Publisher: Federal Reserve Bank of Kansas City

Abstract: This paper discusses how demographic changes are affecting the labor force in emerging markets. As will be shown below, the demographic situation in emerging markets is rapidly changing. After several decades of rapid population growth, with most of the growth coming at the youngest ages, population growth rates have declined substantially and growth is now concentrated in the older age groups. These changes are important to the U.S. economy for several reasons. First, these countries will be some of the United States’ most important trading partners in the decades to come. Changes in the size and composition of the labor force in these countries could have important implications for the kinds of goods they produce and how they compete in the world economy. Second, the demographic changes in emerging markets have potentially important impacts on the demand for U.S. goods in these economies. Third, the changing demographics of the labor force in emerging markets may have important implications for the way these workers compete with U.S. workers. The change from rapid growth of youth cohorts with low skills to slower growth of youth cohorts with higher skills is potentially an important change in the global labor market that could have both positive and negative effects on the relative position of U.S. workers.