How to afford an aging world

Last week, the US’s fertility rate hit a record low: CDC data for 2025 showed that for every 1000 women aged 15 to 44, only 53 gave birth each year, down from 54 the previous year. The decline continues a decades-long decline.

But the US is not alone. In much of the world, fertility rates are in freefall. Almost every developed country today has an aging population, putting a huge strain on social spending and pension systems, and fewer people paying the taxes to support them.

Many governments have pursued creative ways to encourage people to have more children, some as extreme as offering cash bonuses of $55,000 per child, with mixed results. But what about focusing on the other end of life? Some governments are reframing what it means to grow old, trying ways to keep people employed longer and contributing to rather than drawing welfare resources.

Incentivizing later retirement. Life expectancy has been climbing around the world for well over a century. As people live longer, they’re also staying healthier longer, according to the World Health Organization. Some countries with aging populations are trying to capitalize on their so-called “silver economies” and keep people in the workforce longer.

In 2004, Japan, the first country to become ‘super-aged,’ meaning more than 20% of its population is over 65, began incentivizing workers to stay in the workforce until at least 65. Then in 2022, it introduced a policy that permanently reduced benefits for those who took their state pension early. As of September, it’s home to over 100,000 centenarians.

Singapore, which became super-aged in September, offers careers and employment support to those over 50 and, since 2020, has run a program that gives some employers grants of $2,500 Singapore dollars ($1,951 USD) for every employee they hire or retain over 60.

But these efforts aren’t sustainable long term, explained Jeremy Chan, a senior analyst for China and Northeast Asia at Eurasia Group – demand on the welfare state will eventually outpace these measures. “Where it becomes an overwhelming disadvantage is [when] the costs for the government of servicing this aging population begin to overwhelm the revenue that’s coming in,” Chan said. For example, more than a third of Japan’s 2025 budget went to social spending, reflecting the high cost of an aging population.

Raising the retirement age. France, Germany, the UK, and China have all introduced plans in recent years to raise the retirement age. Germany is targeting a retirement age of 70 by the 2090s, up from 67 now. Meanwhile, Denmark, Estonia, Italy, the Netherlands, Sweden, and Portugal have tied or are tying their retirement age to national life expectancy – measures that can be effective in the short term.

“To a certain degree, if you’re extending the working life of the person who would have retired at 55 but is now working till 60, then that kind of solves the problem in the short term,” said Chan.

That’s not always popular: when France proposed raising the retirement age from 62 to 64 in 2023, hundreds of thousands took to the streets to protest. Germany and Denmark also saw protests over increases to the retirement age.

The AI problem. But even as countries grapple with aging populations, many advanced economies will face another workforce disruption: AI. Research shows that AI is dramatically changing the labor market and dampening entry-level hiring. People aged 22 to 25 in easily automated careers are now employed 19% less than their less AI-exposed counterparts.

“You’re going to have a whole generation of people that are going to have to reskill, rebrand, find some sort of productive ends to their time – to [be] contributing members of society while living in this AI future where there are fewer jobs,” Chan said. Down the road, this could mean fewer people contributing tax revenue, and more people needing social welfare.

What’s next?Not every country is seeing a fertility decline. Many countries in South Asia and Africa still have growing populations, particularly in sub-Saharan Africa. By 2030, the World Economic Forum estimates that 40% of the world’s young people will be African. Many of these regions also struggle with underemployment: Niger, for example, will need to create 650,000 new jobs each year for the next 30 years to meet demand from its growing population – a target it is unlikely to hit.

That leaves an enormous opportunity: a region with a booming young population eager for work. The question is whether governments can turn that demographic divide into an opportunity before the costs of aging become too hard to bear.