Top economies threatened by too many dependents

Today’s Chart

Hello,

This week’s chart is focussed on the issue of rising old age population in world’s largest economies.

If you have a suggestion for next week’s topic, shoot me an email (or mention in comments below).

In one of the previous weeks, I had made a post on demographic disaster – showing the working age population decline in major economies. The post was well received by newsletter readers as well as on reddit and twitter.

For this post, I have enhanced the chart – adding more countries to the list, and showing the ratio of elderly dependents to working age population (called old-age dependency ratio in the field of Economics)

The result is quite interesting.

In some of the major economies like Japan, South Korea and Italy, dependency ratio is projected to increase very quickly, driven by increase in elderly population as well as a decline in working age population.

For example, in Japan by 2050, for every 100 people in age 15-64 (working age), there will be 71 elderly people (age 65+). This number is approx. 66 for both Italy and South Korea (almost 2.6x global avg)

Some of the economic implications of having a high proportion of elderly dependents can be quite severe and far reaching:

  1. Decrease in tax revenue for Government
  2. Stretched govt services such as state healthcare (e.g. NHS in UK) impact coverage and/or quality
  3. Increase tax rate on working population to support govt. finances
  4. Lower pension payouts to retirees
  5. Pressure to increase retirement age
  6. Decrease in the competitiveness of the country in the global economy

The coming decades will be a test for policy markers in these countries on how to navigate these challenging demographic trends.

That’s all for this week. Thanks for reading! 👋

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