Decline in the labour force (the population aged 15 to 64) is a demographic change in many developed economies, but some emerging markets also start to face the problem, as birth rates fall rapidly amidst rising living standards. A fall in labour supply will drag on economic growth and consumption, as the working-age population is the cohort that produces and consumes the most. Businesses can use automation and capitalise on foreign, female and older workers to fill in the labour shortage.
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The working-age population refers to people from the ages of 15 to 64 who are capable of performing economic activities. It is, therefore, the labour force and major driver of consumption and growth in an economy.
As a result of low birth rates and population ageing, the working-age population is shrinking in many developed economies, as well as in some of the world’s leading emerging markets. China, Russia, Japan, Germany and South Korea are expected to witness the largest declines in its working-age populations in absolute numbers to 2030.
A shrinking workforce will affect these countries in various degrees, with wide-ranging impacts on the economy, pension system, labour market, industry and consumption. Businesses should take into account changes in a country’s labour force in their business strategy in order to better adapt to its operating environment.