Demographic developments will not dampen inflation

Beyond global economic developments, an important structural trend might
reverse and cause inflation to accelerate again. According to a BIS working
paper, the global potential workforce has increased by 120% to roughly 1.9
billion people between 1990 and 2014, with most of this growth originating in
China and eastern Europe (from 820 million to 1,120 million).

According to
World Bank forecasts, the share of the workforce in the overall population has
probably started to decline, which means that the demographic “sweet spot” is
already a thing of the past. This is also confirmed by a study quoted in the
Working Paper, which focuses on the effect of the population structure on
inflation.

This study finds that the shares of those age groups which are usually
not gainfully employed (i.e. People aged below 20 and above 60) push up
inflation, whereas the share of persons who are of working age dampens
inflation considerably.