Falling Birth Rates Threaten Living Standards in Rich Nations - FT

By Staff, Agencies

The Financial Times reported that the world's wealthiest nations must significantly increase productivity to maintain historical living standards amid a sharp decline in birth rates.

A study by McKinsey indicateed that countries like the UK, Germany, Japan, and the US need to double productivity growth to maintain their per capita GDP growth from the late 1990s to 2023.

In France and Italy, the report indicated, productivity would need to triple, while Spain would face a fourfold increase to achieve similar results by 2050.

The findings revealed how declining birth rates threaten to disrupt economic stability in advanced economies, as the working-age population shrinks and an aging population increasingly depends on it.

Chris Bradley, director of the McKinsey Global Institute warned that without proactive measures, younger generations may inherit lower economic growth, shoulder more retiree costs, and the traditional wealth flow may erode.

"Governments worldwide are grappling with a demographic crisis, exacerbated by rising housing and childcare costs and shifting societal norms, including fewer young adults forming relationships," he noted.

Two-thirds of the global population is in countries with low birth rates, with populations declining in OECD nations like Japan, Italy, Greece, China, and Eastern Europe, as per FT.

"Our current economic systems and social contracts were built around decades of population growth, particularly in working-age groups that drive economic expansion and sustain longer life spans," Bradley stated.