The Economic Challenges of Ageing and the Ways to Address Them

Join us for a Postgrad Seminar presented by Prof. Vincent Vandenberghe from the Economics School of Louvain at UCLouvain in Belgium.

The rise in life expectancy is arguably the most remarkable by-product of modern economic growth and scientific progress. Over the past 200 years, advanced economies have gained roughly 2.4 years of life expectancy per decade. Together with sharply declining fertility rates, this has led to pronounced population ageing.

The central concern is the shrinking share of working-age individuals in the population. Since labour remains a fundamental factor of production — including in operating machines and digital systems — a simple approximation suggests that slower growth of the working-age population will weigh on economic output. This reasoning underpins pessimistic projections for living standards in rapidly ageing countries such as Japan, Italy or Germany. Yet this perspective often conflates demography with economics, implicitly assuming a fixed labour supply and unchanged institutions. In reality, societies adjust. Retirement ages can be indexed to healthy life expectancy, entry into the labour market can be accelerated, participation rates can increase, and productivity growth — enhanced by advances such as AI — can help offset demographic headwinds. Population ageing presents real challenges, but its economic consequences depend on policy choices and productivity dynamics, not on demography alone.

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