A lot has been written about the economic and fiscal challenges associated with the aging of populations. Many studies point to negative consequences of aging such as labor shortages, lower productivity, and intergenerational conflict through higher spending on social security and healthcare programs, which could lead to inadequate resources for government programs that mainly benefit the younger population. There is also concern that we will face greater fiscal deficits and never-before-seen debt levels in the future. It has become commonplace for articles and reports featured in media outlets to use apocalyptic terms like “gray peril,” “demographic tsunami,” “generational storm,” or “fiscal hurricane” to describe those negative consequences. Policy makers in high income countries with large and fast growing older populations are worried that aging will lead to lower productivity, economic stagnation, fiscal deficits and debt.
Recent work by MIT economist Daron Acemoglu and Boston University economist Pascual Restrepo brings a different perspective to the link between population aging and economic growth. Acemoglu and Restrepo argue that places that have gone through faster aging have also adopted technologies with greater automation. They show empirical evidence on this from both the United States and other countries in a recent working paper from the National Bureau of Economic Research (NBER). They use data on robot installations by industry which come from the International Federation of Robotics (IFR). In a paper published by the American Economic Review, they also show that there is no significant negative relationship between population aging and growth in GDP per capita. In fact, the relationship is positive in most of their empirical specifications. They argue that this could be explained particularly by the greater adoption of industrial robots in those countries that are going through faster aging. It is quite possible that some of the aforementioned negative effects of aging are strongly counteracted by technological progress related to automation.
I recently started a new research project related to aging and automation with one of my PhD students, Ege Can. In this new project, we are examining data on the use of industrial robots in 382 U.S. metropolitan areas from 2010 to 2015. U.S. metropolitan areas exhibit a fairly large variation in population age composition. For example, in 2010, Provo-Orem metropolitan area in Utah had a median age of 24.6 and an old-age dependency ratio of only 12.6%, whereas the Villages metropolitan area in Florida had a median age of 62.7 and an old-age dependency ratio of about 156%. Our research results so far show that the population aging indicators we use (share of population 65 and older, median age and old-age dependency ratio) are positively correlated with the growth in the number of industrial robots. In addition, we haven’t found any negative association between these indicators and the growth in real (inflation-adjusted) per capita income in metropolitan areas. These findings are consistent with the previously mentioned results from the work by Acemoglu and Restrepo. I should note however that, this research is still in progress and our results need more robustness checks, including examining a longer data period to explore longer term growth outcomes.
As a final word, I would like to note that there is still a lot of uncertainty not only about future demographic trends but also about the pace of automation in coming years. While it is likely that automation will continue to help areas with aging populations, it may also create problems such as displacement of workers and rising income inequality. It should not be surprising that there is a lot more discussion recently on policy responses to negative consequences of fast-paced automation, including taxation of robots. It looks like a robot tax has already received praises from different individuals including Bill Gates, who stated that he is in favor of such a tax in an interview in 2017.
About the Author
Dr Tosun is the Barbara Smith Campbell Distinguished Professor at the University of Nevada, Reno. He is an affiliate research fellow at the Oxford Institute of Population Ageing, a research fellow at the Institute of Labor Economics (IZA), a research fellow at the Economic Research Forum (ERF), and a fellow at the Global Labor Organization (GLO).
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We welcome your comments on this or any of the Institute's blog posts. Please feel free to email comments to be posted on your behalf to administrator@ageing.ox.ac.uk or use the Disqus facility linked below. Her dissertation focuses on demographic change, intergenerational justice and participation.
Opinions of the blogger is their own and not endorsed by the Institute
Comments Welcome: We welcome your comments on this or any of the Institute's blog posts. Please feel free to email comments to be posted on your behalf to administrator@ageing.ox.ac.uk or use the Disqus facility linked below.
