Demographic old-age to working-age ratio

The evolution of old-age to working-age ratios depends on mortality rates, fertility rates and migration. OECD countries have seen prolonged increases in life expectancy that most analysts project to continue, implying an increasing number of older people and most likely of pensioners too.

Currently, the demographically oldest OECD country is Japan, with an old-age to working-age ratio equal to 52.0 (meaning 52 individuals aged 65 and over for 100 persons of working age defined as 20 to 64). Finland and Italy also have high old-age ratios, of about 40. By 2050, the old-age to working-age ratio is expected to reach more than 70 in Greece (75.0), Italy (74.4), Japan (80.7), Korea (78.8), Portugal (71.4) and Spain (78.4).

By contrast, Colombia, Costa Rica and Turkey are the youngest countries based on this indicator, with old-age to working-age ratios of 15.0, 16.6 and 15.2 respectively, In the second half of this century, however, these countries are expected to age considerably. By 2080, the old-age ratio would rise above the OECD average in Chile (67.5 compared to 61.1) and closer to the average in Mexico and Turkey (50.9 and 58.2, respectively).

Four Anglo-Saxon OECD countries – Australia, Canada, Ireland and the United States – have relatively low old-age ratios, between 25 and 30. This is partly due to inward migration of workers and – except for Canada – to comparatively high fertility rates just below replacement level in recent decades.

There have also been substantial declines in fertility, which, of course, will eventually diminish the number of workers entering the labour market. For example, fertility rates fell below the replacement level on average in OECD countries around the mid-1980s, implying shrinking populations in the long term. In the future, however, there is a great deal of uncertainty over how fertility rates will evolve (Figure 6.1).

For the OECD as a whole, the increase in the old-age to working-age ratio is projected to continue according to the medium forecast of United Nations Populations Prospects, from 30.4 in 2020 to 52.7 in 2050 and 61.1 in 2080. By far, Korea is facing the most rapid population ageing among OECD countries. The old-age ratio would increase from 7.6 in 1960, 23.6 in 2020 to 94.6 in 2080 and Korea would move from being the fifth youngest country in the OECD in 2020 to the oldest in 2080.

The projected working-age population (20-64) will decrease by 10% in the OECD on average by 2060, i.e. by 0.26% per year. It will fall by 35% or more in Greece, Japan, Korea, Latvia, Lithuania and Poland, and also by more than 25% in Estonia, Hungary, Italy, Portugal, Slovenia, the Slovak Republic and Spain. It is projected to increase by more than 20% in Australia, Israel and Mexico, with Israel being a clear outlier with an increase of 67% (Figure 6.5). This will have a significant impact on the financing of pay-as-you-go (PAYGO) systems as it is closely related to their internal rates of return. Even funded pension systems might be negatively affected by rapidly declining working-age populations through its effect on labour supply, in turn potentially lowering output growth and equilibrium interest rates.

Projections of the old-age to working-age ratio vary by source (Figure 6.6). Although the projections for the EU22 countries are virtually identical for 2020 and only differ by 2 percentage points in 2050 this is not the case for all the individual countries. In 15 of the countries the UN data is higher for 2050, with seven countries having a higher figure for the Eurostat data. In Latvia the Eurostat data is 9 percentage points higher in 2050, whereas in Spain the UN data is 14 percentage points higher.

The old-age to working-age demographic ratio is defined as the number of individuals aged 65 and over per 100 people of working age defined as those at ages 20 to 64.

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