Demographic change and the welfare state

The British welfare state was created in the aftermath of the Second World War, at a time when the population and the economy looked markedly different from today. The population was growing rapidly, the economy was expanding and the system was designed around assumptions of almost total male employment in fulltime jobs, limited participation by women in paid work, and relatively low levels of long-term sickness outside old age.

Those assumptions no longer hold. Britain’s population structure, patterns of work, health needs and sources of public revenue have all changed. The welfare state will need to adapt if it is going to be able to provide good health for all. While demographic changes are only one factor in increasing pressure on the welfare state, to understand the impact of these changes and what might be done about it, it helps to look at a set of connected trends: population ageing, falling birth rates, changes in the tax base, shifts in how we work and the role migration plays in propping up the welfare state.

An ageing society with complex health needs

When the NHS was founded in 1948, around 11% of the population was aged over 65. Today that figure is close to 19%, rising to 23% by 2047 and the number of very old people (those aged 85 and over, who are the most intensive users of health and care services) has doubled in the past 20 years. This isn’t a short-term blip, but lasting, structural change.

People are living longer, driven by major successes in treatment and public health. People aged 65 today can expect to live for nearly 20 more years, compared to around 7 years in 1948. However, these life expectancy gains have slowed since 2012 and stalled since the Covid-19 pandemic, meaning that life expectancy in the UK is now among the lowest of high-income countries other than the United States. Healthy life expectancy also stalled in the 10 years before the pandemic, and then fell to around 61 years for both men and women, well below the state pension age (currently 65, rising to 67 in 2027).

This represents a fundamental shift in the nature of demand. The NHS was designed to treat illness, restore people to health and prevent early death, particularly from infectious disease. Today it is increasingly expected to support people through decades of living with long-term conditions such as diabetes, heart disease, arthritis, stroke-related disability and dementia. Advances in neo-natal and paediatric care also mean that there are many more children surviving into adulthood with complex care needs, with conditions such as neuromuscular disease, cystic fibrosis, severe learning disability or brain injury. We often talk about the impact of an ageing  society, but the reality is much more complex and reflects a very different pattern of health and need.

There are also persistent and growing inequalities in life expectancy and healthy life expectancy between areas of the UK. People who live in more deprived areas, or face disadvantage because of ethnicity, disability, poverty or insecure work tend to die younger and spend more of their lives in poor health. People living in one of the most deprived areas of the country, Blackpool, have a healthy life expectancy that is 18 years lower that for people living in Richmond, one of the least deprived areas. These differences aren’t random, rather these inequalities are systemic and largely out of people’s direct control. This matters when thinking about the role of the welfare state and the NHS. The health service cannot on its own undo the damage caused by wider social and economic inequality.

Declining birth rates

A rise in the number of adults and older people with care needs comes alongside a long-running fall in the birth rate. The UK’s total fertility rate has been declining since around 2010 and now sits at about 1.4 children per woman in England, well below the level needed to keep the population stable. While there has been a slight recent uptick in births, it hasn’t been enough to offset relative growth in the adult population.

This decline reflects constraint as much as choice. An Ipsos survey in 2025 found that half of women between 18 and 50 had delayed or decided against having a child, and the most likely reasons were cost, including high housing costs and expensive childcare. Low fertility is not unique to the UK, nor is there a clear international model for reversing it, although there is some evidence that fertility rates rise when there is security of employment and when women can combine work and family life on an equal footing with men through paid parental leave and affordable child care. A forthcoming piece of King’s Fund research that spotlights Japan’s ageing society also reveals that sustained national conversation and engagement with the issue across all policy areas can be helpful in addressing things – although again, not to the extent that the pattern can be reversed. The macro picture remains: lower birth rates today mean fewer workers and taxpayers tomorrow. That feeds directly into the sustainability of the welfare state, which still depends heavily on a large working-age population to fund pensions, health care and benefits for those not in work.

A changing tax base and workforce

At first glance, the share of the population that is of working age looks surprisingly stable. Around 61% of people are of working age today, much the same as in 1948.  

But despite this, there is a major change in the dependency ratio, that is the number of people under 15 and over 65, compared to those of working age . When the welfare state was set up, there was roughly 1 person over 65 for every 6 people of working age. Today it’s closer to 1 to 3. That has clear implications for tax revenues and for the supply of workers, especially in sectors like health and social care where demand is rising fastest. The rise in the state pension age is one way in which government policy is responding to this change.

