An interesting report I saw by McKinsey Global Institute has driven me to write this blog post, and is an indication as to what the future holds in my opinion. An ageing population often leads to a decline in the working age population, this may be ‘fine’ in some cases, but in essential industries such as healthcare, elderly care, and other public services, this translates to a lower quality of life for everybody. This also hampers productivity, an aging population and a decrease in the working-age population hamper productivity due to several factors:

• Labour Force Reduction: Fewer people are available to work, leading to a decline in overall economic output.
• Increased Dependency Ratio: More retirees mean fewer workers supporting more dependents, straining public resources.
• Skill Shortages: Retirements cause loss of skills and knowledge, slowing productivity as younger workers take time to gain experience.
• Higher Healthcare Costs: More elderly individuals lead to increased healthcare expenses, diverting funds from productive investments.
• Economic Focus Shift: Economies may focus more on elderly care rather than sectors driving innovation and growth.
• Lower Savings and Investment: Older populations save less, reducing capital for productive investments.

Addressing these challenges requires policies promoting higher birth rates, encouraging immigration, investing in automation, and retraining workers. This requires time and investment, but nonetheless this gap still needs immigration. Interestingly (but not so surprising), however, with upcoming elections, we are seeing another resurgence of anti-immigrant rhetoric and policy, particularly here in the UK, which can only make matters worse. Certain jobs can become more automated and become more capital intensive, but some need a human touch. For example, the staff needed to look after our own ageing population in the health and care sector? Not only do we lack the working age population to fulfil the shortages, but a native-born brit is not likely to take the roles which are required; Statistics show that native-born Brits are less likely to take jobs such as residential care for the elderly, while immigrants are more likely to fill these roles. In 2022, nearly one in five workers born in non-EU countries worked in the health and care sector, with a significant portion employed as care workers.

The reason I said that this is a precursor of what is to come, is the shift of global demographics. The working-age population in Africa is increasing in comparison to Europe and the USA. Africa’s working-age population is expected to grow by 450 million people, or close to 70 percent, by 2035.

In contrast, Europe’s working-age population is projected to decrease by about 13.5 million, or 4 percent, by the end of this decade. The decline is particularly notable in countries like Germany, Italy, and Poland, where substantial reductions in the labour force are expected due to aging populations​ (McKinsey & Company)​. Similarly, the United States is experiencing slower growth in its working-age population, with increasing challenges in filling job vacancies as the workforce ages and growth rates decline​ (McKinsey & Company)​. This presents opportunities and challenges, an opportunity I find interesting for example is, the demand for ‘greener’ goods and services in the west, particularly electric vehicles and renewable energy, as well as the infrastructure needed for such shifts, requires much of the raw materials found most abundant in Africa. With effective social and economic policy, this creates an immense opportunity for everyone. This scenario underscores the importance of strategic investments in education, healthcare, and infrastructure in Africa to harness its demographic potential, and could really create a night & day change in many of its economies!

On the other hand, Europe and the USA may need to focus on automation, immigration, and retraining programs to mitigate the impacts of an aging workforce.

This presents challenges, but also opportunities, for example:

Experience and Knowledge:

• Older individuals bring valuable experience and can mentor younger workers, transferring skills and institutional knowledge that enhance overall productivity​ (World Bank)​​ (McKinsey & Company)​.

Growth in Certain Industries:

• Increased demand for healthcare, pharmaceuticals, and elderly care services drives growth in these sectors, creating opportunities for businesses to innovate and expand​ (Migration Observatory)​​ (CIPD)​.

Volunteerism and Civic Engagement:

• Retirees often engage in volunteer work, strengthening community organizations and supporting social services, contributing to social cohesion​ (McKinsey & Company)​.

Market Expansion:

• Businesses can innovate products and services tailored to seniors, such as healthcare and wellness products, expanding markets and creating new economic opportunities​ (CIPD)​​ (GOV.UK)​.

Stable Consumer Base:

• Older adults provide a reliable consumer base with steady spending power on healthcare, housing, and leisure, supporting steady revenue streams for businesses​ (Migration Observatory)​​ (CIPD)​.

Increased Savings and Investments:

• Higher savings rates among older populations boost available capital for investments, benefiting financial markets and providing funding for business expansion and innovation​, which creates an interesting global landscape given my points on Africa, something am I incredibly excited to see! (McKinsey & Company)​​ (Migration Observatory)​.

Innovation in Aging-related Technologies:

• Demand for elder care drives technological advancements in fields such as medical devices, assistive technologies, and home automation, improving seniors’ quality of life and creating new economic opportunities​ (CIPD)​.

Employment Opportunities in Elder Care:

• The growing need for elder care services creates numerous job opportunities in healthcare and related fields, which is particularly beneficial in regions with high unemployment rates​ (GOV.UK)​​ (Migration Observatory)​.

Conclusion:

The demographic shifts we are witnessing globally are unprecedented and present both significant challenges and immense opportunities. An aging population in the West, coupled with a declining working-age demographic, threatens productivity, strains public resources, and increases healthcare costs. However, it also brings a wealth of experience, a stable consumer base, and potential for innovation in elder care technologies.

Conversely, Africa’s booming working-age population offers a reservoir of potential talent and growth. Strategic investments in education, healthcare, and infrastructure are crucial to harnessing this demographic dividend and transforming the continent’s economic landscape.