Latin America: No Longer Young

Rosa Do Vale grew up in the rural area of Diamantina, in the southeastern state of Minas Gerais, Brazil, with her nine siblings. She started working as a nanny at age 11, and while still a teenager, as a maid while attending night school. Do Vale became a single mother at age 17 yet managed to graduate from college with a degree in history. Now 48, she decided early on to do things differently than her parents and not have more children.

"It was a natural choice," Do Vale said. "My partner abandoned me when my daughter was born. That led me to reflect on how difficult it is to be a single mother in Brazil."

Do Vale's daughter is now 31, divorced, and doesn't have any children. Their story is one of a generational change occurring among Latin America's population. For different economic, social, and cultural reasons, women and men are now choosing to have fewer children than their parents or no children at all. At the same time, people are living longer due to medical advances and more access to health care. As a result, Latin America’s population is no longer young. According to the World Bank, total fertility in the region fell from 5.2 children per woman in 1970 to 1.9 in 2021. This as life expectancy rose to 72.2 years (up from 58.6), and the population growth slowed to 0.6% a year (down from 2.5%).

The best defense against the economic risks of an aging population is to increase productivity. But the productivity performance of the region lacks compared to the rest of the world. -Otaviano Canuto

"Declining fertility rates and an aging population will begin to place a growing socioeconomic burden on the working-age population," wrote a World Bank team in an April 2024 report, led by William Maloney, Chief Economist for Latin America and the Caribbean. "The demographic shift means that the region is on the brink of reaching the peak in terms of the working-age population. Absent any changes, a decline in the quantity of available labor is imminent, ushering in a phase where labor’s contribution to growth will become progressively smaller."

The International Monetary Fund forecasts that the pace of Latin American population growth will slow from about 1% per year in the two decades before the pandemic to about 0.6% in the next five years.

"The demographic dividend is fading as the region’s population is aging and the share of the working-age population is peaking," wrote Gustavo Adler and Rodrigo Valdés, division chief and director, respectively, of the IMF’s Western Hemisphere Department, in April. "This means that the share of the population able to generate income will stop growing." Adler and Valdés do not expect an increase in the share of Latin America's working-age population in the next five years.

Productivity

For Otaviano Canuto, a senior fellow of the Policy Center for the New South and former executive director at the World Bank, Latin America missed an opportunity to increase productivity while its population was still growing.

When a man becomes a father, he is more respected in the corporate world. He's seen as a more serious person. A woman almost turns into a liability for having become a mother. -Paula Sampaio

"The best defense against the economic risks of an aging population is to increase productivity," Canuto said. "But the productivity performance of the region lacks compared to the rest of the world."

Canuto asserts that countries in the region should have invested more in infrastructure and education and made their markets easier to open and run businesses while their population was still growing at stronger rates.

"The region missed that window," Canuto said.

According to the World Bank, growth in Latin America and the Caribbean is among the lowest in the world. By the end of 2023, the region’s gross domestic product (GDP) was 7% higher than in 2019, yet it was 19% higher in East Asia and the Pacific and 18% higher in South Asia. "This trend is expected to continue through 2024," the bank stated in its April report.

IMF's Adler and Valdés wrote that the region should still focus on increasing labor productivity growth by “tackling poor governance and stringent business regulations, which constrain firms' growth and the associated productivity gains. This will help raise living standards even amid demographic headwinds."

Women in the Workforce

One of the solutions seen to address the shrinking labor force in Latin America is to get more women in the labor force. The IMF says their participation is still low, at 52% of working-age women compared with 75% of men.

"Policies can help," Adler and Valdés wrote. "Expanding childcare programs and providing more training for women can help raise female participation."

But for Charles Kenny, senior fellow at the Center for Global Development, the economic contribution of women may not be entirely reflected in statistics.

"It's not like women aren't doing anything at the moment or just sitting around and playing video games eight hours a day," Kenny said. "That might deal with economic statistics, but not necessarily dealing with economic reality."

Still, Kenny mentions policies such as subsidies for people to have children and "efficient" care services as potential incentives for women to join the labor force. In Brazil, women's participation in the country's workforce is 20% lower than men's, even though female workers account for more than half of working-age people, according to the country's Women's Ministry, citing statistics agency IBGE. Hurdles to join, remain, or return to the labor force exist at all levels in the corporate structure.

Paula Sampaio, 39, left the position of chief operating officer of a Sao Paulo technology company in 2022 when she became a mother. She found it extremely hard to juggle a 15-hour workday, managing a team of 100 people, and the need to be free of stress to have a healthy pregnancy.

"I was absolutely overwhelmed," Sampaio said. "I tried to discuss it with the company many times before reaching my limit. I couldn't reduce my workload."

