Favourable demographics have put the continent on the path to growth, says Rupert Hargreaves
The UK economy needs more workers. Even though net migration hit a record of 745,000 in 2022 and the number of people in employment has risen close to an all-time high, there are still nearly a million open roles. Economists and policymakers have spent countless hours trying to determine the root cause of this problem, and two main issues have been identified, both of which revolve around economic inactivity. The number of people entering retirement or leaving the workforce owing to long-term health difficulties has increased dramatically. The trend does not appear to be slowing.
The Office for Budget Responsibility’s forecasts show that economic inactivity owing to ill health and old age could weigh heavily on economic growth over the next three decades. That is to say nothing of the impact an ageing and sickly population will have on government finances, with a shrinking number of employees funding an ever-growing number of those on state support.
This problem is not unique to the UK. All G7 economies are dealing with ageing populations, mounting economic inactivity and a declining birth rate. Nowhere is the trend starker than in China. China’s economic miracle and explosive growth over the past three decades have been powered by its large, young population. Exports underpinned economic expansion over much of the past few decades, but as discretionary incomes have grown, domestic consumption has taken over.
Household spending now accounts for more than 50% of GDP and is expected to keep growing as the country continues to develop. However, China is ageing rapidly. Its population has declined for two years in a row, with the population falling by 2.1 million in 2023, following a decline of 850,000 in 2022, the first fall since the great famine in 1961. Deaths are exceeding births and the population of residents over 60 reached nearly 300 million in 2023, up by 20 million in a year.
While China still has a relatively young population, with an average age of 37 compared to the UK’s 40, the average age is set to rise rapidly over the next two decades. This is a problem because consumers have a lower propensity to spend as they age, especially if they don’t have a social safety net. According to the United Nations’ International Labour Organisation, the average monthly pension payment in China in 2020 was around ¥2,040 yuan (£222). In 2021, the last full year for which Beijing��
