The world’s three biggest economies are all facing a huge problem. We can see it looming over the horizon, but it’s hard to fully calculate the impact. We know the United States, China and Japan are confronting population challenges. In Japan, the population has been shrinking since 2010 and China experienced its first population drop in 60 years in 2022. In the U.S., population growth is projected to level off over the coming years. How can we start to understand the economic and market implications of this massive shift?
The dependency ratio is the comparison of a working-aged population to the young and elderly among them. This metric is predictive of the shape of the global workforce, measuring which countries are poised to grow economically on the world stage and which ones may suffer economically if actions are not taken to adapt to an aging population and lower birth rates. This is important because, despite increased automation, the number-one driver of economic output is labor. An aging population with low fertility rates means the workforce of a population will decline as retirees stop working and there are not enough young people around to replace them. The top three countries by GDP (gross domestic profit) are the U.S., China and Japan. All three are wrestling with an aging population and low birth rate …