Global consequences of the falling birth rate

During the second half of the 20th century, fears of a population explosion led to billions of dollars being spent on population control programmes. Now there are worries that there will be too few people, not too many.
  • Birthrates are declining despite often generous official financial incentives to procreate.
  • Around half of the world's population lives in sub-replacement countries.
  • A major sociological battle is predicted between Europe's older and younger generations.
  • During the most recent time of population growth, quality of life has improved faster than ever before in world history.
  • There is plenty of evidence to suggest that population aging works to depress the rate of technological innovation and entrepreneurship.
The fearsome spectre of a world overrun with too many people has alarmed governments, powerful foundations and United Nations agencies since the 1960s. Billions of dollars has been spent to prevent a human population explosion.

Dr Paul Ehrlich's 1968 best selling book "The Population Bomb", galvanised western public opinion to support population control policies. He warned: "The battle to feed all of humanity is over. In the 1970s the world will undergo famines. Hundreds of millions of people are going to starve to death."

The global fight to contain population growth intensified through the 1980s and 90s, but at the turn of the century, some demographers were sounding a different alarm.

Throughout Europe, Russia and parts of Asia, particularly in Japan, birth rates were falling below replacement level. On a global level, the overall population will increase from 6.4 billion in 2004 to around 9 billion in 2050 and then go into steep decline.

By 2004, there was general consensus among demographers [those who study the characteristics of human populations, including growth] about the projected fall. The debate is about whether it will occur before 2050 and be a decline - or a freefall.

Newsweek on the "Birth Dearth"
The influential American magazine Newsweek (27th September, 2004) published the results of a global fact-finding survey by its team of reporters. "Birth Dearth" began with this introduction:

"Remember the population bomb? The new threat to the planet is not too many people, but too few."

The prospects for Europe and Russia
"If the U.N. figure are right, Germany could shed nearly a fifth of its 82.5 million people over the next 40 years – roughly the equivalent of all of east Germany."

Parts of Eastern Europe, already sparsely populated, will just empty out.
"Across the Continent: Bulgaria will shrink by 38 percent, Romania by 27 percent, Estonia by 25 percent. ‘Parts of Eastern Europe, already sparsely populated, will just empty out,' predicts Reiner Klingholz, director of the Berlin Institute for Population and Development. Russia is already losing close to 750,000 people yearly. So is Western Europe and that figure could grow to as much as 3 million a year by mid-century, if not more."

China and Japan
Japan is likely to shed a quarter of its 127 million people over the next four decades according to U.N. projections. The average age is 42.3 years, indicating the steady greying of Japanese society.

China's fertility rate has declined from 5.8 in 1970 to 1.8 today. Chinese census data put the figure even lower at 1.3. Coupled with increasing life spans, that means China's population will age as quickly in one generation as Europe's has over the past 100 years, reports the Center for Strategic and International Studies in Washington.

With an expected median age of 44 in 2015, China will be older on average than the United States. By 2019 or soon after, its population will peak at 1.5 billion, then enter a steep decline. By mid-century, China could well lose 20 to 30 percent of its population every generation.
By mid-century, China could well lose 20 to 30 percent of its population every generation.


Asia
Birthrates are declining despite often generous official financial incentives to procreate. The industrialised nations of Singapore, Hong Kong, Taiwan and South Korea, all report sub-replacement fertility. Also, Thailand, Burma, Australia and Sri Lanka.

Elsewhere, Cuba (and many Caribbean nations), Uruguay and Brazil and Mexico are aging so rapidly that within several decades it will not only stop growing, but will have an older population than that of the United States. According to Nicholas Eberstadt, a demographer at the American Enterprise Institute in Washington: "If those figures are accurate, just about half of the world's population lives in sub-replacement countries."

There are exceptions: Mongolia, Pakistan and the Philippines. The United Nations projects that the Middle East will double in population over the next 20 years, growing from 326 million to 649 million by 2050. Saudi Arabia has one of the highest fertility rates in the world, 5.7, after Palestinian territories at 5.9 and Yemen at 7.2.

Although the region's overall population continues to grow, the increase is due mainly to lower infant mortality. Fertility rates are falling faster than in developed countries, indicating that over the coming decades the Middle East will age far more rapidly than other regions of the world.
Birthrates in Africa remain high, and despite the AIDS epidemic, its population is expected to keep growing.


