McKinsey Released report on Demographic Transition and Depopulation

McKinsey has released a report titled ‘Dependency and Depopulation? Confronting the Consequences of a New Demographic Reality’, which offers a comparative analysis of the demographic trends in both developed (first-wave) and developing (later-wave) countries.

Key Highlights of the Demographic Transition

• Depopulation: Two-thirds of the global population resides in countries where fertility rates are below the replacement level of 2.1 children per family. Age structures are shifting from pyramidal to obelisk-shaped, as the number of older individuals rises and the number of younger individuals declines.

• Projected Population Decline: By 2100, populations in several major economies are expected to decrease by 20%-50%, according to the UN.

• Falling Support Ratios: Support ratios are decreasing from 6.5 today to 3.9 by 2050. The support ratio is the number of people aged 15-64 (working age) compared to those aged 65 and older. In advanced economies and China, retirement systems may need to allocate 50% of labor income to bridge the growing gap between the consumption and income of seniors.

• India’s Diminishing Demographic Dividend: India has 33 years to capitalize on its demographic dividend before reaching support ratios similar to developed countries. The demographic dividend has contributed 0.7 percentage points annually to GDP per capita growth. However, by 2050, this contribution is expected to shrink to just 0.2 percentage points per year.

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