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Dependency ratios

Dependency ratios. S imple ratios of population sectors. But what matters is not the demographic dependency ratio. Economic Dependency Ratio. This considers all dependents And the working population only Utilising just 73% of labour force But the key message is that we will

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Dependency ratios

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  1. Dependency ratios Simple ratios of population sectors But what matters is not the demographic dependency ratio

  2. Economic Dependency Ratio • This considers all dependents • And the working population only • Utilising just 73% of labour force • But the key message is that we will have a smaller relative labour force • Who will have wage negotiating ability • Which is likely to draw into work the economically inactive

  3. Changing employment • The losses of jobs to automation are likely to be: • Office Administration, Services & Sales • They are already priced to go. • The burden will fall on the low-wage, low-skilled population • The gains will likely come from health and social care, and education • But that will bring demand for many of this low-wage, low skilled group. • “We can’t afford ever increasing health care”

  4. Economic illiteracy • If we experience growth, then we can afford more of everything • But looking forward, lower than the average post-war growth seems likely • But the affordability of health care is not predicated on further growth • Merely upon differential rates of productivity increase • If we project the post-war experience on the next 50 years, we can afford to be spending 21.6% of GDP on healthcare in 2064 versus 10.4% currently. • If growth is just 1%, this rises to 36.8% of today’s GDP • What matters is not so much the productivity of the health care sector but rather the productivity growth of all other sectors. • And savings, capital and investment enter the productivity framework

  5. Capital and Labour • The labour share of national income has been falling. • Less so in UK & France • Globalisation played a large part

  6. Investment • Investment has been falling – 26 % of global gdp in 1970, now 22% • But the prices of capital goods have also been falling • In UK in 1980 Capex was 12% of GDP, now 8% • But price adjusted that 8% becomes 12%

  7. Trends • Smaller labour force will increase their wages • There will be fewer economically inactive – notably women • The nature of work will alter in response to technological change • Wage pressures due to globalisation will diminish • Capital investment prices will be lower • And will cost less as the population become wealthier • A smaller more capital intensive economy • Requiring lower savings for productive investment purposes • Growing at perhaps 1% – 1.5%

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