Aging societies and falling birth rate could cost trillions, McKinsey report finds

A new report by the McKinsey Global Institute sounds the alarm on what it calls one of the most significant and under-discussed global issues facing advanced economies: Population decline driven by falling fertility rates.

With two-thirds of the world living in countries where fertility rates are below the replacement rate of 2.1 children per family, populations in some regions are projected to drop by as much as 20%-50% by the year 2100, McKinsey says in its report, “Dependency and depopulation? Confronting the consequences of a new demographic reality.”

Similar to global trends, recent data indicates that North Carolina’s birth rate has been declining as well. Between 2007 and 2022, the number of births per 1,000 residents fell from 14.4 to 11.4, which is below the replacement level. This trend is contributing to an aging population, with the average age in North Carolina reaching 39.3, the highest it has ever been.

Among other concerning demographic trends pinpointed by the McKinsey report, the proportion of working-age people between the ages of 15 and 64 years old is shrinking, while the proportion of older adults requiring financial and healthcare support is surging. 

Within first-wave countries like the United States, Germany, Japan, and China, the share of individuals of working age is expected to decline to 59% by 2050, from 67% today. Meanwhile, seniors are projected to account for 25% of global consumption by mid-century, doubling their consumption share since 1997.

McKinsey warns that Gross Domestic Product per capita growth in these first-wave countries could slow significantly—by 0.4% annually on average—if no corrective measures are implemented to offset the impact of aging. That drop would translate to trillions of dollars in lost economic output over the next few decades.

“Absent swift and comprehensive action, younger workers today will inherit a weaker world economy, strained public retirement systems, and eroded wealth transfers between generations,” McKinsey notes in the report. “Building resilience to this demographic transformation requires fundamental societal and economic shifts.”

McKinsey’s findings highlight that, without intervention, by 2050 as much as 50% of worker-generated income in first-wave nations could be required to fund retirement systems—a number that could destabilize global economies.

“In the absence of proven strategies, raising fertility rates to replenish populations remains the steepest uphill battle,” the report states. 

Notably, McKinsey warns that even if birth rates were to rebound immediately, it would still take at least two decades before these newly born generations would contribute to the workforce.

The post Aging societies and falling birth rate could cost trillions, McKinsey report finds first appeared on Carolina Journal.

 

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