An increased dependency ratio is seen in an aging population, resulting in the young burdened by the need to support the aged. This reduces family disposable income, and thus causes standard of living to fall. Also, increases in tax reduce the disposable income of the young. Together with the negative economic impacts, the low income group will find it harder to break out of the poverty cycle. This can lead to increased crime rates and incidences of social unrest as a result of dissatisfaction or desperation due to poverty and unemployment. These can further compound the problem of aging population, as the unsatisfied young migrate to other countries.
Now us look at the negative economic impacts. With decreases in labour pool and aging population, labour cost will increase as a result of increased wages and increase in medical costs. Also, an aging population can lead to reduction in profit as productivity and efficiency of workers decreases due to increase in the number of sick days associated with an aging workforce. Investors may pull out of the country due to the increase in labour cost, lower productivity and lower efficiency of workers.
With increased proportion of the aged in the population, there will be increased government spending on welfare services for the aged. In addition, with increased dependency ratio, there will be fewer economically active to support the aged, straining the income of the economically active. There will be a decrease in tax base as proportion of economically active in the population falls. The government may end up upping tax rates for the economically active to offset the increase in government spending for the welfare services for the aged. The employment of foreign workers to compensate the decrease in labour pool can lead to leakages of income to foreign countries through remittances of wages by the foreign workers.
Regional imbalance and uneven distribution of social burden can become more profound, leading to regional disparities. This is the result of the migration of rich aged migrants to retirement towns and inner city having a higher percentage of poor aged migrants.
However, an aging population does have its positive impacts. Firstly, there will be increased employment choices in the short term as a result of decrease in labour pool. Also, there will be increased wages in the short term as a result of decrease in labour pool. As demand for labour exceeds supply, wages tend to go up.
In conclusion, as can be seen, an aging population is a long term problem that brings about many negative impacts. Although there are some positive impacts associated with an aging population, these tend to be short term.
