Now that the seven-billionth inhabitant of the Earth has landed on Earth, according to the UN, it is clear that demography is an important factor in predicting the future. What will the most important developments be in the next ten years?
Aging population and labor shortages
Population growth is declining all over the world. In Russia and several other European countries, the population is already shrinking. This development is a blessing for the earth as an ecosystem. The fewer people, the less demand on agricultural land and natural resources. From an economic point of view, a shrinking population is less good news.
The four main groups
From an economic point of view, the population can be roughly divided into four different age groups: youth, young adults, mature adults and retired people. The youth costs net money, because their upbringing and training must be paid for. They will grow up to be young adults.
Young adults, adults of childbearing age, work and raise children at the same time. As starters on the labor market, their incomes are low. This means that they are short of money and have to borrow, for example by taking out mortgages.
Mature adults no longer have children, but their income is much higher than that of young adults. Due to their relatively high incomes, they can save a lot (they also have to, for their retirement, for example) and their disposable income is enormous.
Finally, retirees no longer work but are debt-free. Usually their mortgage is paid off, so the elderly have a lot of capital, but hardly pay any tax. These developments are occurring in all developed countries. The Netherlands is following the trend here.
Older workers provide a lot of capital
At present, the Netherlands has an abundance of capital, because most of the population is between thirty-five and sixty-five years old and earns a lot. That will change when this group of people retires. It is therefore wise not to raise the retirement age, at least make it more attractive for older people to continue working. Many older people want to and this is also possible. After all, physical work is becoming rarer and less arduous due to the advance of robotics.
Few workers, many retirees
In ten years, it will be Generation X who will have to raise the capital to help the underpaid younger generations raise their children, as well as to cough up the lavish pensions and retirement provisions of the baby boomers. We have already seen that the older generations have the necessary capital. It is therefore a sensible idea to increase the VAT and to give the younger generation who have to raise children a special child deduction.
Slochteren largely empty
An additional annoying problem for the Netherlands is that the gas bubble in Slochteren is now largely empty. At the moment, this natural gas provides three percent of all income in the Netherlands. If this source of income disappears, the government will have to cut back three percent on a structural basis and we will all become poorer.
In ten years time will we be poorer or richer than now?
Nevertheless, the net state of affairs is positive. After all, there is one force that continues independently of all political developments. That is technological innovation. Because technology is getting better and cheaper, labor productivity is steadily increasing every year. It is true that in ten years' time Dutch prosperity will be lower compared to the rest of the world than it is now, but in absolute terms it will still be high and equal to or slightly higher than now. Because even though the gas bubble is running out, we still have an extensive river network, fertile agricultural land and a well-educated population. In principle, we can absorb the blow reasonably well with a few policy measures.