As has been widely discussed in this journal (for example: Harper, 2019, 2023; Harper & Leeson, 2008; Hammer et al., 2019; Herrmann, 2012; Kudrna et al., 2022; Miyahara & Adelaja, 2022; Taguchi & Latjin, 2023) the challenge for high income economies is that not only are individuals living longer, they are doing so within a population which is in itself growing older. Young nations have high proportions of economically active individuals with the potential to produce the wealth needed to support dependents, both old and young. However, old populations have a lower proportion of workers and thus the responsibility of providing for old age dependency may increasingly fall to the older person themselves. In addition, societies with a large proportion of their populations in old age have to consider how to redistribute resources away from a focus on younger people towards older people in an equitable manner, both inter-generationally (between the generations) and intra-generationally (within each generation).

There thus remain major concerns over population ageing, concerns over public spending on pensions, high dependency ratios between workers and non-workers, increases in health care costs, declining availability of family based care, and a slowdown in consumption due to an increase in older people and a decrease in younger people. This has led to several governments – European as well as Asian – now promoting increased child bearing as a way to counteract the ageing of their populations. However, these apprehensions are based on assumptions developed from the characteristics and behaviours of current older populations. Some of these fears are supported, but many are speculative myths, widespread in public debate, but lacking a robust evidential base.

While there has been a long economic literature linking population ageing with economic downturn, several recent papers have begun to take a more constructive approach to this challenge, suggesting that we need to take into account the changing dynamics of the world around as we rethink ways of both measuring and conceptualising the implications of age-structural change. Cravino et al. (2022), for example, argue that the structural transformation process - large reallocations of economic activity across sectors over time - associated with a decline in the relative size of the agriculture and manufacturing sectors and a corresponding rise in the service sector, conventionally explained by ideas such as technological transformation – are now being also driven by age-structural change. Both Hopenhayn et al. (2022), and Karahan et al. (2019) attempt to show, not that convincingly, that an increase in mature and older adults reduces entrepreneurship and start-ups, counter to sociological work which has revealed the increasing role that older workers are playing in this economy drawing on their accumulation of wealth and experience (Holmquist et al., 2019; Harper, 2023).

Similarly, Boring et al., (2023) argue that one reason for their findings that older workers in Europe have a lower individual productivity potential (IPP) score than younger workers, maybe related to the allocation of potentially productive work tasks to younger workers, thus potentially reducing the older employees’ opportunity to keep up with the potential productivity of younger employees. This is particularly the case in high skilled Northern European countries, characterised by a high average skills level in the workforce, less so in Southern European countries where the general skills level is lower. They thus argue that employers should offer their older employees education and training, and that governments have a responsibility to offer formal training across the life course. They also recognise that in many European industrialised countries, efforts are now being made to increase the population’s skills through formal education across the life course, including mid-and later life.

Turning to broader conceptual approaches, Fernandez-Villaverde et al. (2023) in their paper The Wealth of Working Nations argue that we need to rethink how we measure concepts around demographic dependency, suggesting that as the populations of high income economies age, output growth per capita is a misleading indicator for standard growth theory. They argue that changes in the working-age population become so large that output growth per capita may hide important movements in output per working-age adult, a more natural variable on which to focus. Acemoglu and Restrepo (2022) turn to focus on technology, arguing that ageing leads to greater industrial automation, and especially, to more intensive use and development of robots. Analysing comparative national data, they show that demographic change—corresponding to an increasing ratio of older to middle-aged workers—is associated with greater adoption of robots and other automation technologies across countries, with evidence of more rapid development of automation technologies in countries undergoing greater demographic change.

An excellent paper by Kotschy and Bloom (2023) reminds us of the importance of health and in particular the focus on healthy life expectancy rather than life expectancy per se. Drawing on OECD panel data from the past 65 years, they project economic growth to 2050, arguing that age-structural shifts will indeed will slow economic growth throughout much of the world. Almost all OECD countries are predicted to experience an economic slowdown in the upcoming decades, and this demographic drag will be the norm among countries that advance through later stages of the demographic transition. Seventy of the countries they examined will see their working-age shares shrink as large cohorts progress to old ages, and without sufficient migration, education, and automation, to compensate for these effects, a demographic drag will follow a demographic dividend. However, and importantly, expansions of labour supply due to improvements in functional capacity among older people, can cushion much of this demographic drag. Because remaining life expectancy is comparably high among older people in high income countries most of the demographic drag can be compensated for if economic activity expands into older ages. Indeed, across all OECD countries, up to one-half of the demographic drag can be addressed by changes in labour supply due to improved functional capacity. Alternatively, if instead remaining life expectancy is comparably low among older people, only a smaller portion of the demographic drag can be compensated for, as will be the case in Eastern European countries for example. However, in all cases labour markets and health and social policies are needed to retain older workers in the workforce. They argue that these include creating incentives for remaining in employment, promoting safe workplaces, providing access to an adequate safety net regarding healthcare and retirement, reducing social inequalities conducive to ill health, and meeting people’s needs in dealing with caregiving responsibilities.

It is clear that the question is still strongly contested, and that behind the rhetoric defining dependency and productivity lie the complexity of social and economic behaviour and the ability of societies and individuals to adapt to changing circumstances. It is highly likely that future generations of older adults will have higher levels of human capital – in terms of education, skills and abilities – and that old age, as defined by retirement and dependency will occur at far older ages than currently. In addition, they are all issues which can be addressed by policy, given the political and economic will. JPA welcomes contributors to this debate.