The Aging Population Crisis in the Developed World
- Param Vastani
- Nov 23, 2025
- 3 min read
By Param Vastani
In 2023, it was reported that China’s population had declined by 2 million people; the effects of the one-child policy had caught up to the country. However, China isn’t alone; there has been a trend of declining populations throughout the developed world, from Japan and South Korea, to more recently, western Europe. Before, people worried about overpopulation and how there weren’t enough resources for everyone, and even though it is still a concern, the problem of underpopulation is beginning to plague many countries.
In order to maintain the current population level, there must be 2.1 births per woman. However, this figure stands at 1.26 for Japan, 1.33 for Canada, 1.46 for Germany and so on. Simultaneously, there has been a remarkable increase in life expectancy in almost all countries over the past few decades. Even though this is a good thing, the combination of these two trends are having and will have significant effects on the working population.
As more people live longer, they have longer retirements where many have to rely on pensions and social security. All such tax funded programmes have to cater to a larger proportion of people than before; the reducing birth rates have led to declining percentage of working class taxpayers paired with a growing percentage of elderly. The tax money of the working isn’t enough to keep these programmes running in the long run, if the current situation intensifies. All of this is accompanied by declining productivity and labour shortages, as well as the pressure on the healthcare system. This increases the strain on the working population and puts the government in a dilemma: whether to increase taxes or to abandon the programmes, both of which will raise dissent among the people.
Maintaining such social safety programmes will require more and more investment, which will have to be funded either by increasing taxes, raising the working age, or increasing borrowing. None of these options are going to be very popular, making it very difficult for governments to tackle this problem through fiscal measures. For instance, there were large protests in France in 2023 over a proposed government measure to raise the retirement age from 62 to 64, with over a million participating. The ultimate burden of this ever growing ‘underpopulation’ issue in the developed world seems to be falling upon the working class.
Many governments have tried implementing policies to battle this problem but few have been successful. A common one has been providing incentives such as tax cuts to families having children, although this hasn’t worked to the extent that they might’ve wanted. Others have tried subsidizing the costs of having a kid, such as by providing housing, employment and money. Another aspect to not overlook is the cultural and social expectations of having children which vary in each country. Therefore, each country has unique hurdles to solve this shared crisis.
Another one could be consumption taxes. These are taxes paid when you buy goods and services. Increasing consumption taxes is a possible solution to the problem, as they can broaden the tax base and make tax evasion harder. However, implementing large scale consumption taxes can be difficult, with the problems ranging from setting the tax rate, to not making them a regressive tax, to not destroying the markets of price elastic goods.
One of the more effective, and controversial, strategies to solve this problem is immigration. For example, even though fertility rates in the USA are far below 2.1, it has managed to keep its population stable. Young, skilled workers from all over the world immigrate to the country due to the opportunities they get. The USA is benefiting as it is gaining a diverse and highly skilled workforce. However, immigration is not the perfect solution and people are polarized on the issue across the political spectrum. Both sides of the issue present arguments for and against the proposal, making it a double-edged sword. Immigration is a difficult policy for current governments to implement, especially over the rising unemployment rates in the countries which have the highest immigration numbers.
Other steps that can be taken is to utilize technology to meet labour shortages, increasing the retirement age (another controversial policy which sparked protests in France), or restructuring the pension systems entirely. Thus, this novel crisis doesn’t have a perfect long term solution as of yet, and many of the attractive solutions for the government are not the ones people would be happy with. The issue has far-reaching cultural, societal and economic impacts and requires cooperation of the government and the people to reach the optimum solution.
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