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Cost of Aging

Ronald Lee & Andrew Mason

As populations in richer nations get older, GDP growth slows, support costs rise, and government budgets feel pressure.

16. mars 2017

An aging population and slower labor force growth affect economies in many ways—the growth of GDP slows, working-age people pay more to support the elderly, and public budgets strain under the burden of the higher total cost of health and retirement programs for old people.

Yet an aging population may raise the amount of capital per worker, which would boost wages and output per hour worked (productivity) and reduce interest rates as higher wages lower the return on capital. Alternatively, population aging and slowing labor force growth could lead to secular stagnation if firms are discouraged from investing abundant loanable funds.