In a stark warning, Piper Sandler has identified the global population slowdown as "the mother of all risks." This demographic shift presents profound implications for global economic stability and growth.
The deceleration in population growth, particularly among the working-age cohort, is poised to create substantial economic headwinds.
Declining global population growth:
Global population growth has been on a downward trajectory since its peak in 1964. The working-age population (ages 15-64) peaked in 1979, and its subsequent decline has significantly contributed to the slowdown in global GDP growth.
Piper Sandler adds that the global population will reach its peak around 2080, six years earlier than previously anticipated .
Aging population and dependency ratios:
One of the most pressing concerns flagged is the rising old-age dependency ratio. As the proportion of retirees increases relative to the working-age population, the economic burden on the latter intensifies.
This shift will strain social security systems, public health services, and potentially lead to increased government debt if structural reforms are not implemented. The United Nations projects that the global old-age dependency ratio will rise from 16% in 2024 to 32% by 2070 .
Geographic disparities:
The impacts of the population slowdown will not be evenly distributed. Developed markets (DMs) are expected to face more severe challenges due to their already high old-age dependency ratios and substantial public debt levels.
For example, Germany and Japan are highlighted as nations where the economic burden of an aging population will be particularly acute.
In contrast, the United States is relatively better positioned due to its comparatively lower dependency ratio and potential for immigration to bolster the working-age population .
Government debt and economic stability:
The increasing old-age dependency ratio is likely to drive government debt higher. Developed markets, with their extensive social safety nets, will face significant fiscal pressure as they attempt to support a growing elderly population with a shrinking workforce.
This dynamic could lead to spiraling government debt levels, risking long-term economic stability .
Implications for Policy and Economy
Need for structural reforms:
To mitigate the economic risks posed by the global population slowdown, structural reforms are essential.
Governments must consider policies that enhance productivity, encourage higher birth rates, and facilitate greater workforce participation among older individuals. Without such reforms, the economic and fiscal pressures will only intensify.
Immigration as a buffer:
Immigration can serve as a critical buffer against the declining working-age population in certain regions. For instance, the U.S. and Germany can partially offset their demographic challenges through strategic immigration policies.
However, countries like Japan, which have more restrictive immigration policies, will find it harder to mitigate these demographic headwinds .
Focus on productivity gains:
In light of the shrinking workforce, improving productivity becomes paramount. Investments in technology, education, and healthcare can help maintain living standards despite a smaller labor pool.