GRAY GROWTH: INVESTIGATING THE IMPACT OF POPULATION AGING ON LABOR PRODUCTIVITY IN DEVELOPED ECONOMIES THROUGH CORRELATION AND CLUSTER ANALYSIS
Athish R R , Swaranalatha R
Keywords: Population Aging, Employee Productivity, Life expectancy, Employee to Productivity Ratio, GDP Per worker, Cluster Analysis, Developed World
Abstract
This research analyzes the impact of population aging on high-income economies' labor productivity, an issue of growing importance with many countries experiencing shrinking labor forces and rising dependency ratios. With age increasing in developed countries, the interlinkage of aging and economic performance is central to the construction of efficient labor market and social policy regimes. The study bridges this gap by examining three major indicators—life expectancy, employment-to-population ratio, and GDP per worker (PPP-adjusted) from the data related to aging populations and labor productivity in 30 developed economies in the year2024. The sample includes OECD and high-income non-OECD countries, going to great lengths to avoid outliers to ensure the analytical rigor of the study. Methodologically, the study applies a multi-stage quantitative approach. Descriptive analysis and Z score normalization are used first to normalize variables of differing scales. The results indicate a statistically significant relationship between life expectancy and GDP per worker. The regression analysis findings indicate that the two measures are significant determinants of labor productivity, with adjusted R² = 0.359. Moreover, the cluster analysis identifies three groups of nations: (1) nations of high productivity and high employment and exhibit high resilience against aging, (2) moderate performers across all variables observed, and (3) nations exhibiting relatively high life expectancy but low employment participation and output. These implications indicate that aging is unavoidable but its effects on productivity are directed primarily through employment rate participation. Nations with higher employment rates despite aging populations are likely to have more robust economic performance. The policy implications are significant in the development of some labor market interventions like raising retirement ages, encouraging flexible employment arrangements, and investing in healthcare systems to facilitate active aging.