Dependency and depopulation? Confronting the consequences of a new demographic reality - McKinsey Global Institute

25 May, 2025

This ¹ is a lengthy and highly academic article about the economic consequences of depopulation. There is a particular focus on the effect on national budgets and public pension programs, but there are additional sections on how spending will be affected in different categories (for instance, education, healthcare, and housing) as the age mix of a particular population changes.

• Falling fertility rates are propelling major economies toward population collapse in this century. ...
• Age structures are inverting—from pyramids to obelisks—as the number of older people grows and the number of younger people shrinks. ...
• Consumers and workers will be older and increasingly in the developing world. ...
• The current calculus of economies cannot support existing income and retirement norms—something must give. ...

It also discusses the middle income trap, or the risk that developing economies will "grow old before they get rich" (Ch. 3). Theoretically, these countries (identified as "later wave economies" in the article) may continue to benefit from a demographic dividend long after the rest of the world has transitioned into a post-growth era.

It proposes several ways to maintain growth in the face of a declining population, most of which will be very unpopular (longer working life, higher work intensity).

This paragraph from the conclusion could be the entire thesis of this blog --

In particular, depopulation could affect many sectors of the economy in unanticipated ways. Just imagine schools needing to adjust to a precipitous drop in the number of students or even closing altogether, as they already have in some places. Many home buyers today look for houses with “in-law rooms” to accommodate aging parents, yet the value of those homes could plateau or decline if the number of households shrinks. For decades, rural communities have faced plateauing home prices as they lost people to fast-growing urban centers, but whole nations depopulating would have significantly more severe consequences. Declining asset prices and shrinking pools of workers to generate income could challenge debt sustainability and the social contract, sparking struggles that reverberate throughout society.

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