Inside content area, use arrow keys or tab to access content

Ageing Population and Automation

Ageing Population

The proportion of the world’s population that is depending on others for provision of life’s needs is increasing. This is especially true in the developed world which generates the majority of the world’s wealth. This trend has been brought about to a large degree by birth rates having fallen below death rates according to the United Nations Population Division (1).

As well as the proportion of people working and providing revenue for saving and investment falling, there is the further implication of savings rates falling.

Since the financial crisis, savings rates had increased in European Union countries, Japan and the US(2). However the median age of people in those economies has progressed through the most lucrative stages of life between around 40 and 60 years of age. As that median age continues to increase, less income is being generated and the health and subsistence needs increase. The total amount of money being saved is likely to fall, and people are more likely to cash in their investments.

According to data from the United Nations(3), the most dramatic change is set to take place in China. Its urban workforce increased by nearly a billion over the past 40 years. The rest of the twenty first century is likely to bring a decline of around 400 million in the country’s working population not least because of the consequences of its one-child policy.

In Europe and Japan, the rising participation rate of women in the workforce might have reduced the immediate implications of an ageing population. But this increase can only last for so long before it reaches a stable level and then recedes as the median age increases into retirement age.

Lower rates of saving and investing could have a detrimental effect on the net flow of money into or out of the countries affected; the potential for returns on overseas investments would also be likely to fall.

The combination of lower income and higher spending could put upward pressure on inflation, meaning central banks will need to be extremely deft in their timing of interest rate rises. Apply them too soon and economic growth could be stifled; too late and inflation could increase significantly.

That would be bad news for the demand for, and price of, bonds with their fixed annual coupon payments. In order to attract investors, companies and governments issuing bonds would be more likely to offer higher yields i.e. their borrowing costs would increase.

As well as a higher corporate cost burden, this could drive a downward shift in the value of bonds as they mature and are replaced over time.

Equity values could also be under pressure. Economic growth could slow with fewer workers to drive it. And as people become more inclined to sell their equity investments to sustain themselves in later years, there is a potential double-whammy pushing share prices down.

1. United Nations, Department of Economic and Social Affairs, Population Division (2017). World Population Prospects: The 2017 Revision:, accessed January 2018.
2. Source: Organisation of Economic Co-operation and Development, data covering 2009 through 2016, accessed January 2018.
3. China population age 15-64 median forecast set to drop from over 1bn today to around 550m by the end of the century. Source: United Nations, Department of Economic and Social Affairs, Population Division (2017). World Population Prospects: The 2017 Revision:, accessed January 2018.


To the uninitiated, automation might appear to be nothing more than the threat of job losses across swathes of industries. According to a series of research reports(1), this would not seem to be the case.

Automation has been affecting employment, lifestyle and wealth for centuries. From the centuries old printing press and automated seed drill, through the industrial revolution and into the world of computers, automation is not new.

Perhaps one of the biggest differences today is that with media and communications being so fast and pervasive, people are more quickly informed and frightened about potential change.

Without doubt, another radical wave of change is pending. But the key finding from McKinsey Global Institute’s (MGI) recent series of research papers into the effects of automation is positive, “jobs growth could more than offset the jobs lost to automation” (2). The critical factors appear to be how quickly automation is adopted and how well the process is managed by policymakers and business leaders.

The first requirement is for leaders to encourage training of workers and potential workers for the jobs and industries that benefit from automation. McKinsey’s research suggests that growth opportunities will occur in healthcare (partly due to the ageing population), renewable energy, infrastructure and buildings, currently unforeseeable technological roles, and the professionalisation of previously unpaid roles such as cooking, childcare and cleaning.

What’s more, as has been the case with industrial disruptions in the past, new professions, businesses and jobs tend to be created as part of the process. It is almost impossible to predict what some of those jobs and industries will be; who would have expected demand for social media experts 20 years ago?

By contrast, the areas in which jobs are most likely to be lost include data analysis, manufacturing, agricultural grading, equipment operators, general mechanics and financial workers. This is not an exhaustive list, but it does provide an indication of where increasingly sophisticated automation is most likely to replace human labour.

There will, inevitably, be pain on an individual level, especially for older workers for whom the transition to new lines of work could be very difficult if not impossible. However, from the broader macro-economic perspective, if the transition is managed well and doesn’t occur too quickly, then the net effect on jobs up to 2030 could be positive(3).

As this long-term trend develops, we will be continuing to observe and analyse its progress. Understanding which regions and industries are best managing the challenges will help to inform our investment decisions over time.

1. For example, the McKinsey Global Institute (MGI) January 2017 report on automation and its effects, the MGI May 2017briefing note, ‘What’s now and next in analytics, artificial intelligence and automation’, and December 2017 document, ‘Jobs gained, jobs lost: Automation’
2 & 3. ‘Jobs gained, jobs lost’: Automation’, McKinsey Global Institute, December 2017


Important Information

Forecasts of future performance are not a reliable guide to actual results in the future, neither is past performance a reliable guide to future performance. The value of investments, and the income from them, may fall as well as rise and cannot be guaranteed. Any views expressed are our in-house views at May 2018. Investment markets and conditions can change rapidly and the views expressed should not be taken as statements of fact nor relied upon when making investment decisions. This information may not be used, copied, quoted, circulated or otherwise disclosed (in whole or in part) without our prior written consent.


opens in a new window.

To apply for our Private Banking service, you’ll need to have: at least £250,000 in savings and/or investments with Lloyds Bank, and/or at least a £750,000 mortgage with Lloyds Bank.

Find out if Private Banking is right for you


Book an appointment

Get in touch with us.

No charges for the initial meeting to discuss your individual circumstances and objectives.

No obligation to take any of our services or products.

Any charges that apply and what these cover will be explained and agreed with you before any services or products are provided to you.



Speak to us

You can call us to arrange an appointment or ask a question.

Lines are open Monday to Friday from 09:00 to 17:00 (Tuesday and Thursday until 19:00) and Saturday from 09:00 to 13:00. Excluding Bank Holidays. Call cost may vary depending on your service provider.