Aging Faster Than Peers: Demographic Shifts and Their Impact on Aruba’s Labor Market

Aruba is entering a post-demographic-dividend era, as falling fertility, rapid population aging, and outward migration begin to shrink the workforce and weigh on long-term economic growth. The IMF finds that boosting labor force participation, especially among women, older workers, and migrants can partly offset these demographic pressures and support future growth.

Produced by researchers at the International Monetary Fund, using data from the Central Bureau of Statistics of Aruba, the Central Bank of Aruba, the United Nations Population Division, and national labor force surveys, the report explains that Aruba is reaching a major demographic crossroads. For decades, population growth helped fuel economic expansion by steadily increasing the labor force. Today, that advantage is fading. Fertility rates have fallen sharply, the population is aging quickly, and the number of people entering the workforce is no longer keeping pace with those leaving it. These trends are reshaping Aruba’s economic future.

Birth rates in Aruba have been declining for many years and reached historic lows by 2024. Women now have far fewer children than in the past, and total fertility is well below the level needed to maintain population size. At the same time, the share of residents aged 65 and over has almost tripled since 1990. In a small island economy, these changes are particularly significant because they directly affect how many people can work and support public services such as healthcare and pensions.

Slowing Population Growth and Migration Pressures

Aruba’s population once grew rapidly, especially in the late 1980s and 1990s, when tourism expanded and foreign workers arrived in large numbers. Since then, growth has slowed sharply. After the pandemic, population growth nearly stalled as births declined and net migration weakened. Immigration still plays a crucial role, with almost 40 percent of the population now foreign-born, but even migrant groups are aging.

At the same time, many young Arubans leave the island to study or work abroad, often in the Netherlands, and do not return. This outward migration reduces the supply of skilled workers and limits the country’s long-term growth potential. The report highlights that Aruba increasingly relies on migration to sustain its workforce, yet migration alone may not be enough to offset declining fertility.

An Aging Society and Rising Dependence

Changes in Aruba’s population structure are clearly visible. The population has shifted from a broad-based pyramid to a narrow, aging profile. The median age has risen above 40, and older age groups, especially women, make up a growing share of the population. As a result, dependency ratios have risen rapidly, meaning fewer workers are supporting more retirees.

Old-age dependency is now the main driver of this trend, while the number of children relative to workers has fallen to historic lows. Compared with other Caribbean economies, Aruba is aging faster, placing earlier and stronger pressure on its labor market, healthcare system, and social insurance programs.

Labor Markets Under Strain Despite Low Unemployment

At first glance, Aruba’s labor market looks strong. Unemployment is at a historically low level, around 4 percent, and labor force participation is relatively high. However, the report warns that these figures mask deeper challenges. Participation rates have stopped rising, and a persistent gap between male and female participation remains. Women are more likely to be inactive, especially during mid-career years, often due to childcare and eldercare responsibilities.

Employment dropped sharply during the pandemic and has been recovering, but inactivity remains higher than before. Young people are more engaged in the labor market than in the past, yet many struggle with skill mismatches that make it harder to find suitable jobs. Wage gaps between men and women persist across most sectors, especially in higher-paying industries.

What Demographics Mean for Growth, and What Can Help

Using population projections, the IMF shows that Aruba’s working-age population is likely to begin shrinking in the early 2030s. If current labor market policies remain unchanged, employment growth will slow and eventually flatten, reducing the contribution of labor to economic growth. This demographic drag could significantly lower Aruba’s medium-term growth outlook.

However, the report also shows that policy choices can make a real difference. Raising female labor force participation, encouraging older workers to remain active longer, and modestly increasing male participation could add thousands of workers and lift economic growth. Better vocational training, reskilling programs, and improved job matching can reduce labor market frictions. Expanding affordable childcare, promoting flexible work arrangements, and improving migrant integration would further strengthen the labor supply. The central message is clear: while Aruba cannot reverse demographic aging, smart labor market and social policies can help the economy adapt and continue to grow.