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The Coming Demographic Deficit: How Aging Populations Will Reduce Global Savings
The aging of the developed world is creating a demographic deficit that could radically transform the financial wealth of households, and therefore, the capital available to businesses and governments. There are no easy choices, but fiscal discipline today can yield healthier balance sheets tomorrow.
This has some relevance to Jim Nickerson's thread
Video: (8 min) - 3 short videos
The associated presentation
The whole book can be read at the website
The aging of the developed world is creating a demographic deficit that could radically transform the financial wealth of households, and therefore, the capital available to businesses and governments. There are no easy choices, but fiscal discipline today can yield healthier balance sheets tomorrow.
The long-term solvency of pension plans – both public and private – is a growing concern across the developed world as policy-makers wrestle with the fiscal consequences of aging, and business leaders and investors seek to understand how aging will affect global markets for goods, capital and labor. The answer to all these issues depends largely on a fundamental question that is often overlooked: How will aging affect future levels of household wealth and economic well-being? New research by the McKinsey Global Institute (MGI) sheds light on this question, drawing its conclusions from in-depth analyses of five countries – the U.S., Japan, Germany, Italy, and the U.K.– which together account for two-thirds of global financial assets.
Birth rates will fall and lifespans will continue to lengthen over the next two decades, driving up the median ages in many countries. In Japan, for example, the median age will rise from 43 to 50, and from 42 to 51 in Italy. MGI’s new report reveals that the aging of the developed world is creating a demographic deficit that could radically transform the financial wealth of households, and therefore, the capital available to businesses and government.
MGI’s key finding is that over the next two decades, absent dramatic changes in saving behavior or returns earned on financial assets, growth in household financial wealth will slow by more than two-thirds, from 4.5 percent historically to 1.3 percent going forward. This slowdown will cause the level of household financial wealth to fall some 36 percent, or approximately $31 trillion, below what it would have been had the higher historical growth rates persisted.
Birth rates will fall and lifespans will continue to lengthen over the next two decades, driving up the median ages in many countries. In Japan, for example, the median age will rise from 43 to 50, and from 42 to 51 in Italy. MGI’s new report reveals that the aging of the developed world is creating a demographic deficit that could radically transform the financial wealth of households, and therefore, the capital available to businesses and government.
MGI’s key finding is that over the next two decades, absent dramatic changes in saving behavior or returns earned on financial assets, growth in household financial wealth will slow by more than two-thirds, from 4.5 percent historically to 1.3 percent going forward. This slowdown will cause the level of household financial wealth to fall some 36 percent, or approximately $31 trillion, below what it would have been had the higher historical growth rates persisted.
Video: (8 min) - 3 short videos
The associated presentation
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| The world is aging. Across the globe – and especially in the United States, Japan, and Western Europe, the triad where most of the world's wealth is created and held – falling birth rates and lengthening lifespans are causing populations to age rapidly. In all of these countries, the working population will stagnate or shrink, while the number of retirees will explode. | |
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