Changing Demographics in the Labour Market
Cause for concern?
Demographic changes occur when the composition of a population changes.
For example, today there are less people aged 18-21 in full-time work than there was 50 years ago (more people going to university).
There are also more female workers today than there was decades ago. This has a positive impact on the labour market by increase the supply of labour and decreasing wages – meaning firms costs go down.
The ageing population in developed countries
In the UK, a noticeable change has been the ageing population. Many people in the population are over 60 years of age, and the retirement age where you can claim your state pension is on the rise. You can find out your state pension age here: https://www.gov.uk/state-pension-age.
Here, we can see that life expectancy in the UK has been on the rise for over 100 years. Think about how this affects the economy? More people over the age of 60 claiming the state pension for 20+ years. 100 years ago people weren't even expected to live until 60!
There is a correlation between life expectancy and economic development – populations in the most developed countries are expected to live longer.
So, the UK now has an older population many decades ago. Life expectancy is rising. Are there any problems with this?
Yes, there are a few key problems with an ageing workforce:
1. State pensions, a growing cost – more old people in the population means more people are applicable to claim the state pension once the retirement age is met.
2. Greater strain on the NHS – older people tend to use healthcare services more than young people. This means an increased bill for the taxpayer.
3. Greater proportion of population not in work – if people are living well over 60 years of age, that means a greater proportion of the population is not in work. That means fewer people paying taxes, more people claiming pensions and an increase in dependency ratio. [the dependency ratio meaning the number of people who are too young or too old to work, compared with those of working age.
What does an ageing population mean in the labour market?
Younger workers more scarce – we can expect younger workers to receive higher wages as a result
Greater proportion of older people – with an ageing population, we would expect a higher proportion of older people in the workforce today than there was 100 years ago
Increases in participation rates for those over 65
Tax increases – the greater strain on the welfare system will mean workers’ wages will need to be taxed at a higher rate to pay for the ageing population
More immigration needed – there will be a growing need for young, skilled workers as the proportion of young people in the population becomes more scarce
Changes in job patterns – more jobs created to take care of the elderly
So, in summary we have learned:
What demographics are
The changing demographics in the labour force
Increased percentage of older workers
What this means for the labour market
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