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The Organization for Economic Cooperation and Development (OECD), a global policy forum, is warning that rich countries face a greater chance of slower income growth in the coming decades due to aging populations and shrinking workforces.
By 2060, the number of working-age people (ages 20 to 64) will have declined in many advanced economies, while the number of retirees will soar, the Paris-based research body said Wednesday in its OECD Employment Outlook 2025 report.
The imbalance is likely to strain economies because fewer workers will be supporting more retirees, dragging down economic output and income growth. An aging population also bleeds into changes in housing needs, as demand may shift from large family homes to smaller, more accessible housing, retirement communities or assisted living.
Across all 38 member countries of the OECD, the working-age population is expected to fall by 8% overall. But in more than one-quarter of these countries, the decline will exceed 30%.
As people live longer, the share of retirees compared to working-age adults is projected to rise from 31% in 2023 to 52% by 2060 — and above 75% in countries like Italy, Japan and South Korea. With fewer people working, income growth will slow, which could in turn impact homeownership affordability.
Unless more women, older people and immigrants are brought into the workforce, income per person will grow at just 0.6% annually through 2060, down from 1% before 2020.
Countries like the U.S. and Ireland may avoid this slowdown, the OECD said, partly due to already having high labor-force participation rates.
The OECD said that boosting fertility — which many governments have offered incentives for — won’t help remedy the issue at hand since those children won’t join the workforce for 20 to 25 years.
Given the rise of artificial intelligence in the workforce, the OECD is of the opinion that AI won’t do much to offset the decline in the number of workers, as it argues that there’s no substitute for people.
