“A change-over from an increasing to a declining population may be very disastrous,” John Maynard Keynes once reflected. This may be so, but a declining working-age population could prove even worse.

Advanced economies across the world are experiencing similar demographic trends.  Specifically, ageing populations. And unless faster productivity growth is realised, this could be a problem.

Ageing populations and increasing proportions of the elderly could generate substantial fiscal pressures.

But what is also worrying are decreasing population proportions of the working-age.

Early this month, Tyler Cowen questioned whether prosperous economies will, in coming decades, have too few young people to support themselves.

“Economic debate since the financial crisis and Great Recession has often focused on issues like monetary policy, fiscal stimulus, unemployment and financial regulation. Yes, these are all important, but in the future we will need to pay much more attention to a relatively neglected field: population economics.”

An economy’s potential output depends on the number of workers and their productivity. Total potential output will suffer serious blows if the number of workers decreases. And if we consider the literature on agglomeration effects – the extra productivity you get in bigger places – output per worker could also be at risk. Germany and Japan have had shrinking working-age populations for more than a decade. Neither Britain nor America are projected to fare much better. And don’t even mention China or South Korea.

All things being equal, half a percentage-point drop in the growth of the labour force has been found to trim economic growth by a similar amount.

So what about New Zealand?

Unfortunately, the situation is about as discouraging. The proportion of New Zealanders of working-age was 66.4% in 2010. By 2060, this could fall to 58.1%.

Demographic trends may be exacerbating the “prolonged malaise” being felt around the rich world, in part by reducing the rate at which new entrepreneurial firms are established. Population age distribution there, matters.

But many economists, Cowen included, are optimistic about the potential remedies.

The first is to absorb more immigrants to help rebalance populations. The second is to make larger families more affordable – in part by reducing housing costs. The third, and arguably most important, is to improve labour productivity growth.

As discussed in The New Zealand Initiative’s most recent report, future New Zealanders would be much better off if achieving faster domestic productivity growth were given a much higher policy priority.

Our demographic trends are largely inevitable, barring substantial migration. Mitigating the consequences then rises in importance. After all, there’s no use crying over spilt milk.