Labor days
| | |
Click to get this newsletter weekly |
|
|
|
| Brought to you by Alex Panas, global leader of industries, & Axel Karlsson, global leader of functional practices and growth platforms
| | | | | | |
| | | | |
| Retirement may be decades away for most Gen Zers, but what the world could look like when they hit retirement age is already taking shape.
Global demographic changes—specifically, lower fertility rates and longer lifespans—mean the number of older people in the world will increase and the number of younger people will shrink in the decades ahead. According to a new report from the McKinsey Global Institute (MGI), that could spell trouble for economies around the world based on today’s societal and work-related norms.
As McKinsey senior partner and MGI chair Sven Smit and his coauthors put it, if no action is taken today, “younger people will inherit lower economic growth and shoulder the cost of more retirees while the traditional flow of wealth between generations erodes.”
But don’t despair just yet. Smit and his coauthors identify three ways to combat the drag that shifting demographics may have on future GDP per capita: improving labor intensity (meaning how many hours per week employees are spending on work), productivity, and the “age mix,” or the proportion of people in various age groups at a given time, which can be affected by longevity as well as fertility and migration rates. Pulling only one of these levers won’t be enough to help countries reach their growth goals and raise living standards. All three—more hours, more productivity, and more workers—need to be part of the equation.
Consider the labor intensity factor. If countries around the world set growth rate targets in the next 25 years that are based on rates of the past 25 years, the report projects that workers in developed countries would need to increase the number of hours worked per week. In the United States, for example, employees would need to work an additional 1.5 hours every week. That doesn’t seem so bad compared with Spain, where employees would need to add more than 13 hours of working time to their week. (Did we mention Spain is currently embroiled in a debate about shortening the workweek?)
Plenty of this may seem like a tomorrow problem, but employers can begin offering solutions today. In China, where Smit and coauthors expect to see a sharper decline in the share of the working-age population—compared with countries such as the United States and Germany—employers are offering family-friendly work policies to encourage people to have more children. To be sure, some of these policies include shortening the workweek, which could complicate things all over again.
As for individual Zoomers, they may face another challenge: Accumulating the same level of wealth as today’s seniors could be tricky for them, since public pensions may be difficult to maintain, and more Gen Zers may be living longer in retirement. Some countries are trying to address these potential pension system issues—for example, by tweaking retirement ages.
Still, a combination of other steps (again, increasing labor intensity, productivity, migration, and fertility) will be needed to help protect public finances and boost the well-being of Gen Zers as they age—as well as generations beyond. Here’s to you, Gen Beta. | | | | | | |
| | | | | | | |
| | | —Edited by Alexandra Mondalek, editor, New York
| | |
|
Click to get this newsletter weekly |
| |
|
Have feedback or other ideas? We’d love to hear from you. |
|
|
|
|
|
| |
| |
|
Copyright © 2025 | McKinsey & Company, 3 World Trade Center, 175 Greenwich Street, New York, NY 10007
|
|
|
|
|