The media has extensively pointed out that the ageing of the population in Asia, Europe and North America is slowing economic growth. Ageing reduces the Labor force participation ratewhich in turn dampens GDP growth. But ageing also drags growth down through a second channel – one that is not widely recognized: namely, Labor productivity.

Using metrics from a recent study on the aging of the US population and another on aging in China, we estimate the impact of projected aging, as shown in the left chart above, on GDP growth over the coming decade. Aging will not only reduce the overall growth of these two countries, but will also significantly reduce it overall. per capita Base.

Our calculations are shown in the chart to the right. As you can see, aging will hit China much harder than the US. While aging will lead to 6 percent lower per capita GDP growth in the US than without aging, in China it will cause a much larger decline in per capita growth, 10 percent. This gap is mainly due to China’s much lower birth rate and immigration flows.

China’s political challenges in averting such a sharp decline in GDP growth are accordingly much greater than those of the United States. Increasing the birth rate through financial incentives is expensive and difficult. Raising the retirement age – currently 55 for women and 60 for men, compared to 67 in the United States – will be politically challenging. And China has so far stubbornly refused to tolerate increased immigration to fill the labor gap. The United States, by contrast, has historically been much more open to immigration, although public support will only be sustainable if future immigration flows come through legal channels – not unfettered immigration across the southern border.