Employment, public accounts: these worrying economic consequences of the aging of the population

Falling birth rate and aging population. On the horizon, a worrying demographic deficit. And the French economy is waning. Because these circumstances would represent real threats to the coffers of the State, according to a note from the very liberal Institut Montaigne. It is clear that this “double dynamic will have a direct impact on the national wealth produced, the social accounts, employment and wages of our country”, estimates its author, the political scientist Bruno Tertrais. This is why public policies and societal choices will "necessarily" be influenced by this aging of the population and its economic consequences, such as the reduction in productivity and the fall in interest rates.

Aging is almost certain since the low population growth of “only” 0.3% in 2022 would testify to the entry of France into a phase of demographic slowdown, judges the study. A relatively good rate compared to that of other European countries such as Germany where the population is decreasing. But "the total fertility rate (ICF) was only 1.8 in 2022 while it was still at the "renewal threshold" a decade ago (2 in 2013)", points the finger at the report. Hence the mechanical aging of the French population. For the Institut Montaigne, from a “pioneer of the demographic transition”, France has thus become a “pioneer of aging in Europe”.

While immigration could slow this trend, it will apparently not be enough to halt the aging of the population. INSEE's projections expect a proportion of over 60s to reach 32% in 2040. As for those over 65, it would drop from 21% today to 29% in 2070. the number of assets by 2070, “from 30.1 million in 2021 to 30.5 million in 2040 (end of the ramp-up of the 2014 reform) […] to stand at 29.2 million in 2070”. The Department of Research, Studies and Statistics (Dares) of the Ministry of Labor even shows that, by 2030, nearly 100,000 positions will remain vacant each year, due to the shortage of young people entering the labor market. the job market.

From this aging demography would arise several harmful phenomena for the national economy. “In general, the older a country gets, the more the population of working age decreases, the more potential growth slows down”, notes the Montaigne Institute. Added to this is the potential deflationary effect caused by excess savings and a drop in demand for consumer goods. Public health expenditure would also increase, increasing by 2.5 points of GDP between 2010 and 2060. There are also consequences for the pension system. “The mechanical impact of aging will thus lead to an increase in pension expenditure of 2.2 points of GDP by 2030 and 3.5 points of GDP by 2040”, estimates Bruno Tertrais. For example, by applying the expected age pyramid for 2040 to the year 2019, social protection expenditure would have been 100 billion euros higher, rising from 703 to 803 billion euros.

So many holes that current immigration would not be enough to fill according to the report of the Institute. “New arrivals also end up getting older, and the improvement in the dependency ratio (ratio of population of working age to population over 65) is therefore temporary. The mechanistic reasoning that wants to make up for a lack of labor force through immigration is therefore short-sighted,” comments the author. Before noting that "to stabilize this ratio and therefore have an impact on the financing of pensions, massive immigration would be essential", advancing the astronomical figure of two million immigrants per year between 2025 and 2050, or 50 million in total.

While the aging of the population entails many risks for the economy, some nevertheless underline the opportunities of this profound change. A study by the Xerfi research institute estimated that the aging economy could weigh some 109 billion euros in 2026. A juicy market, for those who know how to take advantage of it.