Implications for the labor market
The changing demographics can affect employment dynamics, wages, and overall economic productivity. For example, in economies where the working-age population is shrinking, the cost of labor could increase, as there will be fewer people available to work. Certain industries may also face skill shortages as the demand for skilled workers may outstrip the supply, which could increase the wage premium for skilled labor. Facing a potential shortage of labor, industries may turn to technological innovation and automation to maintain productivity levels. While this can lead to increased efficiency, it also raises concerns about job displacement and the need for reskilling workers, including the elderly, as there may be a need to keep them in the workforce.
On the other hand, in economies with an expanding working-age population, there is a window of opportunity for accelerated economic growth. Known as a “demographic dividend,” all things being equal, the available labor force is larger than the dependent, non-working population, thereby creating more output and making more resources available for investments in human capital, including education, health, employment, and social protection. But note that this window of opportunity is limited, and the benefits may not be realized immediately, as young people need time to learn new skills to contribute to more productive economic activities, which in turn could generate more growth.
Policy Recommendations
To address the challenges posed by demographic changes on the supply of labor, here are three policy considerations that governments may consider in their efforts to maintain a resilient and adaptable workforce:
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Support labor markets:
Governments can support labor markets by keeping labor costs low. While labor market regulations are very important to protect workers’ rights and support equity and social cohesion, overregulation can discourage job creation and constrain the movement of workers from low to high- productivity jobs. Labor market regulations could be set in a more flexible way, allowing workers to enter formal markets on different types of contracts and arrangements. Excessively protective regulations could push younger workers, women, and minorities into the informal economy, leave them unemployed, or force them to emigrate. This could create non-optimal use of resources in an already constrained, and possibly unequal, domestic environment.
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Promote education and (re)training:
Governments can consider enhancing public employment centers to provide training and reskilling programs for workers, including elderly and underrepresented groups. Most countries have public employment centers which could be better leveraged to bridge the needs of employers and workers. For example, on January 1, 2024, France announced the establishment of a new public employment operator, France Travail, building on the experience of the previous public employment agency, Pôle Emploi. The aim of the new entity is to serve as a one-stop shop for all people, including recently graduated, seniors, and people with disabilities, looking for work.
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Flexible retirement policies:
Explore flexible retirement policies that encourage older individuals to remain in the workforce, if they wish to do so. This can help mitigate the impact of an aging population on labor force participation and provide valuable experience to industries. For example, in 2022, Singapore changed the law on minimum retirement age and reemployment to give employers a bigger pool of talent to choose from.
SDGs, Targets, and Indicators
SDGs | Targets | Indicators |
---|---|---|
SDG 8: Decent Work and Economic Growth | Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading, and innovation | Indicator 8.2.1: Annual growth rate of real GDP per employed person |
SDG 8: Decent Work and Economic Growth | Target 8.5: By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value | Indicator 8.5.1: Average hourly earnings of female and male employees, by occupation, age group, and persons with disabilities |
SDG 4: Quality Education | Target 4.4: By 2030, substantially increase the number of youth and adults who have relevant skills, including technical and vocational skills, for employment, decent jobs, and entrepreneurship | Indicator 4.4.1: Proportion of youth and adults with information and communications technology (ICT) skills, by type of skill |
SDG 10: Reduced Inequalities | Target 10.4: Adopt policies, especially fiscal, wage, and social protection policies, and progressively achieve greater equality | Indicator 10.4.1: Labour share of GDP, comprising wages and social protection transfers |
SDG 10: Reduced Inequalities | Target 10.7: Facilitate orderly, safe, regular, and responsible migration and mobility of people, including through the implementation of planned and well-managed migration policies | Indicator 10.7.1: Recruitment cost borne by employee as a proportion of monthly income earned in country of destination |
1. Which SDGs are addressed or connected to the issues highlighted in the article?
SDG 8: Decent Work and Economic Growth
The article discusses how changing demographics can affect employment dynamics, wages, and overall economic productivity. It highlights the potential increase in labor costs due to a shrinking working-age population and the need for technological innovation and automation to maintain productivity levels. These issues are directly related to SDG 8, which aims to promote sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all.
SDG 4: Quality Education
The article mentions the importance of education and training programs to bridge the needs of employers and workers. It specifically refers to public employment centers that provide training and reskilling programs for workers, including the elderly and underrepresented groups. This aligns with SDG 4, which focuses on ensuring inclusive and equitable quality education and promoting lifelong learning opportunities for all.
SDG 10: Reduced Inequalities
The article discusses the impact of labor market regulations on job creation and the movement of workers. It emphasizes the need to avoid excessively protective regulations that could push certain groups, such as younger workers, women, and minorities, into the informal economy or leave them unemployed. This relates to SDG 10, which aims to reduce inequalities within and among countries.
