The demographic time bomb’s Bernard Hickey yesterday published the below chart showing the projected decline in the number of workers per retiree in a cross-section of major economies:

The chart nicely summarises the population ageing dilemma facing much of the world, whereby economies are likely to face sharply slowing economies, lower taxation receipts, higher aged care expenditures, and greater debt burdens for decades to come.

For readers interested in seeing how Australia compares on these metrics, I’ve created some comparable charts of the ratio of retirees per worker in the Anglospehere nations. For the purpose of this analysis, someone is considered retired once they reach 65 years of age.

As you can see, Australia, New Zealand, Canada and the US are all expected to experience similar levels of population ageing.

Now consider the below chart showing the projected number of workers per dependent. For the purpose of this analysis, a dependent is someone aged 0 to 19 or 65 plus.

As you can see, the number of workers per dependent appears to have peaked and is now projected to fall sharply from here in line with the coming retirement of the Baby Boomer generation.

Whichever way you cut it, the world’s demographics have turned negative, and are likely to create strong headwinds for economies and asset prices going forward.

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  1. So the choice is: (1) Open the immigration floodgates, to transplant young workers, or (2) Close the borders, and rationalise the use of existing national assets. In New Zealand’s case, we have set about selling the national assets, so I guess the future is clear.

    • (1) Open the immigration floodgates, to transplant young workers
      Even better a flood of emigrations will mean economic stability in long run despite the fact that many real time factors and economic data shows the opposite.Its a choice between reckless neo liberal or neo conservative policy where real economics don’t need to apply.Good job.

    • Rusty PennyMEMBER

      Or 3) Raise the retirement age.

      For every person that leaves the ‘dependency’ group, and becomes a worker, the better the ratio looks.

  2. The masses still expect to retire early through housing investment. lol.

    Maybe they will come up with special medication to allow young workers to work 100+ hours a week to fund higher house prices, save for their own retirement, and fund medical expenses for the elderly.

  3. It seems to me that we boomers need to work on relationships with our children. We can’t rely on an amorphous state to look after us in our old age, we need to look to more personal solutions. In the future I see more intergenerational living arising from economic necessity. Grandparents may revert to the option of living with their children and earning their keep by participating in the upbringing of their grandchildren. The effect would be to remove childcare, aged care and possibly some education from the money economy. It would lead to a reduction in property prices as it has been pointed out here before the numbers of persons per house has a significant effect on housing demand. From a social perspective such changes might be quite positive.

    • I think this is a more historical norm than the current situation.

      Many of my family members lived with relatives from 20+ years ago, but these days none do. There is ample capacity in existing houses to return to this norm, but as a country we are actually very well off so there’s no need… yet.

    • I agree that in many western economies family dynamics will change, and retirees will be living with their adult children. At least the current baby boomers will have a decent pension. The next generation will have to fund their own retirement by learning to invest and save, probably along the lines written up by Prince a while ago.

    • I think it’s funny that people have been building 5 and 6 bedroom homes as part of their “Status” creation. Soon those same bedrooms will house Granny, Grandpa and an uncle and two cousins. Occupancy rates will rise so that OO’s can pay the bills for utilities, rates etc. Some unintended future planning which will help pop the housing bubble whilst allowing the populace to remain housed.
      Quite a good survival outcome for some.
      Remember, occupancy was 4.3 people per dwelling in 1930, now it’s around 2.7

    • +10 And not just boomers, all of us. Kids provide security in retirement in developing countries. Hence big families and sometimes three generations living together. Here record household debt levels are shifting our focus away from family and this might need to change if we expect anyone to care about us when we retire.

      • Our household is now 3 people and we have two bedroom. We are the new average … until the next baby arrives!

        Maybe we will be a 3 bedroom when that one comes along!



  4. Good stuff UE

    The real time bomb is China and, despite the fact we depend so heavily on China for our low inflation,low interest rate, credit driven prosperity, it isn’t even being discussed in looking at our future.

  5. Thanks UE.

    So, in the same 10 year span we’ll hit
    -peak workforce
    -peak oil (or peak cheap oil)
    -peak credit

    The world is going to be a very different place.

    • The term “peak cheap oil” doesn’t really make any sense. If we enter a deflationary spiral the price of oil could fall to $10/barrel – which would be considered “cheap” if you compare it today’s price.

      “Peak oil” is the correct term – it puts the focus on flow rates rather than on price.

  6. Its not just the baby boomers that are aging in Australia.

    Its the migrants as well.

    Due to the skilled component, the median age of Australia’s migrant program is 31. They only take 34 years to reach retirement.

    Addressing an aging population with migration is like fixing a debt problem by borrowing more money. IT WONT WORK.

    • Mining BoganMEMBER

      I concur.

      Our national cricket team needs rebuilding. I propose that we only accept immigrants between the ages of 17-21 and they shall come from cricket playing nations. One downside of this is that after the Hobart test, we shall have to accept Kiwis.

      Sometimes the cure is worse than the disease.

