INTERNATIONAL — As birth rates decline and life expectancy rises, emerging economies face a pressing challenge: build wealth before ageing slows them down. While countries like Germany, Italy, and Japan are already grappling with the impact, developing nations must act fast to avoid the same economic slowdown.
A McKinsey Global Institute (MGI) report, cited by The Star, outlines three demographic waves reshaping the global workforce. The most urgent? The one that’s about to hit emerging markets.
Advanced economies face declining labour forces
In advanced economies, working-age populations peaked in 2010 and have been declining since. The result? Slower per capita GDP growth, projected to drop by 0.4 percentage points annually—and in some cases, by 0.8 percentage points by 2050.
With 30% of labour income already funding pensions, that figure is set to rise to 50% by mid-century, placing unprecedented financial strain on governments and workers alike.
Emerging economies face a demographic cliff
While Sub-Saharan Africa remains an exception, most emerging economies will soon face the same demographic wave. Many are still developing their economies but are already seeing fewer births and ageing populations.
Nearly half of the 89 emerging economies outside Africa now have fertility rates below 2.1, the replacement level. In China, the working-age-to-retiree ratio is shrinking so quickly that by 2050, it will be lower than in countries like France and the United States.
For nations like India, Brazil, and Thailand, the challenge is clear: get rich before they get old. India’s per capita GDP has grown steadily, but its demographic dividend is fading fast, meaning economic growth will slow unless action is taken now.
How to avoid the ageing trap
Boost productivity
Workers in emerging economies earn an average of US$13 per hour, compared to US$60 in developed nations. Closing this gap is critical for long-term growth and requires investment in technology, infrastructure, and innovation to make industries more competitive.
Increase labour force participation
Many women in emerging markets remain underrepresented in the workforce. While 80% of women aged 20-49 work in advanced economies, in developing countries, the figure is just 60%. Encouraging female workforce participation could help ease labour shortages and drive economic growth.
Invest in human capital
A skilled workforce is key to long-term economic success. By improving education, developing technical skills, and fostering competitive industries, emerging markets can equip younger generations to thrive in the global economy. The private sector also plays a crucial role by supporting high-growth, innovative companies that create sustainable jobs.
Build sustainable social support systems
Many emerging economies still rely on family-based eldercare, but as populations age, this model won’t be sustainable. Governments must expand healthcare access, promote private savings, and develop long-term care solutions to ease the financial strain of an ageing society.
A gradual, yet urgent challenge
Demographic change is not a sudden event but a gradual process that unfolds over decades. While emerging economies still have time to prepare for the demographic shifts ahead, the clock is ticking. The need to boost productivity, increase labour-force participation, and build sustainable social support systems is urgent.
As advanced economies are already discovering, the consequences of ageing populations are unavoidable. For emerging markets, the challenge will be to manage these transitions while ensuring that they can continue to grow economically and avoid the pitfalls faced by their developed counterparts.
The waters are rising, and while there is still time, the window for action is closing. Emerging economies must act now to navigate this demographic tide effectively.