Birthrates in Africa remain high, and despite the AIDS epidemic, its population is expected to keep growing.

Contributing factors to demographic decline
Newsweek reports that increasing female literacy and school enrolment have tended to decrease fertility, as have divorce, the worldwide trend towards later marriage and abortion.

Contraceptive use has risen dramatically over the past decade. According to U.N. data, 62 percent of married or "in union" women of reproductive age are now using some form of non-natural birth control.

India has the world's largest AIDS epidemic. In Russia, alcoholism, poor public health and industrial pollution have affected male sperm counts and female fertility.

Wealth discourages childbearing, as seen long ago in Europe and now in Asia. Sociologist Ben Wattenberg, author of "Fewer: How the New Demography of Depopulation Will Shape Our Future", writes: "Capitalism is the best contraception."

Future outlook
The potential consequences of the population implosion are enormous. In Italy, demographers forecast a 40 percent decline in the working-age population over the next for decades - accompanied by a commensurate drop in growth across the Continent, according to the European Commission.

A major sociological battle is predicted between Europe's older and younger generations as the cohort of baby-boomers retire and demand pensions and health care.

China is facing a major problem with its millions of elderly citizens...less than one-quarter of the population is covered by retirement pensions
China is facing a major problem with its millions of elderly citizens. Market reforms have removed the cradle-to-grave benefits of the planned economy, while the Communist Party hasn't constructed an adequate social safety net to take their place. According to the CSIS, less than one-quarter of the population is covered by retirement pensions, thus the burden of elder care is placed on what is now a generation of only children.

The one-child policy has led to the so-called 4-2-1 problem, in which each child will be potentially responsible for caring for two parents and four grandparents. Read More Here

Economic development and population growth
An eminent economist, the late Julian Simon, argued that population growth and economic development went hand-in-hand. UNICEF and the UN Statistical Yearbook list a minimum of 20 different areas to measure quality of life.

As the world population has increased, each and every one of the more than 40 measures of quality of life have improved. These improvements have occurred in the more densely populated areas.

Improvements in other areas related to quality of life, also increase life expectancy
The most important measure of quality of life is life expectancy. Because improvements in other areas related to quality of life, also increase life expectancy. Life expectancy in the developing countries increased from 46 years to 61 years between 1960 and 1991.

U.N. data reveals that during the most recent time of fast population growth after 1948, quality of life has improved faster than ever before in world history. By every one of more than 40 amenities measured, the quality of life is also improving on a more global basis with more accessible consumer and household goods and appliances.

UNICEF issued this summary: "Since the end of the Second World War, average real incomes in the developing world have more than doubled. Infant and child death rates have been more than halved. Average life expectancy has increased by about a third.

The proportion of the developing world's children starting school has risen to more than three-quarters, and the percentage of rural families with access to safe water has increased from 10% to 60%."

Productivity
According to the annual U.N. Statistical Yearbook, world industrial productivity has improved far faster than population growth. In developing countries where most of the people live, education spending adjusted for inflation became five times greater from 1975 to 1989. This vast increase in educated people further accelerates the improvements in quality of life in most developing countries.
Improvements in manufacturing productivity have made possible the more than doubling of real income, which then reduces poverty.


Improvements in manufacturing productivity have made possible the more than doubling of real income, which then reduces poverty.

The benefits of a young growing population
Robert Sassone in his Handbook on Population, observes that older populations reflect the normal characteristics of older people. They become more security conscious, less progressive and dynamic, more rigid in their ways.

In contrast, younger populations reflect the dynamism, adventurous attributes and creativity of youth. "Original thinking and enthusiasm for new ideas are far more likely to come from the young than the aged. Little great art, few great books, practically no great music, few plays, few ideas, inventions or scientific theories, have come from older people. Accordingly, progress in countries with older populations is likely to slow or stop."

When population growth stops, there is no need to build new buildings, to devise new ideas, to do the things characteristic of vigorous societies.

Economic consequences of growth
Certain things are necessary for what is now considered civilised living, writes Sassone. "A more dense population can provide these things at a much lower cost per person. There are costs that occur when large numbers of people live relatively close together, such as in cities. But these costs are more than offset by the benefits which result from the higher population.

The more people there are, the less cost there is per person.
Examples of this include development of ports, airports, highways and railroads. The cost is about the same regardless of the population, but the cost per person depends on the number of people. The more people there are, the less cost there is per person.

