CONTRIBUTORS
Kim Catechis
Senior Investment Strategist,
Franklin Templeton Institute
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A version of this article, authored by Kim Catechis, Investment Strategist at Franklin Templeton Investment Institute, first appeared in The Bulletin: Demographics and long-term growth. OMFIF, Summer 2023.
Demographics as a driver of economic growth
Conventional wisdom points to young demographics as a driver of economic growth. The thesis is that young populations indicate a growing labor force, suggesting productivity gains long into the future. The reality is more complicated.
Having a lot of young people is clearly good, but they need to be healthy enough to work and able to learn appropriate skills for the labor market. We don’t need millions of Ph.D.s, but rather, a relatively well-educated pool of young people, because they are more easily employable. Given the trend toward automation and artificial intelligence (AI), the growth of the “knowledge” economy drives demand for skilled workers. A young, well- educated labor force will attract investment in high-margin, productive areas, providing the positive driver for economic growth.
The countries that have driven global economic growth in the last generation are those with aging populations, which likely will result in slower economic growth in the future. Even though many individuals are working beyond the typical retirement age, working age-populations are shrinking. As the pension-age cohort increases, governments will try to find solutions to the anticipated slowdown in economic growth.
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