Demographic trends are always at work within individual countries, shaping societies, economies, and the environment. But today the world as a whole is being shaped by a demographic megatrend: increasing aging and dependency. After decades of accelerating population growth, in which the global population zoomed from 2 billion to 6 billion in 70 years, growth is slowing down as fertility rates decline. As a result, aged citizens will become a larger percentage of populations and their dependency on slower-growing working populations will have serious economic consequences. In short, the next 50 years will look much different from the previous 50.
In the second half of the 20th century, governments, corporations, and individuals viewed their countries as forever young and growing. Based on these assumptions, systems were created and promises made, such as government pension schemes in which current workers pay for aging populations. But these assumptions are proving faulty and, potentially, economically debilitating.
At present, nations fall along a continuum, with some countries already beginning to feel the effects of aging, and others anticipating those effects in the coming decades. The social, economic, and environmental impact of this aging process will be significant. Countries such as the U.S. and Japan must make their workforces more productive in order to cover the costs of social entitlements for an increasing number of aged dependents. Meanwhile, emerging countries such as India and China must understand how to harness the benefits of their relatively younger populations to create a demographic dividend. To better understand aging and its effects, Booz & Company introduces an approach to understanding this megatrend that we call new demographics. Through analytical concepts such as the dependency curve and the arc of growth, it’s now possible to see where individual countries are in their aging and development process; predict the societal, economic, and environmental challenges that lie ahead; and develop policies and actions. Governments and the private sector must both adapt. Some changes will be painful, but their importance cannot be underestimated.