The world's population is ageing. Ageing puts pressure on government finances, but also on the companies that have to pay out pensions for a longer time and on the labour force that has to support the rising number of pensioners.
In the chart above, the old-age dependency ratio in the European Union between 2010 and 2060 is visualised (source: Eurostat). The ‘old-age dependency ratio’ demonstrates the proportion of the population aged 65+ relative to the working-age population (15-64). It is an important indicator of the pressures that demographics pose for pension systems. The evolution of dependency ratios depends on mortality rates, fertility rates and migration.
The old-age dependency ratio in OECD countries
On average in OECD countries, there are 25 people of pensionable age for every 100 of working age today. Or, put another way, there are 4 people of working age for every pensioner. From 2010, ageing is expected to accelerate, with the dependency ratio doubling to 50% or more in 2050. At that point, there will be just two people of working age for every person of pensionable age.
- The most rapid population ageing among OECD countries will be in Korea. The dependency ratio is projected to grow to 77% by 2050. Korea will move from being the third youngest country in the OECD to the second oldest, after Japan.
- Japan will have one of the highest dependency ratios in the world at 74% in 2050.
- The dependency ratio in China and the US will be relatively low at 39% in 2050.
- OECD countries that are currently demographically young – Mexico and Turkey – will age more rapidly as their demographics converge on that of other OECD countries. However, unlike Korea, they will remain among the youngest OECD countries in 2050, with dependency ratios of 38% and 30% respectively.
- OECD countries that are currently old in demographic terms – Belgium, France, the Netherlands, Norway, Sweden and the United Kingdom – are projected to see relatively small increases in dependency ratios over the next 40 years. This illustrates a degree of convergence in the extent of population ageing in OECD countries.
- Of the world regions, the ageing trend is most prevalent in Western Europe. The dependency ratio will be the highest in Italy, Spain, Greece and Germany in 2050 at 59%, 59%, 57% and 56% respectively.
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Sources: OECD, Eurostat, Congressional Research Service, The Economist.