Population ageing is of global concern, especially in Europe and a part of Asia.  A research indicates that the proportion of people worldwide aged 65years and above will increase from 7.5% in 2005 to 16.1% by 2050 (Bengtsson, 2010). Population ageing brings a number of economic and demographic challenges. This paper discusses some of them.

A shift in age distribution towards the elderly lowers working-age population (Tamirisa & Faruqee, 2006). As a result of the shift, the economy faces slow growth in GDP and little living standards advancement. On the other hand, a larger share of the budget goes for pensions and health care and that puts pressure on the budget. Relative productivity and labour supply decline with individual ageing. Life cycle profile of individual earnings is such that earnings increase as a young person joins labor force and gains experience. Then they get to the peak at the middle age and decline as people move towards retirement (Tamirisa & Faruqee, 2006). This explains why population ageing affects total labor supply.

Population ageing increases the elderly dependency ratio. In developed nations, there are proper pension plans that guarantee continued quality of life even in retirement. However, this is not the case for developing countries. The elderly depend heavily on their working family members. High elderly dependency ratio reduces the savings of the working population and slows GDP growth. This is true for both developed and developing economies.

In addition, population ageing demands changes in the political system to prevent generation conflicts and to ensure the older people participate in decision-making. Health care system should have the capacity to deal with effects of aging on individual health. Preventive care that promotes healthy lifestyle and monitoring of health status is crucial for an ageing population.

The environment around the elderly is important for the quality of life. This means that particular changes in this environment are crucial since, with time, senior people cannot carry on their activities as usual. These changes can only come up through innovations in housing, transport infrastructure, and communication. 

In conclusion, countries should anticipate the challenges of an ageing population and develop necessary measures in order to ensure the elderly enjoy proper quality of life. If a country adopts proper policies and budgets for population ageing, the effects of this process will be less. The society should make some efforts to reduce the impact of population ageing.

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