Will They Still Feed Us When We’re 65?

Fariborz Ghadar is the William A. Schreyer Professor of Global Management Policies and Director of the Center for Global Business Studies at Penn State.

In the swiftly changing global economy, only nations, corporations and workers that remain flexible will survive — and those most willing to adapt will thrive.

As population growth sputters in some countries and accelerates in others, and the average age of people worldwide advances, imperceptible change is taking place. This shift is similar to a tectonic force.

Even before the shaking subsides, some nations will have adopted radically different immigration policies, most industries will have shifted to areas where there are enough people to perform the work, workers everywhere will have little choice but to interact openly with immigrants and accept cultural differences, and some parts of the world will be hard-pressed to keep up with new stresses on services and the economy.

Early projections of global population levels approaching 12 billion or even higher were way off the mark. The world population will likely increase from its current level of about 6.35 billion people to no more than 7.8 billion or so by 2025. And the overall rate of global population growth is actually decreasing — and decreasing rapidly. Looking forward and accounting for these decreases in rates of growth, the absolute level of global population is likely to level off sometime in the mid-century — probably at about 9 billion.

The bad news is that our population is growing most quickly in those areas of the world that are the least capable of supporting such growth and generating aging populations in what formerly were the most economically dynamic countries and regions of the world.

Over the next few decades, many developed countries will encounter stagnant population growth or even experience population contractions. Continued immigration to the United States will help this country avoid some of the problems facing other developed economies. But Russia, Japan and other developed nations may witness a decline on the order of one-third of their current populations at least until 2050. The upshot is that over the next 25 years, developed countries as a group will drop in relative size, from an aggregate 20% of world population to about 15%.

Meanwhile, the world’s population is growing old — quickly. By 2050, one of every five people on the planet will be at least 60 years old. In the United States, where aging will be tempered by immigration inflows, the population over 65 will double to 70 million within the next 30 years.

In Japan, the proportion of elderly people relative to the working population is already the world’s highest. Over the next 50 years, Japan’s working-age population is expected to decline by more than 37%. By 2025, experts predict there will be one person too old to work for every two productive workers. At the same time, Japanese women are having on average only 1.35 children, far below the 2.05 average need to keep the population stable.

This shift, coupled with its tight immigration policies, means the country that American workers once feared was taking U.S. jobs will be outsourcing its labor-intensive jobs. Already, 10% of Honda’s workforce is in Ohio producing Honda Pilots for the world marketplace.

That’s not Japan’s only population-related problem. As a population ages, it will need increased medical care. Who will care for the seniors if there aren’t enough medical staff in the labor force? Japanese seniors are already moving to the Philippines and Thailand for elder care.

European countries are facing the same issues and may increase retirement ages to counter expected shortages in the labor force.

Governments and corporations will need to adapt to aging labor pools, rising fiscal pressures from strained pension systems, rapidly changing consumer preferences aimed at ever older age segments and new lifestyles geared to the old — to name just a few of the changes this tectonic force implies.

The prospect for new inter-generational frictions in many societies— especially those with a rapidly diminishing worker-to-retiree ratio — is significant. How will governments confront the difficult choice between sustaining welfare and pension systems that have been in place for decades and offering younger workers the same kind of lifestyles and social privileges that their parents have?

Business could play a significant role in mediating these differences by soaking up labor pools of older workers, by deploying new technologies that enable higher productivity at older ages and by linking labor groups across countries.

South America, Africa and the Middle East are experiencing higher-than-average birthrates, and, in fact, half their populations are under 18. If the political climates in these markets improve, then many labor-intensive businesses will relocate in those areas. Outsourcing will continue in force, and we need to be able to address these shifts in employment.

These changes present great opportunities for U.S. companies, but only if our workforce can keep pace.