Aging population and the future of work: A global challenge requiring long-term vision

Population aging represents one of the most significant challenges for many developed economies, with profound implications for the structure and dynamics of labor markets. In countries like ours, the combination of low birth rates and increased life expectancy has radically transformed demographics, affecting employment as well as underlying economic and social structures.

As highlighted by recent ongoing population statistics and the demographic indicators report from Spain’s National Statistics Institute (INE), while the influx of immigrants has brought the resident population in Spain to historic highs—close to 49 million inhabitants—this “new blood” has not fully countered the trend toward an aging population.

Beyond demographic shifts: The challenges

In addition to driving changes in the types of goods and services consumers demand, an aging population impacts the sustainability of public social security systems, the availability of human capital, and the health and well-being of workers. These issues directly influence labor market dynamics, prompting governments and employers to develop strategies on three main fronts: prolonging working lives, integrating foreign workers, and leveraging the latest technological advances.

Working longer

One of the most common responses to population aging is encouraging workers to remain active longer, delaying retirement in exchange for improved pensions. This strategy reduces pressure on pension systems by extending working lives. Furthermore, older workers’ prolonged employment supports economic activity, preserves accumulated organizational knowledge, and allows seniors to maintain financial independence and a sense of purpose.

For instance, in China—where the population has been declining since 2022 due to the one-child policy (1979–2015)—the government recently announced a gradual increase in retirement ages. Starting next year, the retirement age for women will rise from 50 to 55 for manual jobs and from 55 to 58 for administrative roles, while for men, it will increase from 60 to 63.

Some countries have also introduced regulatory changes allowing certain individuals to combine pension collection with paid work, leading to the phenomenon of “working pensioners.” In Spain, where people over 55 now represent 21% of the workforce—following a 63% increase over the last decade—the active retirement agreement signed by the Social Security Dialogue Table exemplifies this trend.

However, while extending working lives can alleviate the effects of population aging, it also poses significant challenges. Certain sectors cannot accommodate older workers due to the nature of their jobs. Additionally, ensuring that older workers remain productive and adapt to rapidly changing work environments requires continuous training and skill development. Employers must adopt policies promoting flexible work, ergonomic support, and general well-being for older employees.

Some companies are implementing hybrid work models, reduced hours, or workplace adjustments to enable older workers to contribute without jeopardizing their health and well-being. Meanwhile, countries like Germany and Japan have introduced digital skills training and intergenerational mentoring programs. These initiatives not only keep older employees active but also facilitate knowledge transfer to younger generations.

Integrating more foreign workers

Another strategy to mitigate labor shortages caused by population aging is integrating foreign workers. In recent years, numerous countries have eased immigration policies to attract workers who can fill labor market gaps and help companies struggling to find the talent they need. Foreign workers also enhance cultural diversity within organizations, fostering innovation and differentiation—provided employers create psychologically safe environments where employees feel free to express their differences.

Spain has become one of Europe’s main migration destinations. In the second quarter of 2024, two-thirds of employment growth came from individuals with foreign or dual nationality, who now account for 20% of the workforce. However, the Bank of Spain has warned that immigration’s potential to counteract aging is limited. Specifically, it estimates 37 million immigrants would be needed to maintain the current dependency ratio of 26.6% over the next 30 years.

But still, despite its benefits, integrating foreign workers presents challenges. Social and cultural integration is a complex process that spans both community and workplace. Public perceptions that immigrants compete with locals for jobs—despite being untrue—can generate social tensions. A September Ipsos study, What Worries the World, shows that concern about immigration in Spain has reached its highest level in a decade, with 30% expressing anxiety—10 points higher than August and 19 points higher than September 2023.

Legal requirements and bureaucracy surrounding the employment of foreigners are additional barriers to their effective integration. Governments and employers must implement inclusive policies that facilitate integration and promote a diverse and equitable workforce. Countries like Canada and Australia have enacted proactive immigration policies to attract highly skilled talent, offering permanent residency and long-term integration support. In Europe, Germany has eased immigration laws to attract skilled workers, recognizing migration’s role in economic sustainability. In contrast, most immigrants in Spain occupy low-skilled jobs, limiting their contribution to long-term productivity growth. This is compounded by irregular immigration. According to the Interior Ministry, 31,155 people in irregular status arrived in Spain by mid-August 2024—a 66% increase from the same period in 2023, placing Spain second after Greece in irregular migration growth among Mediterranean countries.

