We are living in uncertain times. The rapid advances in generative AI – a key driver of the accelerating digital revolution – are fuelling both optimism and concern. On the one hand, there is hope for renewed productivity growth, job creation, and more inclusive labour markets. On the other, there is fear of job displacement and widening inequalities, as algorithms increasingly take over not only routine tasks but also complex and rewarding ones. Meanwhile, the urgently needed transition to a more sustainable economy continues to move forward in fits and starts. As if these structural transformations were not challenging enough, the short-term economic outlook is becoming increasingly fragile. Rising trade barriers and tighter financial conditions are undermining both business investment and consumer confidence, dragging down growth.
In this complex and volatile environment, one encouraging certainty stands out: people around the world are living longer and healthier lives than ever before. This remarkable achievement has been accompanied by declining fertility, leading to significant demographic shifts and shaping a new era. While there are exciting opportunities to rethink work, retirement, and longevity, the challenges for the labour market and the broader economy are substantial and cannot be ignored.
The year 2025 has been pencilled in the demographers’ calendar for a long time. Indeed, the mid of the decade has been often cited as the turning point when the working age population (traditionally defined as 20 to 64 years old) would have stopped growing in the OECD and then started to decline.
And so it has. Fertility has been on a downward trend over the past decades, and it is now well below replacement levels in almost all OECD countries. As baby-boomers exit the labour market, the working-age population in OECD countries is now starting to decrease, and is projected to continue to fall through to 2060. Though this is not the case in every country, the potential workforce will shrink not only in most of Europe but also in many Asian economies like Japan and Korea.
Meanwhile, the old-age dependency ratio – defined as the ratio of individuals aged 65 years and above to the working-age population – has soared and will continue to grow in the future. According to the United Nations’ medium projections, the OECD old-age dependency ratio will be 52% in 2060, almost three times as large as in 1980. In some countries, it will rise above 70%. In practice, this means that, in the average OECD country, each person of working age would have to sustain herself and provide for 50% of the income of an older person on retirement, and even more than 70% in some countries.
The impact of ageing populations threatens the very engine of economic growth, which depends on human resources to produce output. The economy of OECD countries has entered a new era, where the challenge shifts from a shortage of jobs to a shortage of workers.
Exactly how this new kind of global economy will play out is not clear. It’s an unsettling time with seemingly contradictory indicators. According to evidence presented in this Outlook, as the number of working age people stagnates in the OECD, jobs are now going unfilled even as people are losing work and wages barely keep up with inflation. In the euro area, for example, one in six firms in industry and one in four firms in services cited lack of labour as one of the factors limiting production in April 2025. While these figures are well below the post-pandemic peaks (about one in four in industry and one in three in services), they are above the pre‑pandemic levels of 2019, despite a deteriorating conjunctural phase. The persistence of labour shortages despite the slowdown in growth may be a disorienting preview of times to come.
Alongside the much-discussed transformational topics of climate change and digital revolution, the ageing of OECD economies is the third, and what we might call “forgotten,” megatrend that requires the full attention of policy makers.
According to simulations presented in this Outlook, at current rates of productivity growth, GDP per capita growth is expected to slow down by about 40% in the OECD area – from the already meagre 1% per year in 2006‑19 to 0.6% per year in 2024‑60 on average. All but two OECD countries, Ireland and the United States, would see their per-capita growth declining if nothing is done.
There is no time for complacency, or easy answers. Some brush off the demographic challenge as something that will be solved by the boost of artificial intelligence, a kind of fortuitous historical coincidence that will see bots stepping in for the declining human workforce. While AI can improve productivity, it is by no means a substitute or silver bullet for a lack of human workers. Degrowth or lower growth may have some advantages (including facilitating the fight against climate change), but it is not compatible with the rising needs of an ageing population. When it is not the result of a broadly shared societal consensus, lower growth risks jeopardising social and economic sustainability. Historically, growth deceleration since the 1970s has indeed gone hand in hand with an upward trend in social discontent. Put simply, governments cannot continue to ignore this shift, which will only accelerate.
Instead, hard and smart policy choices are required. The good news is that there are concrete steps our societies can take. OECD countries enjoy several untapped talent pools that they can turn to boost their labour forces: youth, migrants, women and older workers. Some of the changes required can trigger thorny societal and political issues and finding the right policies to mobilise these resources may not be easy. Yet the barriers to employment for these workers must be removed, and governments must take bold actions to do so.
This mobilisation would have not only economic but also social advantages, largely counterbalancing the projected fall in GDP per capita growth as well as addressing intergenerational disparities and labour market barriers. Indeed, these policies include empowering young people, taking a proactive approach to regular labour migration, closing the gender employment gap and encouraging healthy older workers to work as long as they can and desire. While the right mix of policies and solutions will differ among OECD countries, for more than half, mobilising older workers is key. And across the OECD, mobilising all resources is essential to continuing to grow and improving living standards.
