leading to lower investment and manufacturing of goods and services. Also, a potential increase in investment in health care services may require the transfer of investments from economic growth generating activities. The overall effect may be dampened economic growth in OECD countries.
Besides, improvements in the quality of life and access to better healthcare services have significantly increased life expectancy in OECD countries. As people are healthier, they can remain in the work force for a longer time, and potentially stretch the working age population. Also, when people are healthier and working till an older age, they would purchase goods and services for a longer time. Then, the demand for goods and services would not necessarily decrease due to an aging population. This would maintain or improve the economic growth of OECD countries, and decrease the potential burden of pension and healthcare services.
Another way to increase population growth is to create incentives for people to have more children. In Canada, the Universal Child Care Benefit (UCCB) is used by the federal government to financially help families with children. Again, developed countries like Singapore have Baby Bonus Scheme to incentivize people to have more children. A combination of benefits that include cash gifts and tax rebates are used to encourage people to have more children. Therefore, various programs that encourage people to have more children and increase the fertility rate could lead to natural increase in the population level in OECD countries.
Low population growth and an aging population pose certain challenges to OECD countries. A shrinking labor force may be partially compensated by automation and increased use of robots in manufacturing processes. However, it would still lead to lower consumer demand of goods and services.
There are various policies that OECD countries use to solve this problem. Policies that encourage people to have more children, immigration to OECD countries particularly by young and skilled people, and an expansion in the working age that allow people to stay in the work force for a longer time would alleviate the potential problems that OECD countries face.
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