Smaller households, greater economic challenges

That the country is aging is an increasingly evident reality, not only because of the reduction in births and the slow decline in deaths, but also because households appear to be getting smaller and younger generations have shown a reluctance to have large children.

The most recent update on this topic was the 2024 National Quality of Life Survey, conducted by DANE (National Development Bank), which included data that caught the attention of the Center for Economic Studies (ANIF), an organization that has long been warning about the continued decline in the average number of people per household in Colombia.

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For them, this trend, which reflects a deeper structural phenomenon associated with the decline in the birth rate, poses significant challenges for the country's economic and social sustainability, as future impacts are expected on labor, pensions, and business productivity.

Using data from the National Statistics Institute (DANE), this team of analysts estimates that between 2019 and 2024, the average number of household members fell from 3.1 to 2.86, representing a 7.74% reduction in just five years.

"This phenomenon has been most pronounced in municipal capitals, where the decrease was 8.44%, while in populated centers and dispersed rural areas, although the decline is also significant, it was smaller, with a decrease of 5.68%. These demographic changes have serious implications for the social protection system, particularly for pension and health systems," they emphasized.

Structural problems

The decline in household size is closely linked to the decline in birth rates, which has been faster than expected. Between 2020 and 2024, approximately 841,000 fewer children were born than projected, a figure comparable to the entire population of Cúcuta, according to Anif's estimates.

That said, for them, all of the above has led to a progressive aging of the population, which, along with the increase in life expectancy, could limit the country's economic growth in the medium and long term, generating an impact they described as considerable if not addressed in a timely manner.

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"As the population ages and the proportion of young people entering the labor market declines, the country's productive capacity is threatened. Furthermore, if young people who remain in the productive system do not generate sufficient savings to offset the dissavings of older generations, capital investment could be compromised," they explained.

On the other hand, one of the greatest challenges arising from this situation lies in the pension system, especially with the recent expansion of the pay-as-you-go system to 2.3 times the minimum wage. The Colombian government faces increasing financial pressure, as if the number of people of retirement age increases without being offset by a proportional growth in the economically active population, the sustainability of the pension system will be at risk.

The report also warns that the health system will not escape the effects of this demographic transition, since as the population ages, the demand for specialized medical services for chronic diseases and long-term care will increase, which will increase public health spending and require a restructuring of the financing model to guarantee comprehensive care for the older population. With all of the above, Anif concluded by stating that the country must prepare to face a considerable pension deficit if adequate measures are not taken and that it is essential to reform the system to make it more sustainable in the face of the evident aging of the population.

In this way, they concluded by recommending several proposals, such as encouraging the older population to participate in the economy and promoting policies that encourage birth rates, such as subsidies for young families and work-life balance policies that allow for having more children without affecting family income.