That most of the developed world is ageing is beyond dispute.  What is also beyond dispute is the general slowdown in economic growth among the most advanced economies in the world.  Are these two phenomenon connected?  According to a new study from BI Norwegian Business School, the answer is most definitely yes.

The researchers suggest that the ageing populations in these countries, especially in terms of growing life expectancy, has resulted in lower interest rates and lower output growth across the western world.

The conclusions emerged after a comparison of the downward shift in both the Japanese economy after the early 1990s and the American economy after the 2007 financial crash.

In both economies, fiscal and monetary stimulus has failed to jolt growth rates upwards, with both economies suffering from growth below that seen prior to their recessions.  The authors argue that raising life expectancy is a key contributor to this slovenly growth.

“Changes in life expectancy impact not only individuals’ savings decisions but also labor-supply decisions,” the authors explain.  “The deeply puzzling issue is why effective retirement age has hardly changed despite the gains to life expectancy. Almost all gains to longevity has meant more time spent in retirement. The mechanism behind falling interest rates and headwinds to economic growth is closely linked to these retirement choices.”

It’s highly likely that this trend will continue in the coming decades, as life expectancy continues not only to increase, but grow faster than changes in the retirement age throughout the developed world.  The authors argue that unless retirement systems are reformed and people are encouraged to work longer, it will put increasing pressure on governments to fund larger retirement spending from a shrinking tax base.

I’ve written a few times about the ageing population and its impact on the workplace, and it is unequestionable that changes in policy and practice are required if we are to obtain what London Business School’s Lynda Gratton calls the longevity premium.  In our populist times however, I’m not at all convinced those changes will emerge.