By Vassiliki Koutsogeorgopoulou and Hermes Morgavi, OECD.
Populations are ageing in most countries, including emerging economies. The share of population aged 65 years and over has more than doubled between 1960 and 2022 across OECD countries on average, to around 18%, and is projected to reach 30% by 2060. To illustrate the magnitude of the demographic transition, the share of population aged 80 and over will rise even more dramatically, by almost two and half times between 2022 and 2060 (Figure 1).
Note: OECD refers to the simple average among the OECD countries, G20 emerging economies include Argentina, Brazil, China, India, Indonesia, Russia, Saudi Arabia, and South Africa. Other OECD partner countries include Bulgaria, Croatia, Romania, Peru, Morocco, Tunisia, and Egypt. The highlighted area refers to the projection period, starting in 2024. Projections are based on the “medium variant” population projections from the United Nations.
Source: United Nations World Population Prospects: The 2024 Revision.
Living longer and ageing in better health are major accomplishments, boosting people’s potential to remain active and work at a later age, participate in society and live independently for longer (Scott, 2021). However, life expectancy has increased in OECD countries in tandem with steadily declining fertility rates – currently well below replacement levels in most OECD economies (OECD, 2023). The old-age dependency ratio (defined as the number of people aged 65+ per 100 people of working age, 20-64 years old) in the OECD area has more than doubled between 1960 and 2022, as the population aged 65 and over grew at an annualised rate of 2.2% during the period, while the working-age population by merely 0.9% (United Nations World Population Prospects: The 2024 Revision).
From a fiscal perspective, population ageing can have profound consequences for the public finances, according to a recent OECD paper (Koutsogeorgopoulou and Morgavi, 2025). This is because, as previous studies have also shown (Rouzet et al., 2019; Guillemette and Turner, 2021; Guillemette and Château, 2023), age-related government spending, notably on pensions, healthcare and long-term care, exerts substantial pressure on public finances. Defined-benefit, pay-as-you-go pension systems are particularly vulnerable, as contribution rates struggle to keep up with growing retirement cohorts and longer benefit durations. While public spending on long-term care as share of GDP is generally low, it has been rising more rapidly than pension and health care expenditure over the past decades and will continue to do so, especially as the share of population 80 years and over is increasing rapidly (OECD Health database). According to OECD Long-Term Model, in the absence of corrective policy action, fiscal pressure would increase in the average OECD country by nearly 6¼ percentage points of GDP between 2024 and 2060, with ageing accounting for more than 40% (Figure 2).
Policies can help economies to adapt to population ageing, harnessing the benefits of longevity, and address the mounting fiscal pressures stemming from ageing, thereby safeguarding public finance sustainability. While the scope of demographic change varies across countries, a comprehensive policy approach is indispensable. The strategy needs to encompass measures to promote healthy ageing, including through disease prevention policies, fiscal reforms to manage the rise in age-related spending, and structural reforms to boost labour force participation of older workers and other under-represented groups.
Indicative of the large fiscal gains of comprehensive reforms, changes in retirement policies that reduce early exit pathways and link retirement ages to two-thirds of projected increases in life expectancy, in combination with labour market reforms, would lower the fiscal pressure in 2060 by around 4 percentage points of GDP for the average country, compared to a baseline no-policy change scenario, based on OECD Long-Term Model (Source: Update of (Guillemette and Château, 2023) based on OECD Economic Outlook No. 115 May 2024 database).
Policy efforts to address the fiscal implications of ageing can be complemented by measures to boost fertility and immigration. While today’s fertility rates would only raise the share of workers in the population in around two decades, ensuring continuity of support over the child’s early life course by avoiding “spending dips” is essential (OECD, 2024). Immigration can help ageing countries to address labour shortages in the short- or medium-term, though is unlikely to fully offset population ageing (André, Gal and Schief, 2024). Addressing integration challenges and enabling immigrants to reach their potential are essential.
* This blog is based on the paper by Koutsogeorgopoulou, V. and H. Morgavi (2025), “Ageing populations, their fiscal implications and policy responses”, OECD Economics Department Working Papers, No. 1844. The paper was prepared as part the work programme of the OECD Crete Centre on Population Dynamics. The Centre, established in 2023 in partnership with the Greek Government, is dedicated to advancing policy-oriented research and advisory work on demographic issues and their impact on economic prosperity: https://www.oecd.org/en/about/programmes/oecd-crete-centre-on-population-dynamics.html.
References
André, C., P. Gal and M. Schief (2024), “Enhancing productivity and growth in an ageing society: Key mechanisms and policy options”, OECD Economics Department Working Papers, No. 1807, OECD Publishing, Paris, https://doi.org/10.1787/605b0787-en.
Guillemette, Y. and J. Château (2023), “Long-term scenarios: incorporating the energy transition”, OECD Economic Policy Papers, No. 33, OECD Publishing, Paris, https://doi.org/10.1787/153ab87c-en.
Guillemette, Y. and D. Turner (2021), “The long game: Fiscal outlooks to 2060 underline need for structural reform”, OECD Economic Policy Papers, No. 29, OECD Publishing, Paris, https://doi.org/10.1787/a112307e-en.
Koutsogeorgopoulou, V. and H. Morgavi (2025), “Ageing populations, their fiscal implications and policy responses”, OECD Economics Department Working Papers, No. 1844, OECD Publishing, Paris, https://doi.org/10.1787/6aec03b3-en.
OECD (2024), “Fertility trends across the OECD: Underlying drivers and the role for policy”, in Society at a Glance 2024: OECD Social Indicators, OECD Publishing, Paris, https://doi.org/10.1787/fa367bad-en.
OECD (2023), Pensions at a Glance 2023: OECD and G20 Indicators, OECD Publishing, Paris, https://doi.org/10.1787/678055dd-en.
Rouzet, D. et al. (2019), “Fiscal challenges and inclusive growth in ageing societies”, OECD Economic Policy Papers, No. 27, OECD Publishing, Paris, https://doi.org/10.1787/c553d8d2-en.
Scott, A. (2021), “The Longevity Economy”, Health Policy, Vol 2, pp. 828–35.
Further related research
Crowe, D. et al. (2022), “Population Ageing and Government Revenue: Expected Trends and Policy Considerations to Boost Revenue”, Economics Department Working Papers, No. 1737, OECD Publishing, Paris, https://doi.org/10.1787/9ce9e8e3-en.
de Biase, P. and S. Dougherty (2023), “From local to national: Delivering and financing effective long-term care”, OECD Working Papers on Fiscal Federalism, No. 45, OECD Publishing, Paris, https://doi.org/10.1787/578b296f-en.
Morgavi, H. (2024), “Is it worth raising the normal retirement age?: A new model to estimate the employment effects”, OECD Economics Department Working Papers, No. 1823, OECD Publishing, Paris, https://doi.org/10.1787/5f2a3b40-en.
Rawdanowicz, Ł. et al. (2021), “Constraints and demands on public finances: Considerations of resilient fiscal policy”, OECD Economics Department Working Papers, No. 1694, OECD Publishing, Paris, https://doi.org/10.1787/602500be-en.