A second major benefit comprises lower prices of items that must be transported and distributed to consumers. A simple test of this principle would be to compare gasoline prices, or the prices of similar items in city and rural areas.

Ratio of costs to society of elderly over 65 to under 18's
The young and old are usually non-workers. Parents support their children, but there is a cost for the raising of each child. Elderly people are supported by social security, their relatives, their savings, etc. The expense necessary to maintain an elderly person is substantially higher than the cost of a younger person, because older persons have more expensive needs such as medical care.

On the average, the cost to maintain an old person at a middle class standard of living, is about three to four times as great as the cost to maintain a person who is under the age of 14. Although older people are valuable for non-economic reasons, economically, a younger society spends a lesser percentage of total income supporting its non-working members.

Global Implications


Britain
Actuaries make financial sense of the future. In May 2004, the Faculty and Institute of Actuaries in London released a report on Britain's population trends entitled "More Babies? Who Needs Them?"

Their keynote conclusion: Should the number of British babies fall as low as current "bambini" birthrates in Italy, it would cause real problems for the finances of both the government and individuals in the UK.

After supply statistics on Britain's aging population, David Lewis who chaired the committee that produced the report, commented: "It is important to understand that future fertility rates will have a profound effect on the size and shape of the future population. We are presenting our findings in order to promote discussion."

Clare Hobro, who co-authored the report, commented: "The Actuarial Profession believes that not nearly enough attention is being paid to this fundamental issue of the birthrate. Now is therefore a good time to review the current incentives and disincentives that government policy offers to families raising children."

New Zealand
The Institute for Economic Research's April 2002 report said, "An older, less productive population will be a principle cause of a downward trend in economic growth."

The Institute concluded that the rate of GDP growth will inevitably decline over the next 30 years, constrained by the next 30 years, constrained by the slow growth in the labour force.

The NZ Herald's Economics Editor, Brian Fallows wrote "Growth's daunting arithmetic" on May 22, 2002: "If we were looking for workforce growth to contribute half of the desired 4 percent trend growth, the workforce would have to be growing by 2 percent, or around 40,000 people a year."

The limits to population growth by immigration are not primarily physical, but rather cultural and social, depending on the speed of social change that people are prepared to accept.

Apart from domestic popular opposition to relatively large-scale immigration, there is the problem of supply as other low birth rate countries compete for the pool of suitable immigrants. Read more here.

Australia
In early 2004, Tony Abbot, the Australian Minister of Health, aroused controversy by labelling the 100,000 annual abortions "a national tragedy." He told a press conference of journalists to play their part: "Go home and have three babies. One for Dad, one for Mum - and one for the country."

A June 2005 news report stated that "Australian Bureau of Statistics figures show the number of babies per woman rose to 1.77 last year, breaking a forty year decline."

The Government's $3000 baby bonus for every baby born in 2004 played a significant role in halting the nation's declining fertility rate, the Australian National University's head of demography, professor Peter McDonald said. He also predicted the fertility rate would rise to 1.8 in 2005 as the baby bonus starts having an effect.

The bonus will increase to $4000 from July 1, 2005.<

China
Gender imbalance in China is ominous. Phillip Longman's "The Global Baby Bust", published in Foreign Affairs (June 1, 2004) reports: "Making demographics there even worse, the spreading use of ultrasound scans and other techniques for determining the sex of fetuses is, as in India and many other parts of the world, leading to much higher abortion rates for females than for males. In China, the ratio of male to female births is now 117 to 100 - which implies that roughly one out of six males in today's new generation, will not succeed in reproducing."
Read Full Story

Longman on national economic implications of demographic decline:
"Largely because of this imbalance, population aging, once it begins creating more seniors than workers, puts severe strains on government budgets.

In Germany for example, public spending on pensions, even after accounting for a reduction in future benefits written into current law, is expected to swell from an already staggering 10.3 percent of GDP to 15.4 percent by 2040 - even as the number of workers available to support each retiree shrinks from 2.6 to 1.4.

Meanwhile the cost of government health-care benefits for the elderly is expected to rise from today's 3.8 percent of GDP, to 8.4 percent by 2040.

Population aging also depresses the growth of government revenues. Population growth is a major source of economic growth. More people create more demand for the products capitalists sells, and more supply of the labour capitalists buy.
Economists may be able to construct models of how economies could grow amid a shrinking population, but in the real world, it has never happened.

