## Sustaining Growth in an Aging World

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### Healthy aging: empirical findings
- Recent cohorts of older people (those 50 and older) have better physical and cognitive capacities than earlier cohorts of the same age.
- Cognitive example: "the 70s are indeed the new 50s" — a person who was 70 in 2022 had the same cognitive health score as a 53-year-old in 2000.
- Physical capacities of older workers (grip strength, lung capacity) have improved.
- Labor market associations for improvements in cognitive capacity among those 50 and over:
  - Cumulative improvement over a decade associated with an increase of about 20 percentage points in the likelihood of remaining in the labor force.
  - Associated with an additional six hours worked per week.
  - Associated with a 30 percent increase in earnings.
- Conclusion: Better health among older cohorts could mitigate aging’s drag on growth.

### Economic impact: model projections and country outcomes
- Model: multicountry general equilibrium model that accounts for uneven age-structure changes and longer lives in better health.
- Global projection summary:
  - Improved labor market outcomes for people aged 50 and older could contribute about 0.4 percentage point annually to global GDP growth in 2025–50.
  - Global growth would still be about 1.1 percentage points slower than in prepandemic years if governments do nothing, with demography’s drag accounting for almost three-fourths of the decline.
- Country-specific highlights:
  - Some advanced economies with relatively older populations (such as Japan) are likely to see their economies shrink.
  - Canada and the United States are expected to continue to grow during this century, albeit at a slower pace.
  - China: projected to see a particularly sharp decline in GDP growth—about 2.7 percentage points relative to 2016–18—driven by adverse demographics and the end of rapid catch-up to the world’s productivity frontier.
  - India: projected to see a milder growth decline of about 0.7 percentage point in 2025–50; India and low-income developing countries are set to experience a sharper growth slowdown from 2050 onward.
- Note: LICs = low-income countries, bloc of 44 countries (as referenced in Chart 1).

### Policies that help: scenarios and simulated gains
- Policy package simulated:
  1. Additional public health measures that narrow cross-country gaps in the functional capacity of older individuals by about one-fourth over the next four decades.
  2. Complementary changes to retirement plans, training programs, and more flexible work conditions that incentivize a gradual rise in the effective retirement age in line with improvements in life expectancy.
  3. Policies that narrow gender gaps in labor force participation by three-fourths by 2040.
- Simulated impact:
  - These policies could boost global annual output growth by about 0.6 percentage point over the next 25 years.
  - This would offset almost three-fourths of the estimated demographic drag during that period.
- Distribution of gains:
  - India could see a strong boost given large existing gender gaps in labor force participation.
  - European economies with low effective retirement ages relative to life expectancy (such as Greece, Italy, and Spain) would benefit from incentivizing longer working lives.
- Feasibility:
  - For the majority of countries in the study, the assumed improvements in health and labor supply are comparable to trends observed over the past two decades; they are within reach.

### Policy implications and recommendations
- Prioritize health policies that enhance the human capital of older workers and reduce disparities in health outcomes across socioeconomic groups and countries.
- Implement measures to increase labor supply, notably:
  - Policies to increase female labor force participation.
  - Incentives and reforms to foster longer careers (retirement plan adjustments, training, flexible work).
- Complement public health improvements with labor market and retirement reforms to realize substantial mitigation of demography’s drag on growth.

*Article by Bertrand Gruss and Diaa Noureldin; draws on Chapter 2 of the IMF’s April 2025 World Economic Outlook.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2025/06/gruss.pdf_