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A blog by Leon Oudejans

The global “youth scarcity” crisis (Axios)

Intro LO:

The Axios Macro article below on demographics is a must-read.

Actually, China is already facing this “youth scarcity” crisis and millions of young Chinese already refuse to contribute to the pensions for the elderly (eg, Bloomberg, 10 January 2025).

The main solution appears simple but is actually complex: import of foreign labour to fill vacant domestic jobs.

Lack of communication due to foreign languages, and conflicting religions will guarantee domestic, escalating problems (eg, crime, housing, jobs, violence).

Following that complex solution, nationalism has surged in Western countries. Their voters view nationalism as a political solution against immigrants. Ultimately, voter self-interest will prevail (eg, cleaning, repairs).

Example: the former Chancellor of Germany (2005-2021) invited many thousands of refugees in 2015 by claiming Wir schaffen das. As a result, the German nationalist party AfD may win the 2025 federal elections.

Another – technological – solution is still many years – if not decades – away: artificially intelligent robots (eg, healthcare, home, hospitals). Slowly, that solution is being implemented (eg, medical robot, social robot).

Please also see my 2019 blog, The new generational conflict and divide:

The first reports about a new generational divide started in USA (eg, Forbes-2013McKinsey-2016) and then Western Europe (my 2017 blogFT-2018). It seems increasingly likely that future generations will be less powerful and poorer than previous generations. This paradigm shift will have major political consequences: more conservatism and more nationalism.

My 15 January 2019 blog, The new generational conflict and divide


Axios Macro title: The global “youth scarcity” crisis

By: Neil Irwin and Courtenay Brown

Date: 16 January 2025

Around the world, people are having fewer babies than in the past. A new report from McKinsey puts sobering numbers on that reality, a profound economic threat for the decades ahead.

Why it matters: The entire social contract in rich countries — of ever-rising wealth and the ability to retire and live comfortably in old age — is threatened by the reality of “youth scarcity,” as researchers at the global consultancy put it.

  • It implies that too few younger people in their prime working years are producing goods and services, relative to retirees consuming but not producing.
  • Productivity growth achieved thanks to AI and other technologies could help lessen the dilemma, as could higher immigration rates from places where population is still growing. But both create their own risks of contributing further to societal strains.

What they’re saying: “Falling fertility rates are propelling major economies toward population collapse in this century,” a team from the McKinsey Global Institute, the firm’s in-house think tank, writes.

  • “Our current economic systems and social contracts have developed over decades of growing populations, in particular working-age populations that drive economic growth and support and sustain people living longer lives,” they write.
  • “This calculus no longer holds.”

By the numbers: For a country’s population to remain steady over time, absent migration, it needs a fertility rate of 2.1 live births per woman. Two-thirds of the world population lives in countries with fertility rates below that, McKinsey finds.

  • In Western Europe, the fertility rate was 1.4 in 2023. In North America, it was 1.6; in China, 1.0; in Latin America, 1.8; and in India, 2.0.
  • The major exception was sub-Saharan Africa, with a 4.4 fertility rate in 2023.

Between the lines: The structure of pension systems across rich countries is that when adults hit some advanced age, usually in their 60s, they stop working and become recipients of support. That’s ultimately borne by the working-age population, typically aged 15 to 64.

  • “Without significant changes, the world’s aging population means a growing number of older people who aren’t working will require the support of a shrinking number of younger people who are,” the McKinsey researchers write.
  • These trends cannot be changed quickly. Even if people around the world start having more kids tomorrow, it takes years for those progeny to contribute to economic output.
  • Babies and small children, famously, are not very good workers.

Of note: “I think this will be a big, big source of tension because of the intergenerational burden,” Anu Madgavkar, a McKinsey partner and author of the report, tells Axios.

  • “Younger people are going to find that they will possibly have to work much longer and harder,” she adds. “They will have to probably be taxed more at the same time, and they’re probably going to wait longer for intergenerational wealth transfer to occur.”
  • “Negotiating that burden is not going to be easy or pretty,” she says.”


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