Economists may be able to construct models of how economies could grow amid a shrinking population, but in the real world, it has never happened. A nation's GDP is literally the sum of its labour force times average output per worker.

Thus a decline in the number of workers implies a decline in an economy's growth potential. When the size of the work force falls, economic growth can occur only if productivity increases enough to compensate. And these increases would have to be substantial to offset the impact of aging.

Fewer bambinis
Italy, for example, expects its working-age population to plunge 41 percent by 2050.

This means that output per worker would have to increase by at least 41 percent just to keep Italy's economic growth from falling below zero. With a shrinking labor supply, Europe's future economic growth will depend entirely on getting more out of each remaining worker (many of them unskilled, recently arrived immigrants), even as it has to tax them at higher and higher rates to pay for old-age pensions and health care.

Declining fitness among the general population makes the idea of raising the retirement age less feasible.
Declining fitness brings medical problems
Theoretically, raising the retirement age could help to ease the burden of unfunded old-age benefits. But declining fitness among the general population is making this tactic less feasible.

In the United States for example, the dramatic increases in obesity and sedentary lifestyles are already causing disability rates to rise among the population 59 and younger. Researchers estimate that this trend will cause a 10-20 percent increase in the demand for nursing homes over what would otherwise occur from mere population aging, - and a 10-15 percent increase in Medicare expenditures on top of the program's already exploding costs.

The same declines in population fitness can now be seen in many other nations, and are likely to overwhelm any public health benefits achieved through medical technology.

According to the International Association for the Study of Obesity, an "alarming rise in obesity presents a pan-European epidemic." A full 35 percent of Italian children are now overweight. In the case of European men, the percentage who are overweight or obese, ranges from over 40 percent in France, to 70 percent in Germany.

Half of all deaths in places such as Mexico, China, and the Middle East, are now caused by non-communicable diseases related to Western lifestyle.
And as Western lifestyles spread throughout the developing world, so do Western ways of dying. According to the World Health Organization, half of all deaths in places such as Mexico, China, and the Middle East, are now caused by non-communicable diseases related to Western lifestyle, such as cancers and heart attacks induced by smoking and obesity.

The "Private Ryan" factor
Current population trends are likely to make military actions increasingly difficult for most nations. One reason will be psychological. In countries where parents have generally one or two children, every soldier becomes a "Private Ryan" - a soldier whose loss would mean overwhelming devastation to his or her family.

Another reason is financial. America is currently the world's superpower. As the cost of pensions and health care consume more and more of the nation's wealth, and the labor force stops growing, it will become more difficult for Washington to sustain current levels of spending, and the number of men and women in uniform.

Even within the US military budget, the competition between guns and canes is already intense. The Pentagon today spends 84 cents on pensions for every dollar it spends on basic pay. In 2000, the cost of military pensions amounted to 12 times what the military spent on ammunition, nearly five times what the Navy spent on new ships, and more than five times what the Air Force spent on new planes and missiles.

In another 20 years, the United States will no more be able to afford the role of world policeman than Europe or Japan can today.
In another 20 years, the United States will no more be able to afford the role of world policeman than Europe or Japan can today. Nor will China be able to assume the job, since it will soon start to suffer from the kind of hyper-aging that Japan is already experiencing.

Aging and the pace of progress
Even if there are fewer workers available to support each retiree in the future, won't technology be able to make up the difference? Perhaps. But there is plenty of evidence to suggest that population aging itself works to depress the rate of technological innovation.

Cross-country comparisons imply, for example, that after the proportion of elders increases in a society beyond a certain point, the level of entrepreneurs and inventiveness begins to drop.

In 2002, Babson College and the London School of Business released their latest index of entrepreneurial activity. It shows that there is a distinct correlation between countries with a high ratio of retirees, and those with a high degree of entrepreneurship.

In countries in which a large share of the population is retired, the amount of new business formation is low.
Conversely, in countries in which a large share of the population is retired, the amount of new business formation is low. Two of the most entrepreneurial countries today are India and China, where there are currently roughly five people of working age for every person of retirement age. Meanwhile, Japan and France are among the least entrepreneurial countries on earth, and have among the lowest ratios of workers to retirees.


Risk-averse characteristics of an aging society
Both common sense and a vast literature in finance and psychology support the claim that as one approaches retirement age, one usually becomes more reluctant to take career or financial risks.