    • Immigration does work – for the short term. You are essentially infilling the workforce with workers, which does bring the worker:dependent curve back up. But I think it is called kicking the can (34 years) down the road.

      You need ever increasing immigration in the future to sustain it. The immigration solution to these demographic crises is essentially a human capital ponzi scheme.

      The real solution is that the productive output of a generation of workers must be such that it can fund that generations present consumption and their future needs, without borrowing from future generations.

      • The unsustainable expansion of the whole world is based on an pyramid scheme. IS there an end game or will I be dead before then?

      • what I don’t get is that this has been circulating as information since at least the 90’s that I know of. That noone “in power” has done diddley squat to address it is a testimony to the failure in planing.

  7. How valid is it to assume a retirement age of 65 into the future?
    Even on current legislation, no one in Australia currently under 54 years old will be able to draw the government pension until they are 67.
    The UK has recently outlawed the concept of a retirement age. No one in the UK can any longer be sacked on the basis of reaching 65 or any other age. Employers now need some other excuse.

      • I was thinking more along the lines of assuming an ever increasing retirement age. Even small increases to the assumed retirement age have a significant effect on the workers per retiree ratio. It increases the numerator and reduces the denominator at the same time.

        For example, assume a worker/retiree ratio of 4:1. Now assume one year added to the retirement age. The number of workers might be about 2% more, but that would reduce the retirees by about 8% (based on the 4:1 ratio). The new ratio would become 4.08/0.92 or 4.44.
        So just a one year rise in retirement age can increase the worker/retiree ratio by more than 10%.

      • Will there be retirement?

        My girlfriend’s grandfather is 101 and still works twice a week and then another two days as a volunteer. He refuses to stop. He still has full use of all his faculties.

        Isn’t there research showing that with the mind as in the body, it’s use it or lose it?

    • Surely retirement is only for people who hate their jobs, right? If I love what I’m doing, I’ll keep doing it ’til I die.
      (assuming I’m physically and mentally able to continue doing it).
      You know, like artists, chefs, sculptors, ticket inspectors etc etc

    • I guess a key problem in this is the hurdle faced by anyone over 50 in getting a job. Despite “skill shortages” noone seems to want to hire older people (except say Mackers)

  8. Women participation is still only around 50%, if we develop a proper childcare support program & incentives it can probably be push to 70-75% and solve most of the problem 😉

    easy..thank you for asking

    • Yeah Right,and if we genetically modified Pigs to child-berth capabilities
      and then send the Women into full-time work the problem could all be solved ,with crackling to spare…JR

    • Rusty PennyMEMBER

      A woman (or man) staying at home, raising children and engaging with other child raising people in their locality is the most productive use of their time.

      Raise the retierment age

      * It take people away from dependencies, * It adds workers;
      * It adds more money to retirement savings;
      * A person needs less retirement savings due to them being a dependent for a less amount of time.

      • Unfortunately raising the retirement age does very little as only few reach the legal limit, in most country over 55 are quite underemployed/unemployed/retired.

        raising kid by yourself is quite inefficient when a childcare worker can take care of 4-5 of them at the same time. furthermore it make difficult for them to get back to work.

        Waste of perfectly good brain (and stay at home mothers seem to have their IQ dramatically fall after few years of stayathomeness )

      • Rusty PennyMEMBER


        Underemployed and unemployed is not a retirement age issue, it is an IR and immigration issue.

        Being retired before then, particuarly with the preservation age in Australia, is an income distribution issue.


        ?? I would suggest that is a very naarow term of reference you have there for ‘inefficient’ and ‘take care’.

        Raising them yourself offers increased attention and support.

        There is also value in being home to raise them. It may not be as easily quantified as $xxx in your pay cheque, only an individual parent can qualify the value

        furthermore it make difficult for them to get back to work.

        Again, this is an IR issue.


        It isn’t ‘wasted’, it is redeployed to a different skillset. To think it is wasted, it is being deployed on something as ‘inferior as child raising’, well that sounds too much like militant feminism that is beyond the scope of a rational adult to debate.

        I can say I’ve ever seen credible studies on IQ decline due to child raising.

    • dumb_non_economist


      It’s only my opinion, but one parent or close family member needs to be in the home.

      Child care is crap, regardless of how good it is, they need a parent or close family member around for emotional support and love.

      Maybe going back a couple of generations and staying in the home as grandparents would be a good thing.

  9. Would I be hated to suggest that policies, particularly in Europe, of allowing mass immigration of people from the Middle-east and Africa will make this problem much worse? From what I’ve read, they refuse to integrate, hate the country, yet happily take advantage of welfare and don’t get jobs. The ultimate lose-lose.

    As a disclaimer, I’m not anti-immigration. It makes a country better and more vibrant, but only as long as immigrants are happy to integrate and become productive members of society.

    • True. The immigration program needs to be managed to ensure we get best future residents / citizens in terms of their financial contribution (business / professional skills) and their possible contribution to our social harmony / coherence. This is not about being racist and anti – multiculturalism, but just pure logic that a nation with greater social coherence usually is more productive and has less social problems like high crime and unemployment rates. So new immigrants can be from anywhere as long as they want to integrate to our current values and systems.

