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Emerging economies must get rich before they get old
Within a generation or two, many emerging economies will likely face the same demographic problems plaguing their developed-country counterparts – without the financial resources needed to cushion the blow.
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A couple poses for wedding photos on Feb. 11, 2025, outside the Forbidden City in Beijing. China in 2024 saw a one-fifth decline in marriages, the latest sign of persistent demographic challenges as Beijing works to encourage births despite an uncertain economic outlook for young families. (AFP/Greg Baker)
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he effects of falling birth rates and rising life expectancy are increasingly evident in advanced economies like Germany, Italy and Japan. Labor markets are tightening, worker shortages are worsening and families are struggling to find care for aging parents. In some areas, declining student numbers are forcing schools to shut down.
But population aging is not limited to advanced economies. Within a generation or two, many emerging economies will likely face the same demographic problems plaguing their developed-country counterparts – without the financial resources needed to cushion the blow.
In a new McKinsey Global Institute (MGI) report, we divide these demographic shifts into three distinct waves.
The first wave has already swept advanced economies, as well as Eastern Europe and China, where working-age populations peaked around 2010, followed by steady declines.
As a result, per capita gross domestic product growth in those economies is projected to slow by 0.4 percentage points annually on average, or as much as 0.8 percentage points in some countries by 2050. While around 30 percent of the labor income is currently used to fund pensioners’ consumption, this figure could increase to close to 50 percent by mid-century.
The second demographic wave will hit emerging economies over the next decade, as working-age populations peak everywhere except Sub-Saharan Africa, where it is projected to peak when the third wave arrives in the second half of the century. These economies have a narrowing window of opportunity before their demographic dividend diminishes and the financial burden of supporting an aging population rises sharply.
In nearly half of the 89 emerging economies outside Sub-Saharan Africa, fertility rates have already fallen below the replacement level of 2.1 births per woman, leading to a rapid decline in the ratio of working-age individuals (typically defined as 15-64) to those who are 65 or older.