Aging countries such as Italy, France and Japan are marked by exceptionally low rates of job turnover and by exceptionally conservative use of capital. Because prudence requires that older investors take fewer risks with their investments. They prefer safe bonds and bank deposits instead of speculative stocks and venture funds.

Mounting costs of pensions and health care
Huge public deficits are projected to be run by major industrialised countries over the next several decades. Because of the mounting costs of pensions and health care, government spending on research and development, as well as on education will likely drop.

The cost of public benefits to the elderly will consume a dramatically rising share of GDP in industrialised countries.
Massive government borrowing could easily crowd out financial capital that would otherwise be available to the private sector for investment in new technology. The Center for Strategic and International Studies has recently calculated that the cost of public benefits to the elderly will consume a dramatically rising share of GDP in industrialised countries.

In the United States, such benefits currently consume 9.4 percent of GDP. But if current trends continue, this figure will top 20 percent by 2040. And in countries such as France, Germany, Italy, Japan and Spain, somewhere between a quarter and a third of all national output will be consumed by old-age pensions and health care programs before today's 30-year olds reach retirement age.

An aging workforce may also be less able to take advantage of new technology.
Effect on Japan
An aging workforce may also be less able to take advantage of new technology. This trend seems to be part of the cause for Japan's declining rates of productivity growth in the 1990s. Before that decade, the aging of Japan's highly-educated workforce was a positive force in increasing the nation's productivity, according to studies.

Older workers learned by doing, developing specialised knowledge and craft skills and the famous company spirit that made Japan an unrivalled manufacturing power. But by the 1990s, the continued aging of Japan's workforce became a cause of the country's declining competitiveness.

Importing human capital
Importing new younger workers is only a partial solution. The United States and other developed nations derive many benefits from their imported human capital. Immigration, however, does less than one might think to ease the challenges of population aging.

One reason is that most immigrants arrive not as babies, but with a third or so of their lives already behind them - and then go on to be elderly themselves. In the short term, immigrants can help to increase the ratio of workers to retirees, but in the long term, they add much less youth to the population than would newborn children.

if the United States hopes to maintain the current ratio of workers to retirees over time, it will have to absorb an average of 10.8 million immigrants annually through 2050.
According to a study by the U.N. Population Division, if the United States hopes to maintain the current ratio of workers to retirees over time, it will have to absorb an average of 10.8 million immigrants annually through 2050. At that point, the U.S. population would total 1.1 billion, 73 percent of whom would be immigrants who had arrived since 1995, or their descendants.

A fundamental problem
Some biologists speculate that modern humans have created an environment in which the "fittest," or most successful individuals, are those who have few if any children. More and more people find themselves living under urban conditions in which children no longer provide economic benefit to their parents, but rather are costly impediments to material success. People who are adapted to this new environment will tend not to reproduce themselves.

So where will the children of the future come from? Today, there is a strong correlation between religious conviction and high fertility. In the United States for example, 47 percent of people who attend church regularly say that the ideal family size is three or more children, compared to only 27 percent of those who seldom attend church.

In Utah, where 69 percent of all residents are registered as Mormons, the fertility rates are the highest in the nation. Utah annually produces 90 children for every 1,000 women of childbearing age. By comparison, Vermont produces only 49.

The spread of urbanisation and industrialisation is a major cause of falling fertility.
Current demographic trends work against modernity. The spread of urbanisation and industrialisation is a major cause of falling fertility. It is also a cause of so-called diseases of affluence, such as overeating, lack of exercise and substance abuse, which leave a higher and higher percentage of the population stricken by chronic medical conditions.

Secular solutions
How can secular societies avoid population loss and decline? Phillip Longman notes that surveys reveal that Europeans and Americans want to have larger families, but are constrained by several factors:
  • The knowledge-based economy requires more tertiary qualifications, meaning longer periods of study. By the time couples feel they can afford children, they can no longer produce them, or must settle for just one or two.
  • Aging societies become more dependent on the human capital (children) parents provide. But parents keep less and less of the wealth they created by investing in raising children.
  • Governments depend on parents to provide the next generation of taxpayers, but give parents no greater benefits in old age than non-parents.
  • Governments must relieve parents from having to pay into social security systems. By raising and educating their children, parents have already contributed hugely (provided human capital) to these systems. Requiring parents to contribute to payroll taxes is not only unfair, but imprudent.