The baby boomers will be responsible for the average wealth in Spain growing less in the next 20 years. According to the latest CaixaBank Research report, “population aging due to the retirement of baby boomers will reduce GDP per capita growth by 0.5 percentage points each year over the next two decades”. Since such a large group stops working, the GDP, which measures everything produced in a year, will suffer.
The first cohort of baby boomers turns 65 in 2023, and over the next two decades the entire generation will retire. The collective is made up of those born between 1958 and 1975. They get this name because it corresponds to the years of the boom in the birth rate. The phenomenon is not Spain’s heritage, as it took place before in other countries, such as in the USA, where it was between 1946 and 1964.
GDP per capita is a good indicator of the wealth and health of an economy, because it goes beyond the numerical figure of GDP. It measures how growth is being achieved: whether it is through productivity improvements or just the arrival of labor.
In this case, the massive entry of workers into the pensioner lists will cause the index (GDP per inhabitant) to grow less, because there will be more dependents and fewer people producing. The exponential increase in retirees will take place at a time when the Spanish economy is moving away from Europe in terms of GDP per capita. In Spain, for 15 years – as the Bank of Spain showed in the last annual report – the GDP per capita has been 17% below that of the euro zone, while before the real estate crisis of 2007 it was 9% below.
Now the demographic structure does not row in favor of reducing the gap with the euro zone. Although CaixaBank Research points out that there will be other European countries that will experience a similar situation due to the aging of the population. “The magnitude of these macroeconomic effects of aging per country will depend on other dynamic and idiosyncratic factors, such as consumption habits in each country, the aggregate productivity of the economy and by age group, the predisposition to delay the moment of retirement, as well as elements associated with the quality of public services or the characteristics of the Social Security system”, explained CaixaBank Research sources.
The process will also have a direct impact on generic GDP simply because there will be fewer employees. “The labor force’s contribution to GDP growth would turn negative starting in 2033. Precisely, the decade 2030-2040 is when the largest negative impact on the labor force of the retirement of baby boomers will occur,” he says. the report Although there may be corrective elements. For example, an increase in immigration or the number of active workers could slow down the negative effects. In the attached graph, you can see the projections made by CaixaBank Research on the GDP in three scenarios with more or less presence of corrective measures in the workforce, such as those cited for net immigration flows or the increase in the rate of ‘ occupation
The report also analyzes the future behavior of retirees in the area of ​​consumption to analyze in more detail how they affect GDP. According to data taken from CaixaBank’s operations, “the level of consumption after retirement is reduced”. Specifically, 1.2% after one year of retirement, and even 6.4% after five years of ending working life. In addition, the report highlights that “the important role played by savings in determining the adjustment in terms of the level of consumption after retirement is evident”. So, for the same level of income, a greater accumulated savings allows a higher level of consumption to be maintained.
The arrival of baby boomers in retirement obviously raises doubts about the sustainability of the system. The CaixaBank Research report proposes “boosting productivity through reforms linked to European funds and creating a greener and more digital economy that allows dynamic and sustained potential growth to be achieved”.
