How tech innovation can address falling fertility, rising dependency

SINGAPORE’S resident total fertility rate fell to a new low of 0.87 in 2025, compared with 1.24 in 2015, and 0.97 in 2024. Even with immigration, Singapore’s citizen population has been slowing over the past decade, growing just 0.7 per cent in 2025, and is projected to start shrinking by the early 2040s if there are no new interventions.

Singapore is not alone in this trajectory. By 2050, the world’s leading economies are all projected to experience a significant increase in the elderly dependency ratio – or the population over 65 to the population aged 15 to 65 – regardless of whether their total populations increase or decrease. 

Ageing economies face a stark choice: either do nothing and decline in population and economic activity, or invest in innovation and technological transformation and continue to grow. 

Declining fertility rates, rising elderly dependency ratio

Japan was the first country to experience important fertility declines in the 1950s, while the largest and sharpest decline is seen in China, where fertility hovered around six prior to 1970, then sharply fell to 2.7, before dropping below the replacement level from the 1990s. Fertility in Europe has been declining consistently since 1950.

Based on the medium fertility projections from the United Nations, Italy, Spain, Germany, Japan and China will experience declines in population, while Canada, the US, UK, Switzerland, Benelux and France are expected to see their populations increase through 2050. These projections assume that current immigration policies continue.

However, increasing social and political resistance to immigration in many developed countries introduces significant uncertainty into these forecasts. 

Japan is and will remain the oldest, most dependent country through 2050. China’s dependency is expected to increase exponentially, from 21 per cent to 52 per cent by 2050 and to over 100 per cent in the 2080s. The US and UK are expected to suffer only mildly from ageing, while Italy, Spain and Germany will see their dependency ratios increase substantially. 

The above projections are all but certain to materialise given the nature of population changes and the inability of social policies to have a materially positive impact on fertility rates. 

Investing in automation and AI

Technology can counterbalance the economic consequences of these demographic changes. Indeed, as labour becomes scarcer and more expensive in ageing societies, businesses have greater incentives to invest in technologies that can substitute human labour and/or enhance productivity. 

This innovation dynamic is particularly relevant in the context of industrial automation, where advancements in robotics and artificial intelligence are enabling machines to perform an expanding range of tasks and render existing labour more productive.

South Korea operates 101 robots per 1,000 employees – over six times the global manufacturing average of 16. Singapore follows with 77, while China, Germany and Japan each utilise more than 40 per 1,000 workers. 

The experiences of Germany and Japan show how this dynamic is already playing out in different ways in different countries. Germany’s rapidly ageing population requires immediate worker replacement, whereas Japan’s earlier demographic shift has enabled a more mature emphasis on enhancing productivity.

This two-phase pattern provides a guide for investors. Countries undergoing demographic transitions should anticipate initial waves of automation focusing on labour-intensive sectors, followed by investment in productivity-enhancing technologies.

Policymakers must consider how to support the transition to automation, ensuring that investments in new technologies mitigate labour shortages rather than induce labour market disruptions.

The key to success will lie in developing the organisational capabilities that turn individual machines into significant efficiency improvements.

As AI takes automation beyond manufacturing to cognitive tasks, grasping these sequential patterns will be essential for navigating the broader economic transformation and investment opportunities on the horizon.

A catalyst for productivity growth

Rather than leading to stagnation, demographic shifts coupled with automation technologies may serve as a catalyst for productivity growth.

A declining working-age population raises the cost of routine labour, prompting an initial wave of automation aimed at replacing workers. But once the most pressing bottlenecks are resolved, a subsequent, longer wave of investment focused on efficiency gains emerges, increasing value per hour worked.

Wider economic ramifications can also be expected. Automation could boost gross domestic product, thereby curbing debt levels. At a more micro level, consumption patterns can be expected to change as the relative size of different age groups morphs.

The “silver economy” catering to seniors is already booming, while technology-driven increases in the affordability of some goods and services will appeal to younger age groups.

These demographic changes and economic developments should create distinct investment opportunities, especially in sectors and countries that stand to benefit from shifting consumption patterns and can leverage technological efficiencies to meet evolving demographic needs. 

Understanding these interconnected trends will be crucial for navigating the investment landscape in the years to come, as they represent fundamental shifts in the drivers of global economic growth and consumption demand.

The writer is head of the Pictet Research Institute