The Great Inversion: Aruba's Demographic Transformation

Author: Rendell de Kort

How Aruba's population is quietly transforming—and why it matters for your future

Something fundamental is shifting beneath the surface of Aruba's economy. For years, economists and policymakers have been sounding warnings. The IMF flagged pension sustainability concerns as far back as 2005, warning that without reforms, Aruba's public debt could reach an unsustainable 250% of GDP by 2030. The Central Bank of Aruba's 2021 white paper "Governing from the Future" identified demographic aging as one of Aruba's "Gray Rhinos"—highly probable, high-impact threats that are often ignored. APFA underwent major pension reforms in 2014-2015 to address mounting financial pressure.

Most recently, the IMF's October 2025 Article IV consultation explicitly warned that "additional measures are needed to prevent the healthcare and social security systems from straining the budget due to population aging," recommending parametric reforms to preserve the actuarial balance. The Fund noted that SVB surpluses "are expected to decline due to demographics" and called for analysis of reform options.

Yet despite these warnings echoing through technical reports and policy circles for two decades, the full picture—visualized clearly and made accessible—remains underappreciated by the broader public. But the economic implications need to be clear to the people whose futures it will reshape.

The transformation: A population turning upside down

In 1991, Aruba's population looked like a traditional pyramid—lots of children at the base, fewer elderly at the top. It's what demographers expect in a healthy, growing society. Children grow into workers. Workers support both the young and the old. The cycle continues.

But something changed.

Over just 35 years, that pyramid began to invert. The base narrowed. The top expanded. Today, we stand at a historic crossing point.

Watch as Aruba's population pyramid transforms over 25 years. The base—once dominated by children—steadily shrinks, while the top expands with a growing elderly population.

This says something about the fundamental economic structure of our society. For the first time in Aruba's history, we have nearly as many people leaving the workforce as entering it. The pyramid that took centuries to build has inverted in just one generation.

The dependency crisis: Fewer workers, more mouths to feed

The working-age population (26-64 years old) is the engine of the economy. They work, pay taxes, generate economic output, and support both children and the elderly through social systems. But the burden they're carrying is growing heavier.

In 1991, every 100 workers supported 35 dependents. By 2025, they support 46 dependents—a 31% increase in dependency burden.

But here's the critical shift that changes everything: We've gone from supporting mostly children (investments in the future) to supporting mostly elderly (costs of the past).

Children eventually become workers who contribute to the economy. The elderly, while deserving of dignity and care, need increasing support until they pass. The math changes fundamentally when your dependents shift from one category to the other.

Why this matters for the economy

Every dependency point matters because it represents real economic pressure:

• Tax burden increases: Fewer workers must generate more tax revenue to fund the same services

• Labor shortages emerge: Critical sectors struggle to find qualified workers

• Economic growth slows: A shrinking working-age population means less innovation and productivity growth

• Fiscal sustainability threatened: Pension and healthcare systems face mounting pressure

The cost explosion: Healthcare and pensions under pressure

Not all dependents cost the same. This is the uncomfortable truth at the heart of the demographic challenge. An elderly person requires approximately 3-5 times more healthcare spending than a child. They need specialists, chronic disease management, medications, and often long-term care. Add pension costs, and the fiscal reality becomes stark.

This chart shows an estimated dependency cost index, based on a simplified model where children cost 1x in education and basic healthcare, working adults cost 0.5x (generally healthy and productive), and elderly cost 4x in healthcare, pensions, and long-term care.

The result: dependency costs have increased by roughly 85% since 1991, while the tax base has grown much more slowly.

What this means in practice

The same pool of workers must now fund:

• Nearly double the healthcare infrastructure and personnel

• More hospital beds, more specialists, more advanced treatments

• Expanded pension payouts as people live longer

• Growing long-term care facilities and home health services

• All while maintaining education, infrastructure, and other public services

Without reforms, this leads to an inevitable trilemma: higher taxes, reduced services, or mounting debt. Most likely, we'll see a combination of all three.

The IMF's October 2025 Article IV consultation reinforced the urgency, explicitly stating that "additional measures are needed to prevent the healthcare and social security systems from straining the budget due to population aging." The Fund recommended everything from expanding preventive care to parametric reforms of the social security system.

The future: What happens if trends continue?

These aren't projections based on wild assumptions. They're extrapolations of current, observable trends in fertility rates and life expectancy. Trends that have been remarkably stable.

If current patterns continue, by 2040, one in three Arubans could be 65 or older. The working-age population could shrink to 46% of the total—down from 55% today.

Think about what that means:

• Healthcare systems built for today's elderly population of 19% must serve 33%

• Pension systems must support twice as many retirees per worker

• Immigration becomes not just beneficial but necessary to maintain economic function

• Retirement ages may need to increase significantly just to maintain fiscal balance

Policy implications: What can be done?

We can't stop aging, but we can adapt. Evidence from other aging societies shows several pathways forward:

• Strategic immigration policy: Attract working-age adults to balance the dependency ratio and fill critical labor shortages

• Gradual retirement age increases: As life expectancy rises, gradually increase retirement age from 65 to 67-70 to maintain the worker-to-retiree ratio

• Healthcare efficiency: Invest heavily in preventive care and healthy aging to reduce expensive acute care for the elderly

• Productivity and automation: Leverage technology and AI to maintain economic output with a smaller workforce

• Pension reform now: Transition to partially funded systems before the crisis hits, when changes can be gradual rather than draconian

• Family and fertility policy: Consider childcare subsidies and parental leave (though effects take 20+ years to materialize)

• Labor force participation: Remove barriers to women and older adults working, expanding the effective workforce

These recommendations align closely with IMF guidance. In their most recent 2025 Article IV consultation, the Fund called for strengthening formal labor markets to "offset the negative growth pressures from the projected population decline" and recommended "parametric reforms...to preserve the actuarial balance in the social security system."

The window for painless adjustment is closing. Every year of delay makes reforms more difficult, more expensive, and more politically contentious.

The bottom line

Aruba's demographic transformation isn't a distant future problem—it's happening now, in real-time. The decisions we make in the next 5-10 years will largely determine whether we manage this transition smoothly or face a severe fiscal crisis.

This isn't about abstract statistics or demographic theory. It's about your healthcare when you're 70. It's about your taxes over the next decade. It's about whether your children can afford to build their lives in Aruba or must leave for economic opportunity elsewhere.

The great inversion is here. It's visible in the data, inevitable in its progression, and transformative in its effects.

The only question is: Are we ready to make the hard choices while we still have time to make them gradually?

---

Data note: This analysis is based on official demographic data from the Aruba Central Bureau of Statistics (1991-2025). The cost index uses a simplified model based on international research on age-related public spending. Projections assume fertility rates and life expectancy trends continue at current rates.

Sources:

• IMF (2025). "Kingdom of the Netherlands—Aruba: Staff Concluding Statement of the 2025 Article IV Mission" (October 2025)

• IMF (2023). "Kingdom of the Netherlands—Aruba: 2023 Article IV Consultation" Report No. 2023/284

• IMF (2005). "Kingdom of the Netherlands-Aruba: 2005 Article IV Consultation, Concluding Statement"

• Centrale Bank van Aruba (2021). "Governing from the Future: Prospects, policies, and pathways for Aruba 2040"

• Central Bureau of Statistics Aruba (2023). "Special issue on Aruba's ageing population, 1960-2023"

• Central Bank of Aruba (2015). "Financial Sector Supervision Report 2015" (covering APFA pension reform)

For technical questions or data requests, contact Cornerstone Economics.