THE world is about to experience something not seen since the Black Death in the 14th century—lots of countries with shrinking populations. Already, there are around 25 countries with falling headcounts; by the last quarter of this century, projections by the United Nations suggests there may be more than 100.

Such a shift seems certain to have a big economic impact, but there is plenty of debate about what that impact might be. After the Black Death a shortage of labour eventually led to a sustained rise in real wages. If that trend were repeated, it would come as a big shift after a prolonged period of sluggish wage growth, something that has fuelled political discontent across the rich world.

A new report on the demographic outlook by Berenberg, a German bank, focuses on one important measure: the dependency ratio. This compares the number of children and the elderly with people of working age (those aged 15-64). The higher the dependency ratio, the greater the burden on the workforce. In the world’s biggest economies, America apart, the workforce is set to shrink significantly (see chart).

In many...Continue reading