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Sheila Bair: Shrinking populations pose a huge economic opportunity

The Honorable Sheila C. Bair

(FORTUNE) – Smaller populations are not necessarily a bad thing.

The former chairwoman of the FDIC Sheila Bair on Monday took on the topic of shrinking populations: in developed countries, she says, they pose a huge economic opportunity.

Long-term demographic trends in developed countries that indicate shrinking populations will produce “short-term issues” like large elderly populations being forced to depend on a smaller working-age cohort, she said. But the problems will “level out over time,” especially with the aid of technology.

Smaller populations could “improve the quality of life” and produce a “smaller labor force that’s better paid” since a smaller available workforce will put a premium on labor, she said. A smaller population will also reduce humans’ environmental footprints. “Over the long term, a shrinking population is a positive.”

The United States Census projected in March that the population of the U.S. will increase from 319 million to 417 million between 2014 and 2051, but it will grow at a slower rate in future decades than it has in the past because of declining fertility rates. By 2030, one in five Americans is expected to be 65 or older.

Bair, who was recently named president of Washington College in Maryland, made these statements on a panel focused on global risk and opportunities at Fortune’s Most Powerful Women Summit in London, which began on Monday.

The topic of shifting demographics also cropped up in comments made by another panelist, Kristin Forbes, a member of the Monetary Policy Committee for the Bank of England and a professor at the MIT Sloan School of Management. Forbes pointed to low productivity growth as a risk, especially in the United Kingdom, which, she claims, has experienced zero productivity growth since 2012. In the U.S., for the first quarter of 2015, non-farm labor productivity decreased at a 3.1% annual rate, according to the Bureau of Labor Statistics, and it’s been trending lower for years. Those figures are concerning, Forbes says, because increasing productivity growth is key to improving standards of living.

What might be even more concerning is that it’s hard to pin down an overarching reason for the productivity slowdown. Shifting demographics within developed countries may account for part of this trend. Perhaps, Forbes says, “an aging workforce is not as productive as they grow older.”

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