Global economic growth will decline to about 1.7 per cent a year over the next three decades, about 30 per cent down on the rates achieved between 1970 and 2000, unless older people work longer to offset falling birth rates, according to the Organisation for Economic Co-operation and Development (OECD).
A study into the impact of an ageing workforce on labour markets warns of rising wage inflation, increased pressure on public finances and declining growth unless the demographic time bomb is defused.
By 2050 there will be an average of more than seven older, inactive people supported by only 10 active workers in OECDcountries, compared with a ratio of four to 10 in 2000.
The pressures on public finances and welfare systems will be even more intense in Europe, where the ratio of active to inactive workers is expected to fall to one-to-one by 2050, says the report.
It estimates that GDP growth in OECD countries will be 30 per cent down on 1970-2000 unless more older employees work longer to overcome skill shortages. "Ageing on this scale would place substantial pressures on public finances and reduce growth in living standards," it says.
The study calls for an overhaul in labour market attitudes, pension arrangements and welfare benefits to discourage employees from opting for early retirement.
Simply raising the age at which state pensions are paid will not work if countries also provide generous unemployment and other welfare benefits, making it less attractive for older people to remain in work.
"It is essential," says the OECD, "that older people do not face a large implicit tax if they choose to continue to work".
Employers also needed to change "negative perceptions" towards older workers and increase training and flexible and part-time working opportunities. The problem of higher wage and non-wage costs, such as health insurance, will also have to be resolved, says the report.