Work itself has also changed. Employment rates are similar to the late 1940s, at around 75% of working-age adults, but the structure of employment is completely different. Back then, almost all men worked in full-time, stable and unionised jobs, few women worked, and part-time work was rare. There is now much higher female employment, offset by lower male employment. The nature of work has also changed, with a move from a mainly industrial economy to a service economy with more part-time, flexible and insecure work which leads to more volatile income with in-work poverty now a major policy concern. Work is both healthier, with fewer industrial accidents, and unhealthier, with more sedentary working and work-related stress, with much higher levels of working-age ill health and disability.

The tax system has struggled to keep pace with these changes. Workers in the UK are relatively less taxed than other countries in the Organisation for Economic Co-operation and Development (OECD), but the UK relies more on income tax than some other countries, which rely more on consumption and property taxes than taxes on earnings. This difference matters as the population ages and labour supply tightens. Revenues from labour taxes become harder to sustain as a lower proportion of people are in steady, well‑paid employment. By contrast, taxes on consumption, wealth and property are less directly tied to the size of the workforce and tend to be more robust as societies age. At a time when the welfare state requires a broader and more stable revenue base, the tax system remains weighted towards a form of economic activity that demographic and labour-market trends are steadily eroding.

Immigration

Immigration is often at the top of public polls on priorities for the nation and that governing parties of all hues have made it a priority to reduce multiple forms of migration. Discussion about migration sits uncomfortably at the intersection of demographic facts and political arguments. Net migration to the UK has fallen sharply in recent years. The main drivers of this fall have been policy changes affecting work and study visas, particularly in health and care, where higher salary thresholds and changes to rules on dependents have reduced the number of people migrating for these roles. Largescale humanitarian routes from Ukraine and Hong Kong have also tapered off, while emigration of both British and EU citizens, the vast majority being working age adults, has increased. Many international students are also now leaving after completing their studies as post-study routes tighten. Asylum-related migration accounts for around 12% of long-term immigration, with approximately 100–110,000 people seeking asylum per year, and just under half likely to be granted protection.

From an economic perspective, the migration rate matters because migrants are disproportionately of working age, have high employment rates and are often, at least initially, not eligible for benefits. Analysis shows that migrants make a modest but positive net fiscal contribution to the UK economy and public finances overall.

If low migration rates continue, it would reduce labour supply and slow growth in the tax base, particularly as recent falls have been concentrated in people with work visas and the dependants of people with student visas, while emigration of working-age British nationals has risen. Also interesting to note is that about 40% of births in the UK last year were to families where one or both parents was born abroad. The low birth rate may therefore also be impacted by lower migration.

Also critical is the impact of reduced migration on the health and social care workforce. Currently, around 20% of the staff working in health care report non-British nationality, 30% of those working in social care were not born in the UK and almost half of trainee GPs are international medical graduates. And according to the last NHS workforce plan published in 2023, by 2036/37 we’ll need about 6% of the working-age population to work in the NHS and another 5% in social care. That’s double today’s levels. There are currently more than 200,000 vacancies across both workforces and the most recent workforce plan published by the NHS, forecasts that the number of health sector employees will need to rise from 1.5 million today to around 2.1 million over the next 10 years to keep up with rising demand. According to one major study, the social care workforce will need to find more than 500,000 staff by 2040. Even though the new long-term workforce plan for the NHS, expected in 2026, is likely to have a lower target due to changes in service models and ambitious hopes for technology, the system will likely still remain short of the staff it needs to provide now and in the future and hence the degree and quality of care it can provide.

What can be done?

Demographic change, and particularly the ageing society, is often framed as a looming crisis, but it is also the product of extraordinary success: fewer early deaths, longer lives, and the survival of children who would not previously have reached adulthood. The real crisis is one of care. We want our health and care system to care well for older people, for disabled people, for children with complex needs – and yet our current economic and institutional structures are not designed to support this. Our care models, workforce structures, performance metrics and institutional prestige remain rooted in the system that was built for post-war needs, not the needs of today. This is a global challenge, and no country has a complete answer. But the implication is clear. Without rethinking prevention, the NHS and social care offer, workforce planning and the way we raise revenue, the welfare state will continue to struggle under demographic realities it was never designed to face. If we are serious about caring well in an ageing society, we may need not just policy tweaks, but a deeper reimagining of the economic structures that underpin care itself.