What are the implications of the next generation being smaller than the one before it?

Population ageing leads to a decline in the ratio of the working-age population to the retired population. This can be characterised as the next generation (the future labour force) becoming smaller than the previous generation (the former labour force). What are the likely implications of this situation? The ratio of capital to workers will increase (capital has been accumulated by the larger generation and will be used by the subsequent smaller generation), leading to higher labour productivity and real wages and lower real interest rates (a positive situation for wage earners and negative for holders of financial assets); The ratio of public debt (inherited from the larger generation) to workers will increase. Government bond holdings are therefore going to use a growing share of workers’ savings at the expense of the accumulation of productive capital. Later, in the very long term, there will be less capital and less production. The only winners from this trend are workers in the initial smaller generations: they will enjoy high real wages. The losers will initially be pensioners and asset holders, followed in the future by the whole population .