Technology to the rescue

A third strategy to mitigate the impact of an aging population has been the use of advanced technologies. Therefore, in sectors such as manufacturing, logistics, and customer service, advancements in robotics and artificial intelligence are either replacing certain jobs or enhancing the productivity of existing workers.

For example, in the automotive industry, companies like BMW are exploring the use of humanoid robots such as the Figure 02, which has already demonstrated its ability to insert metal components into specific structures during a test conducted at the German manufacturer’s Spartanburg plant. These robots will allow human workers to focus on higher-value, less physically demanding tasks. In this context, it is no coincidence that several leading contenders in the emerging humanoid robot market are Chinese companies—a country well aware that the demographic dividend that fueled its economic growth is running out.

Japan, where the working-age population fell from 87 million in 1993 to 75.3 million in 2018 and continues to decline, presents another fascinating case. In July, the Ministry of Transport and Tourism announced an ambitious engineering project: the development of an underground automated transportation system connecting Tokyo and Osaka. This project, which some have likened to a large-scale sushi conveyor belt, will ease pressure on the country’s highways and reduce transport-related emissions. However, according to the Japanese government, its primary goal is to address the truck driver shortage caused by the aging workforce.

In this country, robots are also beginning to be used for elder care—a practice that will likely soon spread to other geographies. For now, these machines assist with daily tasks, helping to improve the autonomy and quality of life of older individuals. However, we will soon see even more advanced robots, such as the NEO Beta model developed by the Norwegian company 1X, assisting seniors with more complex household chores, facilitating their mobility, or reminding them when to take their medications. Furthermore, these robots can contribute to the well-being of people of all ages by reducing domestic burdens while also offering an intriguing opportunity to improve the quality of life for those who must balance work with caring for dependents.

In any case, advancements in technology offer multiple avenues to mitigate the effects of an aging workforce beyond automation. Artificial intelligence (AI), for instance, plays a pivotal role in reskilling older workers, enabling them to acquire new competencies necessary to remain employable in an ever-evolving job market. Additionally, AI-driven tools can facilitate the inclusion of seniors in roles that may have previously been inaccessible, through intuitive interfaces and systems that assist with complex tasks. Moreover, AI can expedite the integration of immigrant workers into the labor force by providing advanced machine translation systems that overcome language and cultural barriers, thereby promoting more effective collaboration within diverse, multicultural teams. Furthermore, numerous tech-based solutions are emerging to enhance the physical, psychological, and financial well-being of individuals likely to experience longer lifespans than previous generations. A prime example is the recent recipients of the “Prospering in Longevity Challenge” awards—a joint initiative by Manulife and the World Economic Forum aimed at promoting preventive health and financial wellness, and empowering individuals across all generations to thrive and enjoy long, fulfilling, and financially resilient lives.

Where does this lead?

The convergence of strategies—prolonging working lives, integrating foreign workers, and accelerating automation—offers both challenges and opportunities for employers, workers, governments, and society. These measures aim not only to mitigate the immediate effects of population aging but also to build a sustainable future. However, they are not without significant hurdles and require a systemic approach.

For employers, these strategies lead to profound transformations in people management practices. Extending working lives require adapting policies, processes, and workplaces while challenging generational stereotypes. Integrating foreign workers demands inclusive practices, while advanced technology adoption calls for reskilling and upskilling to optimize these tools’ benefits.

For workers, the extension of working lives and automation create uncertainty. Older individuals must stay employable in a constantly evolving labor market, often requiring them to acquire new digital skills. Meanwhile, automation may displace low-skilled jobs, disproportionately affecting certain population segments, including immigrants who often fill these roles.

For governments, population aging and associated strategies create immense pressures on public policies. Sustaining pension and healthcare systems, managing migration effectively and equitably, and regulating automation’s impact are monumental tasks requiring foresight and collaboration.

At a societal level, population aging raises ethical and social dilemmas. How can we ensure fairness in active retirement policies? How can migration be managed sensitively to avoid exclusion or social tensions? What role should companies and governments play in redistributing automation’s benefits to prevent inequality?

Nevertheless, we should see these strategies not as definitive solutions but as palliative measures during a transitional period toward a new era. The key lies in addressing these challenges with a holistic approach that integrates economic, social, and environmental needs, as the decisions we make today will shape the society our children inherit.

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Photo Age Cymru in Unsplash