Global | Demographic challenges: urgent need for better labor market policies

The demographic challenges facing developed countries are well known: rapid aging and populations that in are already beginning to shrink in some regions. Less well known, however, is that the demographic transition is already changing the landscape in the vast majority of developing countries.

Key points

• Key points:
• In these countries, the transition will also be intense in the coming decades, with the risk that it will be even more dramatic than current forecasts suggest.
• Particularly striking is the case of China, where our forecasts imply that its labor force will decline at rates between -1 and -1.5% between 2040 and 2060, much worse than in Italy or other southern European countries.
• One implication is that the growth rate of the global labor force will slow from a rate of just over 1% per year over the past 10 years to almost 0% by 2050.
• Our estimates at BBVA Research predict that rich countries need unprecedented levels of immigration, more than double the average observed over the past 40 years, to maintain recent labor force growth levels.
• However, some factors could help counteract these labor force challenges, such as increasing the participation of older people by delaying the effective retirement age, or how vitally important it is to increase the participation of women in the labor force and close the gender gaps in the participation rate.

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