2. What specific targets under those SDGs can be identified based on the article’s content?
Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading, and innovation
The article mentions that industries may turn to technological innovation and automation to maintain productivity levels in the face of a potential shortage of labor. This aligns with Target 8.2, which focuses on achieving higher levels of economic productivity through diversification, technological upgrading, and innovation.
Target 8.5: By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value
The article emphasizes the importance of maintaining a resilient and adaptable workforce. It mentions the need to support labor markets, promote education and (re)training, and explore flexible retirement policies. These measures contribute to the achievement of Target 8.5, which aims to achieve full and productive employment and decent work for all.
Target 4.4: By 2030, substantially increase the number of youth and adults who have relevant skills, including technical and vocational skills, for employment, decent jobs, and entrepreneurship
The article highlights the role of public employment centers in providing training and reskilling programs for workers. This aligns with Target 4.4, which focuses on increasing the number of youth and adults with relevant skills for employment, decent jobs, and entrepreneurship.
Target 10.4: Adopt policies, especially fiscal, wage, and social protection policies, and progressively achieve greater equality
The article discusses the impact of labor market regulations on job creation and the movement of workers. It emphasizes the need to strike a balance between protecting workers’ rights and supporting equity and social cohesion. This relates to Target 10.4, which aims to adopt policies that progressively achieve greater equality, including fiscal, wage, and social protection policies.
Target 10.7: Facilitate orderly, safe, regular, and responsible migration and mobility of people, including through the implementation of planned and well-managed migration policies
The article mentions the potential for individuals to emigrate if labor market conditions are unfavorable. It highlights the importance of well-managed migration policies to facilitate orderly, safe, regular, and responsible migration. This aligns with Target 10.7, which focuses on facilitating the migration and mobility of people through planned and well-managed policies.
3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?
The article does not explicitly mention specific indicators to measure progress towards the identified targets. However, based on the content, the following indicators can be inferred:
Indicator 8.2.1: Annual growth rate of real GDP per employed person
This indicator can be used to measure progress towards Target 8.2, which aims to achieve higher levels of economic productivity. By monitoring the annual growth rate of real GDP per employed person, it can be assessed whether diversification, technological upgrading, and innovation are contributing to increased economic productivity.
Indicator 8.5.1: Average hourly earnings of female and male employees, by occupation, age group, and persons with disabilities
This indicator can be used to measure progress towards Target 8.5, which aims to achieve full and productive employment and decent work for all. By analyzing the average hourly earnings of female and male employees across different occupations, age groups, and persons with disabilities, it can be determined whether equal pay for work of equal value is being achieved.
Indicator 4.4.1: Proportion of youth and adults with information and communications technology (ICT) skills, by type of skill
This indicator can be used to measure progress towards Target 4.4, which focuses on increasing the number of youth and adults with relevant skills for employment. By assessing the proportion of youth and adults with information and communications technology (ICT) skills, it can be determined whether individuals are acquiring the necessary technical skills for employment, decent jobs, and entrepreneurship.
Indicator 10.4.1: Labour share of GDP, comprising wages and social protection transfers
This indicator can be used to measure progress towards Target 10.4, which aims to achieve greater equality. By monitoring the labor share of GDP, which includes wages and social protection transfers, it can be assessed whether policies are effectively reducing inequalities in income distribution.
Indicator 10.7.1: Recruitment cost borne by employee as a proportion of monthly income earned in the country of destination
This indicator can be used to measure progress towards Target 10.7, which focuses on facilitating orderly, safe, regular, and responsible migration. By analyzing the recruitment cost borne by employees as a proportion of their monthly income earned in the country of destination, it can be determined whether migration policies are effectively reducing the financial burden on migrants.
4. SDGs, Targets, and Indicators
SDGs | Targets | Indicators |
---|---|---|
SDG 8: Decent Work and Economic Growth | Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading, and innovation | Indicator 8.2.1: Annual growth rate of real GDP per employed person |
SDG 8: Decent Work and Economic Growth | Target 8.5: By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value | Indicator 8.5.1: Average hourly earnings of female and male employees, by occupation, age group, and persons with disabilities |
SDG 4: Quality Education | Target 4.4: By 2030, substantially increase the number of youth and adults who have relevant skills, including technical and vocational skills, for employment, decent jobs, and entrepreneurship | Indicator 4.4.1: Proportion of youth and adults with information and communications technology (ICT) skills, by type of skill |
SDG 10: Reduced Inequalities | Target 10.4: Adopt policies, especially fiscal, wage, and social protection policies, and progressively achieve greater equality | Indicator 10.4.1: Labour share of GDP, comprising wages and social protection transfers |
SDG 10: Reduced Inequalities | Target 10.7: Facilitate orderly, safe, regular, and responsible migration and mobility of people, including through the implementation of planned and well-managed migration policies | Indicator 10.7.1: Recruitment cost borne by employee as a proportion of monthly income earned in the country of destination |
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Fuente: blogs.worldbank.org
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