How demographics affects the economy

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A 2016 research focused on economically powerful countries like the United States and Japan has revealed a significant relationship between demographic changes and the trend of economic growth. The study further suggests that the dramatic shift towards an aging population can possibly lead to a decreasing GDP growth over the next decades.

The question of whether or not demography affects the economy is not a new one. The fact that economic growth greatly depends on productivity gains is a clear indication that the increase or decrease in workforce population can have a significant effect on a country’s economic output.

However, it’s important to point out that the effect of population growth can either be positive or negative depending on the circumstances. For countries with a large population, stable workforce and enough resources, the number can be a huge asset for economic growth. On the other hand, nations with a larger population, limited resources coupled with a high unemployment rate will tell a different story.

The effect of an aging workforce

Demographics, as some economists conclude, is the hardest to overcome among a list of factors that affects growth not only in the U.S. but also in other countries with a steadily and slowly declining working-age population.

While experts agree that demographics is one of the key determinants of whether or not an economy has the potential for growth, they believe that that alone will not determine the fate of a nation’s economic growth.

This is because, as the world progresses, so as the technological advancements which are also being introduced into the workplace, increasing productivity and ensuring a steady workforce.