What this lesson teaches
I can explain optimum population and the effects of changes in a population's size, age and gender structure.
Syllabus K343, 5.3.2. The effects of changes in the size and structure of populations: the concept of an optimum population; the effects of increases and decreases in population size and changes in the age and gender distribution of population
Make a guess
A country's population ages quickly. Who is affected?
- Everyone, through fewer workers per retiree.
- Few people, because older people live on their savings.
- Older people, who need more healthcare as they age.
Show the answer
Everyone, through fewer workers per retiree.
Fewer workers support more retirees. That can mean higher taxes, labour shortages and slower growth for all.
An optimum population makes the best use of resources; an ageing population raises costs and shrinks the workforce.
The optimum population is the size at which output per head is highest, given the country's resources and technology. A country with fewer people than this is under-populated: it has too few workers to use its resources fully. A country with more is over-populated: resources are stretched and output per head falls.
A rising population increases the labour force and demand for goods, which can help growth. But it raises demand for housing, schools and healthcare, and can strain resources and the environment. A falling population reduces these pressures but can leave too few workers.
Age structure matters. An ageing population has a rising share of older people. The labour force shrinks, while spending on pensions and healthcare rises. A smaller number of workers must support more dependants.
Gender distribution matters too. A large imbalance between men and women can affect the labour force and future birth rates.
- Optimum population
- Size that maximises output per head.
- Ageing population
- Rising share of older people; smaller workforce, higher pension and healthcare costs.
- Dependants
- People not working who rely on workers: children and retirees.
Worked example: Effects of an ageing population on the government
Suppose the share of people over 65 rises from 15% to 25% over twenty years.
- Spending: more on healthcare, eldercare and pensions.
- Revenue: fewer working people pay income tax.
- Budget: pressure to raise taxes, cut other spending or borrow.
- Responses: raise the retirement age, encourage immigration, automate, and support higher birth rates.
Watch out for this
An ageing population only affects older people.
It affects everyone. Fewer workers support more retirees, which can mean higher taxes, labour shortages and slower growth.
Check your understanding
How is an ageing population most likely to affect the labour force?
- It has little effect, because older workers simply stay in their jobs longer.
- The labour force grows quickly, as older people return to work.
- The labour force shrinks as a share of the population.
Show the answer
The labour force shrinks as a share of the population.
Right. More people retire while fewer young people join.
Check your understanding
A country's population is ageing. Which effect on the government is most likely?
- Less pressure to raise the retirement age
- Higher spending on healthcare and pensions
- More income tax from a growing workforce
- Higher spending on primary schools
Show the answer
Higher spending on healthcare and pensions
Right. Older people use more healthcare, and more people draw pensions.