When we talk about a nation’s economy, many factors play their role. One such factor is the Demographic aspect that determines the age-structure of a country. An ideal situation is when the younger people, from 18 years to 45 years of age work efficiently and build the workforce of a country, and their workforce keeps increasing with new children coming into the world. This workforce is the tailwind of an economy that pushes it forward in a better direction. On the other hand, there is another tier of the population which comprises of people older than 60 years. These people are in the retiree-age group, and they are the ones who are not an active part of the workforce of the country. They are beneficiaries and dependent on government spending. So, they are like the headwind to an economy and an opposition to the workforce tier.
Another important role these various age groups play is in the growth of the GDP.
When there are more younger people, the consumption increases, and with the help of stable inflation rates, the consumer prices increase along with consumer demand. When both increase simultaneously, this benefits the economy directly, and hence, helps in the spike of the GDP.
On the other hand, older people above 60-65 years of age spend more on healthcare, but their overall consumption decreases drastically. So, in this way, they do not contribute much to the growth of an economy.
Currently, in the US and by extension in the entire world, the situation is that there is a problem with the demographic dividend. It means that the economic growth potential has drastically decreased over all these years because of a shift in the population’s age structure. The working force is decreasing, and the non-working force is increasing, where there should be an opposite situation. Ideally, it’s the working force that should be larger and the non-working force should share the load.
Impact Of The Pandemic On Birth Rate
According to some studies and surveys, the number of births in 2019 in the US was around 3.7 million. By the end of 2020, around 500,000 children came into this world, which is almost 13% of the birth rate decline since last year only.
This is huge. There are predictions that the birth rate will continue to decline in the following years too because people are apprehensive and uncertain about their financial situations that faced a major blow during the 2020 pandemic. So, they are less inclined to bring more kids to the world. During 2020, there was a 50% increase in people demanding contraceptive measures.
Some important macroeconomic solutions to improve the demographic issues
Arnott and Casscell’s paper, ‘Demographics and Capital Market Returns,’ back in 2003 predicted all these changes in the world that we are facing now. As per them, there are certain macroeconomic solutions to counter this problem.
- To increase productivity by making the working force stronger and adding more children to the mix who can eventually contribute towards the growth of the economy in the future.
- To improve international trade, which sadly was at 0% even before the pandemic. The countries should try to improve the trade instead of fighting with each other and implying tariffs and taxes.
- Make the retiree-age group more effective and productive. This issue has been addressed to some extent because, in many countries, people above 65 years are also working.
I’m Ava Paul, an experienced news website author with a special focus on the entertainment section. Over the past five years, I have worked in various positions of media and communication at World Stock Market. My experience has given me extensive knowledge in writing, editing, researching and reporting on stories related to the entertainment industry.