Even when retirement age isn't at play, any attempts to reform pension systems seem to have a high political cost.

She quit her job and gave birth to a boy who is now a year old. Sampaio is contemplating returning to the job market, but it is difficult to find a position that would allow her to work partially from home so she could spend more time with her baby.

"When a man becomes a father, he is more respected in the corporate world. He's seen as a more serious person," Sampaio said. "A woman almost turns into a liability for having become a mother."

The pay-gap between women and men is another factor that may discourage women from joining the workforce.

"In Brazil, women are paid 22% less than a man's salary. When we talk about Black women, the difference is almost 50% compared to white men," said Cida Gonçalves, Minister of Women,  in a speech at the G20 Women's Empowerment Working Group meeting in January. "I have argued that we must tackle the root of the problem, which is misogyny—hatred of women—and the central point of all other gender discrimination."

The ministry said in an emailed response to questions that it's working on different fronts to boost women's participation in the labor force and reduce gender inequality. Some of the initiatives include a national care policy, more pay transparency, enforcement against gender discrimination, diversity and inclusion initiatives, and professional training for female workers.

Boosting Retirement Age

Increasing the age for retirement is another initiative to boost labor force participation, which isn’t easy, according to professor Canuto of the Policy Center for the New South. "There have been threats even from parties from the right to reverse any changes."

Canuto mentioned the difficulties faced last year by French president Emmanuel Macron when he tried to pass a retirement reform bill that raised the retirement age to 64 from 62. The country endured strikes and protests, sometimes violent, for weeks.

"I think that raising the retirement age slowly, as much as politically possible, probably would play some role," said Charles Kenny, of the Center for Global Development. "Places that tried to do that found it immensely hard. It's very unpopular."

Even when retirement age isn't at play, any attempts to reform pension systems seem to have a high political cost. Chile President Gabriel Boric is currently crusading to reform the country's pension system. There's already an agreement with Congress to increase the mandatory contribution from workers' paychecks from 10% to 16%. But the government and opposition disagree on how to use that additional revenue. Boric's leftist administration wants it to be managed by a "solidarity" state-run fund that will support retirees, women, and lower-income contributors, besides financing a national policy for the care of people with disabilities. The opposition is pushing for the entire contribution to go to Chile's system of individual savings accounts managed by private funds.

The Migration Opportunity

Being more open to immigration has helped alleviate the negative impacts of aging populations, especially in high-income countries. Immigrants boost the workforce and support the economy as taxpayers, consumers, and entrepreneurs. The office of New York City Comptroller Brad Lander says on its website that when the city "faced abandonment and fiscal crisis in the 1970s, a strong wave of immigration contributed to public safety, increased the city’s population, and boosted public revenues."

The comptroller points to analysis from the US research and advocacy organization Center for American Progress that shows undocumented immigrants represented approximately 3.2% of the US population in 2021, but 4% of the country’s workforce. In Latin America, the impact of migration flows tends to be different. For professor Canuto, the region still doesn't benefit as it exports workers more than it receives them.

"Brazil and Colombia, for example, attract people from neighboring countries that are nearing a complete collapse, like Venezuela," Canuto said. "This could change in the future if the region is able to alter its economic dynamics."

Will Freeman and Shannon K. O'Neill from the Council of Foreign Relations see benefits for Latin American countries that are showing relative openness to migration.

"Governments such as Colombia’s, Brazil’s, and Peru’s have given immigrants temporary residential status, work permits, and access to education and healthcare," Freeman and O'Neill wrote in May. "If governments in the region can stave off backlash to immigration by native-born citizens and better support new arrivals, more demographic benefits of migration will come."

“Not Existential”

Some analysts expect that globally, the growth of artificial intelligence and robotics will help increase productivity—and potentially compensate for an aging population.

"The expected decline in the world’s labor force will need to be offset, for instance, by widespread adoption of AI technologies to maintain current growth rates," states the S&P Global report, written by Samuel Tilleray, Marko Mrsnik, and Ken Wattret in January. "Yet, historically, such transformative technological changes have not usually created a persistent change in productivity growth after an initial boost."

For Charles Kenny, AI won't necessarily be the answer as it’s harder to apply in services and agriculture, which are strong areas of Latin America's economy. Kenny says although many policy solutions to fight the issue of demographic changes can be adopted, there's no silver bullet. Still, Kenny is optimistic about how Latin American nations will manage their challenges: "There's no particular reason to think that the region shouldn't continue converging with high income countries."

Helder Marinho is a New York-based journalist. He worked for Bloomberg News for more than 20 years in the US and Brazil, in different roles, including as managing editor for Latin America.

Cover photo: São Paulo, Brazil. Shutterstock/Antonio Salaverry.