The Aging of the Labor Force and Globalization

The rapid aging of the population structure across most developed countries is one of the main challenges facing their economies and governments (CEC 2004a).1 These changes will have significant impacts upon pension and healthcare costs, the demand for different products and services, the quantity and composition of labor forces, productivity levels etc. and hence national and regional economic growth and living standards (Mackeller 2003; Samorodov 1999). Indeed, Bloom and Canning (2003) argue that having a younger population with an increase in working age per non-working age population may be one of a number of factors in the huge growth of ‘Tiger’ economies, such as Ireland in the 1990s, and the reverse of having an aging structure may have a negative impact on growth. For example, Lisiankova and Wright (2005) argue that EU growth rates will fall significantly due to population aging. Unemployment may also be influenced by changes in the age structure as Katz and Kreuger (1999) estimate that 0.4 percentage points of the total fall in USA NAIRU from the mid-1980s to mid-1990s was due to the baby boom maturing. For those countries with at younger age structure these changes may provide opportunities for increased development using their own growing labor supplies to help meet global consumption, but they may also be a source of migrants to countries experiencing a reduction in their labor force, as part of labor market globalization.