The Impact of an Ageing Population on the Economy

An ageing population means there is a greater % of the population over the age of 65. Therefore, it means there is an increase in the dependency ratio, with a smaller % of workers supporting a greater number of people not in the labour force.

  1. Increase in the dependency ratio. This means that there will be more people claiming benefits such as state pensions and less people working and paying income taxes
  1. Increased government spending on health care and pensions
  1. Those in work will have to pay higher taxes. This could create disincentives to work and for firms to invest, therefore there could be a fall in productivity growth.
  1. Shortage of workers. This shortage of workers could push up wages causing wage inflation. Alternatively, firms may have to respond by encouraging more people to enter the workforce, through offering flexible working practices.
  1. Changing sectors within the economy

 

Government Responses to an Ageing Population

  1. Increase participation rate,
  2. Raise the retirement age
  3. Increase the importance of the private sector in providing pensions and health care. However this may cause increased inequality

 

Essays and Revision Notes on Labour Markets

Flexible Labour Markets

Minimum Wages

 

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