Using OECD population projections and holding labour productivity constant, by 2050 the decline in output per head induced by ageing would be 14% in Germany, 16% in Italy and 22% in Spain. A continuation of current rates of labour productivity growth in the euro area would just about offset that scenario. But this would mean running just to stand still.
If we are to raise living standards within ageing societies, productivity growth must accelerate. And yet what we see today is sluggish labour productivity growth relative to twenty years ago in most advanced economies. This is in part because so-called capital deepening has slowed – the amount of capital per worker – as investment has fallen during the crisis.