Working Paper（26-017E）Aging on a Short Clock: Demographic Compression, Fiscal Adjustment, and Growth

Population aging is usually summarized by a single number—an old-age dependency ratio (OADR), or a projected drag on growth—as though fiscal pressure and growth pressure were two readings of the same quantity. Using the 2024 UN World Population Prospects and Penn World Table 11.0, this paper measures both on a common basis for 103 economies and finds that they are not. The speed through the critical range, in which four working-age adults per elderly person become two, strongly predicts the required retirement-age adjustment ( ρ = −0.69) but is nearly unrelated to the demographic growth effect in a calibrated Solow decomposition ( ρ = 0.14).

The two measures differ because one compares age structures at two dates whereas the other depends on the path between them and on how much calendar time it occupies. The dissociation survives finer partitions of the transition, a projection truncated at 2060, alternative working-age boundaries, and either allocation of the interaction between the two channels; it attenuates only among economies that traverse the entire transition within the projection window.

The first implication is for measurement: projected growth drag is not a sufficient statistic for fiscal urgency, so rankings built on either measure alone misidentify which economies face the hardest adjustment.

The second is sharper. Higher fertility moves only the denominator of OADR, with a lag of at least two decades, and in the interim raises the total dependency ratio: under the UN’s medium variant Korea has a higher total dependency ratio in 2050 than under the low variant, and a smaller working-age share until 2060. The retirees of the next two to three decades are already alive, so the initial phase of the adjustment is locked in by today’s age structure regardless of future fertility.

Keywords: Population aging, dependency ratios, retirement age, growth drag, demographic compression.

JEL Codes: E62, H55, J11, J26