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Wednesday, January 21st, 2015

Declining Population Could Reduce Global Economic Growth By 40%

Author:     Nick Timiraos
Source:     Wall Street Journal
Publication Date:     6:00 pm ET Jan 14, 2015
 Link: Declining Population Could Reduce Global Economic Growth By 40%
Stephan:   I haven't done much about the trend covered in this report because there hasn't been much new data. But now there is. The fact is that no advanced technology nation has a sustainable birth rate. This is a huge deal in a number of ways (See the next story). This report concentrates on just one aspect. The decline of population will mean a declining pool of labor, and that is going to have a very big effect on global growth. That is not entirely bad because unlimited growth is destroying the environment, at least as it is currently practiced. But it also means decreasing standards of living, again unless we change our economic model and make wellness the first priority with profit made within that paradigm.

Annual GDP declineDeclining population growth that shrinks the pool of available labor over the next 50 years will reduce by 40% the rate of growth in global economic output for the world’s 20 largest economies compared to the past 50 years, according to a new study.

The report from the McKinsey Global Institute says that to compensate for the drop in the growth of the labor force, productivity needs to accelerate 80% from its historical rate to keep global growth in gross domestic product from slowing.

Over the past 50 years, global growth increased six-fold, and average per capita income nearly tripled. McKinsey researchers estimate that around half the increase stemmed from gains in productivity and half from the growing labor force.

Now, the workforce isn’t going to grow nearly as fast, and it could peak in most of the 20 countries analyzed in the report over the coming 50 years. Employment growth averaged 1.7% since 1964 and is set to drop to 0.3% in the coming decades. “In a world in which we can no longer rely on…the supply of labor to drive GDP growth, […]

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