Saturday, July 28, 2007

Economic Effects of a declining Birth rate

  1. Increase in Dependency Ratio. Higher number of retired people to those active in the labour force.
  2. Higher taxes on those of working age. Because of the increased number of old people. Government spending on pensions and health care increases. As a consequence the government are obliged to raise taxes to avoid a deficit shortfall.
  3. Change in sectors of the economy. Although the government may have to spend more on health care and retirement homes, there may be less demand for schools and education spending. This enables the government to make some savings to offset the extra spending.
  4. Change in demand for labour. A decline in birth-rates will shift demand for labour. Less demand for child care assistants more demand for care workers. However, this shift will be gradual and should occur gradually.
See also: Impact of an Ageing Population

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