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 liberalization of product and labour markets and the resulting decline of institutions like lifetime full employment. This development has been particularly evident in Australia and other English-speaking countries. Although there are connections between these two developments, their demographic implications are quite different. An information-based economy implies long periods of education, late childbearing and a reversal of the trend towards early retirement. Labour market liberalization implies extensive use of redundancy as a tool for labour force 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 25 to 54. Within the next decade, this proportion will start to decline. If current institutions are maintained, an economic «ageing crisis» will arrive at least a decade earlier than would be suggested by an examination of traditional dependency ratios.