GLOBAL – The group behind the annual World Economic Forum meeting in Davos has issued a report in conjunction with Watson Wyatt saying ageing could undermine developed countries’ economies.

“The combined effects of slower labour-force growth and population ageing could undermine the pension systems and broader economic prospects of many developed countries,” the forum said of new 31-page study.

“Living Happily Ever After: the Economic Implications of Aging Societies” was released before its annual meeting in the Swiss resort of Davos this week.

It highlighted what it termed “profound questions” about issues ranging from labour participation and productivity, the cross-border flow of capital, the globalization of labour markets and the financial viability of social insurance programmes.

“Economic output is determined by labour force growth and productivity rates,” said Richard Samans, managing director of the Institute for Partnership and Governance of the World Economic Forum.

“In countries with significant projected labour shortages, the supply of goods and services may not meet demand and standards of living. However, things do not necessarily have to unfold this way.”

The forum said governments have several remedies to the problem, including: increased immigration, capital deepening, technology investment and higher workforce participation. “They also need to develop ways to tap surplus labour pools in developing countries through greater economic integration than ever before.”

“While no single solution provides a magic bullet, it’s clear that the flow of capital and labour across borders can be improved,” said Watson Wyatt president and chief executive John Haley.

“If the world’s developed countries cannot find adequate labour within their own borders, they can export capital to other parts of the world where there are ample and growing supplies of workers.

“It will help raise standards of living in the developing world. It will provide sources of income and goods in the developed economies where worker shortages will strain the economic capacity to meet consumer needs. In the end, we all will benefit.”

“The demographic changes present enormous challenges for developed countries,” said Sylvester Schieber, director of research at Watson Wyatt and co-author of the report. “There will be hard choices ahead, but in the final analysis, more global integration is needed, not less.”

The report will be discussed during the meeting. The forum has also put together a series of profiles, looking at the impact of ageing on individual developed countries.