      Disclaimer: I myself is a recent immigrant, living in Sydney from 2003 and not from Anglo-Saxon / Western background but I hate to see extreme multi-culturalism used as excuses not to integrate and live a harmonious live with society by some recent migrant groups.

      • Welcome to Australia! 🙂 I too immigrated here with my parents when I was a child.

        I agree 100% with you, but it seems the political class prefers to defer and increase the problems by ignoring the leechers and trouble-makers that come here and elsewhere. After all, we know that some of them would blow us up if we dare offend them…

      • Good god Fred Dag! … how have you been!

        I never actually saw your show I was to young but when I lived in NZ you were constantly referenced in pop culture between the mooloo’s and the sheeeeeps!

        Nice one.

        Kia Kaha Pakeha!



  10. Immigration is only one answer in defusing the demoraphic timebomb.
    The real answers lies in how we;
    1.Utilize the infrastructure of the NBN.
    2.Encourage older workers participation.

  11. Soylent Green!

    More seriously, it might finally fix the chronically high unemployment & underemployment most western nations have.

  12. Diogenes the CynicMEMBER

    In a world with Peak Oil implications playing out don’t we actually want lower populations anyway?

    The surplus available from energy for use in various economic ways is likely to be much lower, unless we want drastically lower living standards, a lower population would actually ease some of these issues.

  13. The answer is pretty simple: reverse the trend over the last few decades for young people to delay entering the full time work force later and later.

    • Rusty PennyMEMBER

      The problem isn’t at the left hand side of the population distribution curve, it is at the right.

      • RP, are you denying that young people enter the full time work force later than they used to?

        I know “the problem” is usually framed in the way you have put it, I’m pointing out there is another dimension to it.

        As an additional point, if the demographic profile swings towards more old people, inevitably that means fewer young dependent people. Fewer child care workers and fewer teachers needed. More people available to work in aged care.

      • Rusty PennyMEMBER


        Not at all, but they perceive there is a demand for them to be more productive at an earlier time in their life. Thus they engage in upskilling.

        But the issue is the number/ratio of people who are dependent.

        If we moved the retirement age to 35, there’d be an even higher dependency ratio.

        Why is 35 unacceptable, and 65 acceptable?

        It’s an arbitrary decision, a prescriptive law, not a natural law. So it is best to view the legacy of it implementation.

        When the retirement age of 60 was introduced, the average life expectency for men was 59, for women it was 62.
        I would assume that the average 66 year old today, i.e. one year into retirement is healthier than a 59 year old in 1902, i.e. 1 year before retirement. Also, there were 27 workers for every retiree, a rather small depency ratio.

        It was meant as income support for those approaching death, it was not meant as 25 year long service leave.

        Say we have a medical breakthrough and it raise life expectency to 150 years, soon enough a majority will be depending on the minority to bring all product to market.

        That is the problem.


        Labour involved with child care is based on absolutes. You won’t be taking numbers away at all.

        The increase in dependency ratio means the workforce is shrinking.


        Que? If the number of pre-school children is reduced from (say) 750,000 to 500,000, you are saying we still need the same number of child care workers?

      • dumb_non_economist


        I can’t remember when, but in the msm your points were covered and the opinionator said the problem was being overplayed for those reasons. Basically the argument was there would be a transfer of resources from one end of the age spectrum to the other. They weren’t arguing a zero sum case, just that it wasn’t going to as problematic as it’s being stated.

  14. Would be interesting to see a chart how Efficiency of labor increases over that period.

    Though politicians may restrict number of working hours per person same as they restrict release of new land 🙁

  15. I remember this trend in Japan being constantly discussed in business school in the 90’s. I find it fascinating.
    Take a drive on Sydney’s north shore. I wonder what it will be like in 20 years with all these 60+ couples in gigantic houses.
    It’s mostly all for sale now, but I don’t get the impression anyone is buying…

    • The Manly Daily WE real estate lift-out has been thinner than usual this Spring, but at least young people want to live here (or the inner city, until they tire of the “buzz”).

  16. The demographic bomb works in other ways as well, look around how many motor mechanics, plumbers, tradespeople of all ilks, scientist, doctors are in the baby boomers group. Some years ago HP did a report which said that for every 7 workers in AU there will be one replacement. So for every seven, say motor mechanics, there will be one. Long line up for sure for car servicing. No doubt immigration has helped slightly but the problem still remains – who is going to do the work?

  17. This argument is regularly trotted out by the globalist Big Australian crowd but ignores several facts. Older people are not just excess mouths to feed, they are not unproductive burden to the society they helped to build, unproductive children are a bigger burden on the public purse and I can point to a dozen African countries with young demographics that are economic basket cases. An aging demographic is a sign of a societies success.

  18. I think BB’s will actually work longer than many think. With interest rates where they are (and falling) and stock markets going nowhere, they will continue to work.