The working-age population across the OECD is projected to shrink by about 8% between 2023 and 2060. For businesses, that does not mean one permanent, economy-wide labour shortage. It means smaller recruitment pools, more pressure to retain experienced staff and a stronger incentive to redesign jobs, widen hiring and invest in productivity.
For decades, employers in many developed economies could expect another sizeable group of school-leavers and graduates to enter the labour market each year. Low birth rates and population ageing are making that assumption less reliable.
The change will be gradual in some countries and severe in others. It will also affect occupations very differently. A shortage of nurses or electricians does not create an automatic surplus of opportunities for every young graduate.
That distinction is central to understanding what demographic change will actually do to business.
The pool of potential workers is getting smaller
The OECD Employment Outlook 2025 projects that the number of people aged 20 to 64 across its member countries will fall by about 8% between 2023 and 2060. In one quarter of OECD countries, the projected contraction exceeds 30%.
The same report expects the average old-age dependency ratio to rise from 31% in 2023 to 52% in 2060. This ratio compares the number of people aged 65 and over with the population aged 20 to 64. It does not show how many people are actually working, but it illustrates the changing balance between older and working-age populations.
Germany shows how quickly that balance can shift. Its Federal Statistical Office projects that one quarter of the population will be aged 67 or over by 2035, compared with one fifth in 2024. Depending on assumptions about births, deaths and migration, Germany could have between 37.1 million and 45.3 million people aged 20 to 66 in 2070.
These are projections, not fixed outcomes. Migration, retirement decisions, health, public policy and productivity can all change the result. The direction, however, is difficult for businesses to ignore: large groups of baby boomers are retiring and smaller birth cohorts are following them.
A worker shortage is often a matching problem
Demography is only one reason employers struggle to recruit. Skills, location, pay, working conditions and housing can be just as important.
The European Labour Authority’s report on 2025 shortages and surpluses, published in June 2026, found persistent imbalances across the EU, Iceland, Liechtenstein, Norway and Switzerland. It identified demographic change, skills mismatches, job quality and limited labour mobility among the causes.
Almost every occupation was reported in shortage in at least one country, while some appeared as a shortage in one place and a surplus in another. That apparent contradiction explains why a country can have unemployed people and unfilled vacancies at the same time.
A hospital cannot replace a missing nurse with an applicant who lacks clinical training. A manufacturer may need technicians in a town where suitable housing is scarce. A hotel may receive few applications because its hours or pay are unattractive. A smaller incoming generation can intensify each problem, but it does not create them all.
This also limits the advantage for young workers. Their bargaining power will increase most where they have skills that employers need, where training takes time and where technology cannot readily perform the work. Being young, by itself, is not a scarce qualification.
The latest evidence underlines that point. The OECD Employment Outlook 2026 says young labour-market entrants have become more likely to be unemployed relative to the rest of the working-age population, even while structural shortages persist. A long-term demographic squeeze and weak early-career job prospects can exist at the same time.
Retention becomes an investment decision
When replacements are plentiful, a company can absorb high staff turnover more easily. When recruitment is difficult, keeping a trained employee can be worth more than filling the same job again.
That changes the economics of management. Better scheduling, flexible hours, training, career progression and less physically demanding work can protect productive capacity. They are not simply employee benefits if they reduce vacancies, repeated recruitment and the loss of practical knowledge.
Older workers are already becoming a larger part of that calculation. Across the OECD, the average employment rate among people aged 55 to 64 rose from 47.7% in 2004 to 66.4% in 2024, according to Pensions at a Glance 2025. Pension reforms contributed to the increase, alongside other social and labour-market changes.
Longer working lives require more than postponing retirement. Employers may need to update skills throughout a career, adapt physical tasks and make phased retirement possible. Experience remains valuable, but workers cannot use new systems effectively without access to training.
A 2025 IMF working paper, based on data for people aged 50 and over in 41 countries between 2000 and 2022, found that physical, cognitive and mental health improved across successive cohorts. Its analysis linked better health with higher labour-force participation, more hours worked, stronger earnings and higher productivity. As a working paper, it represents research in progress rather than an official IMF position.
Automation can relieve pressure, but it changes the shortage
A company with too few workers can invest in machinery, software or artificial intelligence so that each employee produces more. This may remove some tasks entirely. More often, it changes the mix of people the company needs.
Japan offers a useful example. A 2025 IMF working paper on ageing and artificial intelligence noted that 29% of Japan’s population was aged 65 or over in 2023, with the proportion projected to reach about 40% by 2070.
The researchers found that software investment across Japanese industries was negatively correlated with the share of workers aged 34 and under. They said this was consistent with ageing having accelerated automation. It is an association, not proof that demographic change caused every investment.
Technology has not removed Japan’s recruitment problem. Around half of the firms in the data used by the study reported a shortage of qualified full-time employees in 2024. Construction, information and communications, and medical services were among the hardest-hit sectors.
This is the practical limit of automation. A robot can perform a repeatable factory task, while software can reduce administrative work. Businesses still need people to install systems, maintain equipment, make judgements, serve customers and handle work that varies from one case to the next. The shortage may move rather than disappear.
The missing workers may already be in the economy
International recruitment can slow a domestic workforce decline, but migration is not a complete answer. Qualifications need to be recognised, people need housing and language can matter. Employers also depend on government rules that they do not control.
There is another source of labour closer to home. The European Commission’s 2025 employment and social review counted about 51 million EU residents aged 20 to 64 outside the labour force in 2024. Women, older people and migrants made up more than four fifths of that group, with considerable overlap between the categories.
Outside the labour force means neither working nor actively seeking work. It does not mean all 51 million people could take a job immediately. The Commission found barriers that included care responsibilities, disability, health problems, early retirement, limited recent experience and financial disincentives.
For employers, the implication is narrower but useful. A job advertised around rigid hours, a conventional career history and a fully formed list of skills will reach fewer candidates than one that offers training or flexibility. Some reported labour shortages are partly shortages of people who fit an unnecessarily narrow job design.
Productivity will decide how costly ageing becomes
A smaller workforce does not automatically produce a smaller economy. If output per worker rises, productivity can offset part of the loss in worker numbers. Higher participation among older people, women and other underrepresented groups can also expand the effective workforce.
The OECD illustrates the scale of the adjustment. Without further policy or behavioural change and without stronger productivity gains, it estimates that average annual growth in GDP per person across the OECD could slow from 1% in 2006 to 2019 to 0.6% between 2024 and 2060. GDP per person measures economic output divided by population and is commonly used as a rough indicator of average living standards.
That is a baseline simulation, not an unavoidable forecast. It shows why the business response matters. Investment in equipment, useful applications of AI, better training and wider participation can change how much output a smaller workforce produces.
The most durable advantage may belong to companies that combine those responses. Automation without skills can create new bottlenecks. Recruitment without retention can keep vacancies recurring. Longer careers without training can leave experience disconnected from new technology.
For young people, fewer peers may improve prospects in some occupations, but skills and location will matter more than the size of their generation. For employers, the old replacement model is becoming less dependable. The next worker may need to be trained, recruited from a different group, retained for longer or supported by technology before the vacancy appears.
