• Commentary
• By
• Alen Mattich

Everyone knows Japan has a demographic problem. Its people are growing older and not enough babies are being born, which has led to an overall shrinking of the population. But what’s less commonly known is that much of Europe suffers from the same problem

And it is a problem, according to some economists. They ascribe Japan’s lost decades and persistent deflation to those poor demographics. If they’re right, that suggests much of Europe, and particularly the euro zone, is going to suffer the same sort of economic squeeze.

The result of an aging population and a diminishing number of babies being born–and therefore fewer people joining the workforce a couple of decades later–is a climbing “dependency ratio”.

That’s to say, the number of people excluded from the workforce because they’re too young or too old is rising relative to the number of those of prime working age. In other words, those in work will be carrying an ever larger burden.

And this burden will be substantial, given the increasingly generous pensions and social benefits awarded in the days when the dependency ratio was much lower.