Organisation for Economic Co-operation and Development (OECD) countries are heading for a major economic slowdown as their populations get older, and governments need to act fast to avoid a 40% drop in growth rates, the organization warned in its latest OECD Employment Outlook 2025. The problem is simple: baby boomers are retiring faster than young people are entering the workforce. The old-age dependency ratio has jumped from 19% in 1980 to 31% in 2023. By 2060, it will hit 52%. Without big improvements in productivity, GDP per capita growth would drop from 1% annually in 2006-19 to just 0.6% in 2024-60. All but two OECD nations would see their per-capita growth decline.
Right now, labor markets look strong. Employment and labor force participation have hit record highs. The OECD unemployment rate sits at 4.9% in May 2025, and the average employment rate reached 72.1% in the first quarter. But there are warning signs. Employment growth is slowing down, and labor market tightness is falling back to pre-COVID levels in many countries and sectors.
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Real wages are growing virtually everywhere in the OECD, but half of member countries still haven’t gotten back to early 2021 levels before inflation hit after the pandemic. This wage recovery is happening as declining fertility and longer life expectancy reshape the workforce. The working-age population (20-64 years old) is shrinking as baby boomers leave their jobs.
The economic slowdown doesn’t have to happen. Countries can largely offset it by getting more people into the workforce—especially older workers who are still healthy, women, and regular migrants. If countries reduced the percentage of older workers leaving employment to match the 10% of OECD countries with the lowest exit rates, about half of OECD nations could gain at least 0.2 percentage points of annual GDP per capita growth.
Closing the gender employment gap would give similar growth benefits. The report shows that keeping healthy older workers in jobs longer is key to boosting the workforce and maintaining economic momentum as demographic changes reshape OECD economies.
