What Does an Aging Population Mean for Economic Growth?

Turn any article into a podcast. Upgrade now to start listening. Members can share articles with friends & family to bypass the paywall. There’s no way around it: America is getting older. The country’s median age climbed to a record-high 39.4 in 2025, according to U.S. Census Bureau population estimates, up from 35.6 in 2001. Almost one-third of Americans are over the age of 55, compared with roughly a quarter of the population in 2010. It would be tempting to attribute this phenomenon to Americans living longer, but the data shows that is the less significant of two main factors. While life expectancy increased from 78.1 in 2007 to 79.0 in 2024—a change of just over 1 percent—the general fertility rate, a measure of births per 1,000 women aged 15-44, fell by 22 percent over that same period. Life expectancy may be creeping upward, but over the past decade, American women have given birth at a lower rate than any cohort since the late 1970s, and demographic trends are adjusting accordingly. With an aging population come inevitable questions about the future of economic growth, particularly as the number of Americans in the labor market decreases and businesses must find ways to sustain productivity with fewer human resources. Meanwhile, the entire baby boomer generation will soon surpass the U.S. full retirement age of 67, putting extra fiscal strain on entitlement programs like Social Security and Medicare. That prognosis might appear dire, but there is also some cause for optimism. Despite the conventional wisdom that aging populations slow economic growth, new research is changing our understanding of how economies adapt to demographic shifts in surprising ways. The trade-offs of aging. Research has typically suggested that an aging population is likely to reduce a country’s per capita GDP—the measure of total economic output divided by population. One recent study found that, between 1980 and 2010, for every 10 percent increase in the proportion of the U.S. population that was older than 60, per capita GDP decreased by 5.5 percent, a reduction brought about by a combination of slowing employment growth and slowing labor productivity growth. The authors concluded that, during this period, population aging reduced the growth rate of America’s per capita GDP by 0.3 percent. The logic behind this claim often amounts to a simple math problem that economists call the “support ratio.” The ratio is derived by taking a country’s working-age population (for example, those aged 20–64) and dividing it by the total population. A higher support ratio means a country has more workers earning incomes to care for fewer dependents, like children and retirees. The lower the support ratio, the less capable an economy is of supporting a country’s non-working population. As the U.S. heads toward a lower support ratio, the argument goes, economic growth metrics are likely to slide. “I think it’s clear, AI and such aside, that slowing population growth translates into slower GDP growth almost on a one-to-one basis,” Ronald Lee, a professor emeritus of economics and demography at the University of California, Berkeley, told The Dispatch. Yet Lee said that while GDP growth animates much of the discussion surrounding the economics of aging, more precise measures of quality of life paint a different picture. “To me, a measure that is closer to individual well-being, like per capita income, is more relevant, and the effect on per capita income is not at all clear.” Economists, including Lee, have argued that stagnating labor force growth might increase the amount of capital available to each worker, which could in turn raise productivity and wages. Lee has also argued that a lower birth rate can increase the capital invested in each child, partially offsetting the economic effects of having fewer workers. More than any other mitigating factor, however, the possibility that technological innovation could neutralize the negative effects of an aging population may be most promising. Can technology fill the gaps? In a new working paper published by the National Bureau of Economic Research this month, economists from MIT and the London Business School analyzed seven decades of demographic change across dozens of countries. The paper found that, contrary to popular assumptions, lower birth rates have raised GDP per working-age adult to such an extent that the trend “fully offset the negative effect of population decline, leaving aggregate GDP broadly unaffected.” Keelan Beirne, an MIT doctoral student and one of the paper’s co-authors, told The Dispatch that his team was surprised by the results but found the evidence for them to be overwhelmingly corroborated across countries and within different geographic regions of the U.S. “Across the board, we found that these lower birth rates were leading to a faster pace of technological adoption and progress,” Beirne said. In other words, when countries were forced to adapt to a sparser workforce, they more readily leaned into technological solutions and saw a boost in productivity. Recent research by Harvard Business School professor Joseph Fuller also suggested that technological adaptation could be crucial to offsetting population aging. Fuller proposed that artificial intelligence can help older Americans work later into their lives if companies lean into midcareer reskilling programs and allow more experienced workers to focus on roles that emphasize judgment. “We have to stop presuming that older workers are incapable of responding to advances in technology and start thinking about them as a source of knowledge and perspective that is essential for unlocking the potential of that technology,” Fuller said in a Harvard Business School interview. Yet, despite the promise of technology to maintain growth, innovation cannot mitigate every economic problem created by an aging population—most notably, the increasing strain put on Social Security by its growing cohort of beneficiaries. “While this is what happened in the past, and maybe this is how the economy works, this isn’t necessarily how aging is going to play out in the future for a variety of reasons,” Beirne said of the ameliorative effects of technology. “I think one of those reasons is the government’s fiscal position.” The future of pension programs. The good news for the U.S. is that, compared to its Western peers, America’s elderly population is among the least reliant on public transfers like Social Security, welfare benefits, and pensions. While those over the age of 65 in countries like Belgium, France, and Finland receive, on average, more than 70 percent of their post-retirement income from public transfers, Americans in the same age bracket draw less than 40 percent from public coffers. Americans work later into their lives than in most other high-income countries, but the primary difference comes from the large amount of asset income Americans earn from voluntary private pensions like 401(k)s. And America’s birth rate, while shrinking, is still higher than that of almost every European country. The bad news is that probably won’t be enough to ward off Social Security’s impending fiscal crisis, which could lead retirees to lose an estimated $16,900 per year in benefits, according to a recent report by the Committee for a Responsible Federal Budget, a nonpartisan think tank. According to the annual Social Security trustees’ report released last month, Social Security is set to become insolvent in 2032 if its current trajectory continues unabated. “We have to do something,” Lee said. “That’s obvious. It’s been obvious for decades, but now it’s becoming increasingly pressing that we do something.” The trustees’ report projected that Social Security’s actuarial deficit—the average change in income needed to achieve a balance of zero—over the next 75 years is 4.42 percent of taxable payroll, or 1.5 percent of GDP. However, Lee suggested that any revenue of that magnitude would be better spent on children, and instead proposed raising the age at which high lifetime earners can begin receiving Social Security benefits. Lee also proposed introducing automatic stabilization measures so that the benefit structure of Social Security reliably adjusts to demographic and economic changes. He cited Sweden and Germany as examples of countries that have successfully introduced automatic stabilization to their pension programs. “I think it’s very important that we get used to the idea that people are living longer,” Lee said. “They’re healthier longer, they’re cognitively strong longer, they should be working longer as well.” Eli Kronenberg is a Dispatch intern and a rising senior at Northwestern University. When he’s not reporting, he is usually taking long walks, listening to an array of podcasts, or riding the emotional rollercoaster of supporting Tottenham Hotspur.