What rates of productivity growth would be required to offset the effects of population aging? A study of twenty industrialized countries

Abstract

A shift in population distribution toward older ages is underway in industrialized countries throughout the world, and will continue well into the future. We provide a framework for isolating the pure effects of population aging on per capita GDP, employ the framework in calculations for twenty OECD countries, and derive the rates of productivity growth required to offset those effects. Taking the twenty countries as a whole, the average productivity growth rate (a simple unweighted arithmetic average) required to just offset aging effects over the full 30 years from 2015 to 2045 would be 4.2 per cent per decade, or approximately 0.4 per cent per year; to achieve an overall increase of 1 per cent in GDP per capita would require an average rate of 15.1 per cent per decade, or 1.4 per cent per year. We consider also some labour-related changes that might provide offsets, for comparison with productivity.