from the International Monetary Fund
— this post authored by Francesco Grigoli, Zsoka Koczan, and Petia Topalova
Population growth in advanced economies is slowing, life expectancy is rising, and the number of elderly people is soaring. Because older workers participate less in the labor market, the aging of the population could slow growth and, in many cases, threaten the sustainability of social security systems.
But, as our research in Chapter 2 of the April 2018 World Economic Outlook shows, there is considerable scope for policies to mitigate the forces of aging by enabling those who are willing to work to do so.
In the past decade, population aging accelerated significantly in almost all advanced economies as the exceptionally large cohort of people born in the years following World War II began reaching retirement age. The dependency ratio (measured as those ages 65 and older as a percent of those ages 20 – 64) for the median country increased from 27 percent in 2008 to 34 percent currently, and is expected to increase to a striking 55 percent by 2050 as demographic trends accelerate.
Yet, even though aging is already exerting pressure on the supply of labor, there are considerable differences in the evolution and composition of aggregate labor force participation rates – defined as the fraction of population, ages 15 and over, either working or looking for work – in advanced economies.
For example, participation by women has increased dramatically since the mid-1980s. More recently, participation has picked up considerably among older workers, while it has fallen among the young. In almost all advanced economies, prime-age men, particularly those with lower educational attainment, have become increasingly detached from the labor force. The United States stands out among advanced economies having experienced a decline in both female and male prime-age labor force participation.