Demography and the New Economy

The term ‘new economy’ is used to refer to two distinct developments. The first is the increasing importance of pure services, particularly those related to information, and the corresponding decline in the importance of the goods-producing sector. The second is the liberalisation of product and labour market and the resulting decline of institutions like lifetime full employment. Although there are connections between these two developments, their demographic implications are quite different. An information-based economy implies long periods of education, late child-bearing and a reversal of the trend towards early retirement. Labour market liberalisation implies extensive use of redundancy as a tool for labour flexibility and an accentuation of the trend for workers over 50 to withdraw from the labour market. This trend has been sustainable so far because the baby boom has resulted in an increase in the proportion of the population aged between 25 and 54. Within the next decade, this proportion will start to decline. Whereas an ‘old economy’ perspective implies that the aging of Australia’s population will not be a problem for some time, the ‘new economy’ implies that an ‘aging crisis’ could affect the economy in the near future.