One of the strongest engines of economic growth started slowing 10 years ago — and it’s not coming back

Economics professor Charles Goodhart and his team at Morgan Stanley just published a note on global demographics, with some fantastic charts that show just how much the shape of the world’s population is changing, and how it will affect us.

During the second half of the 20th century, there was an explosion in the size of the global workforce, with countries like China opening up to international markets. Demographics were on-side, with the working-age population growing at strength around the world. That was a pretty easy and natural source of growth for decades.

Now, that’s not looking so great any more. It’s not a new development — in fact, the growth peaked at over 70 million new workers per annum in 2005, and is heading down:

World population growth

By the 2030s, at the end of the chart, population growth will have slowed in absolute numbers to the lowest increases since the 1960s, rising by less than half than what it did in 2005. Workforces in developed markets and China will shrink, and African growth will provide the lion’s share of the world total.

But in proportional terms it will be far, far weaker. The world is projected to have a population of over 8 billion by 2030, as opposed to more like 3 million in 1960.

Unlike other economic projections, this one’s more difficult to get wrong. Fertility rates aren’t particularly volatile, and you can already tell how many people will be added to the working-age population a couple of decades early — because they have been born.

The world’s population is also increasingly aged. You can see on the chart below that the ratio of workers to elderly non-workers is falling. That’s a concern, because it puts pressure on things like social security systems. There’s more pressure on the government to spend than there is new tax revenue coming into the economy:

Dependency ratios

This is one problem that there isn’t going to be an obvious solution for — migration can give a demographic boost to struggling countries, but can’t solve the problem if it’s global.

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