ince 2011, sales of adult diapers in Japan have outpaced those for infants, reflecting a decline in the country’s fertility rate (live births per woman) from 3.66 in 1950 to around 1.5 by the early 1990s. Since then, Japanese fertility has remained stuck far below the “replacement rate” (2.1), amounting to a mere 1.3 in 2021.
And geriatric Japan is not alone. Fertility rates have also dropped below the replacement level in all eurozone countries, and they are strikingly low in Hong Kong, Macao, Singapore, South Korea, and Taiwan—the five wealthiest East Asian economies, omitting China. At 0.81 and 1.38, respectively, South Korea and Hong Kong’s 2021 fertility rates are among the lowest in the world.
Moreover, China is likely to record an absolute decline in its population in 2023. Though the government ended its 35-year-old one-child policy in 2016, China’s fertility rate stood at just 1.16 in 2021, down from as high as 6.3 as recently as 1968. The United Nations has revised down its projection of the size of China’s working-age population (those between 15 and 64) in 2100 by a startling 201 million, from 579 million to 378 million. This trend poses a big problem for the Chinese economy. “Today, every 100 working-age Chinese need to support 20 retirees,” Oxford historian Rana Mitter wrote recently in The Spectator. “If trends continue, by the turn of the next century, every 100 workers will have to support 120 retirees.”
Meanwhile, the U.S. fertility rate has more than halved over since 1960, falling from 3.7 to 1.66 in 2021. And even an emerging-market powerhouse like India is experiencing a population decline, recording fertility rates of 2.03 in 2021 and 2.05 the year before, the first time the country had fallen below the replacement rate.
According to the UN’s World Population Prospects 2022 (WPP2022) report, the global fertility rate, which stood at 2.3 overall in 2021, will hit the demographic tipping point of 2.1 by 2050, owing to a globally synchronized decline in birth rates, including in Africa and Latin America.
Declining fertility rates have already shifted the age distribution of the population upward in many economies. According to the WPP2022, “Worldwide, persons aged 65 or over outnumbered children under five for the first time in 2018.” By the middle of this century, there will be twice as many senior citizens as people under five, and around as many as the total number of people under 12.
The consequences will be immense, particularly in high-income economies. In addition to straining pension and health-care systems, low fertility rates—in the absence of more immigration—will reduce the working-age population, in turn lowering household consumption and economic growth. Fewer workers also will lead to wage inflation, which could add to uncertainty and volatility in the global economy. Historically, per capita output growth has accounted for around half of average annual world economic growth, with the other half coming from population growth. But population aging risks upsetting this balance.
As low fertility rates become increasingly entrenched, many countries may adopt aggressively pro-natalist policies. Following Nobel laureate economist Gary Becker’s modeling of household behavior and family planning—which suggests that the demand for children responds to changes in the price of the “marginal child”—such policies tend to emphasize financial incentives, such as paid maternity leave, “bonuses” for couples that have children, monthly grants for mothers who take time off work to raise a third child, and personal tax deductions to cover childcare expenses.
But these inducements have not proven especially effective. France offers substantial support to families, but its fertility rate stood at just 1.83 in 2021. Adding to the challenge, rising per capita incomes and medical advances have increased life expectancy, tempering the historical “utility” of having more children as a kind of intergenerational insurance policy.
In the late eighteenth century, the clergyman and economist Thomas Malthus, worried about rapid population growth, posited two sets of factors that might stabilize it: “positive checks” that increase mortality, including wars, famine, and disease; and “preventive checks” such as celibacy, birth control, and attitudes toward family planning. In addition to advances in medicine, the rules-based international order that emerged after the second world war helped to diminish positive checks on population growth. But Malthus could not have imagined how effective the preventive checks of the last 70 years would be.
These developments were fueled by two key influences. First, changes in family-planning approaches can become quite “sticky” once they take hold as social norms, as the resurgent debate about access to abortion in the United States makes clear. Second, and even more consequentially, extremely low fertility rates exhibit a persistence effect, becoming increasingly difficult to reverse the longer they endure.
Throughout modern history, international migration from low-income, high-fertility countries to those with higher average incomes and lower birth rates has helped shield the latter from demographic headwinds. According to the WPP2022, high-income countries’ population growth between 2000 and 2020 was driven primarily by international migration, with net inflows (80.5 million) exceeding the balance of native births over deaths (66.2 million) by more than 20%.
Moreover, international migration is set to become the sole driver of population growth in these economies in the coming decades. That means there will be a swelling of high-income countries’ foreign-born populations, which accounted for over 14.7% of their total population in 2020—with higher ratios for some of the largest economies, including the U.S. (15.3%) and Germany (18.8%).
Despite the strict immigration policies that many governments have promoted in recent years, international migration has helped high-income countries sustain economic growth and ease the burden of supporting their growing elderly populations, including by keeping state pensions on a sustainable path. At a time of heightened geopolitical tensions and the risk of global fragmentation, it is more important than ever to recognize the mutually beneficial relationship that exists between low- and high-fertility countries.
Still, facilitating migration cannot be the sole long-term solution. If global fertility does fall below the replacement rate within the next 30 years, the consequences for the entire planet may be dire. Our children may be the future, but they will be growing up in a geriatric world.
Copyright: Project Syndicate, 2023.
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The Silver Tsunami
Photo by Rod Long via Unsplash.
January 2, 2023
The global fertility rate, which stood at 2.3 in 2021, is expected to hit the demographic tipping point of 2.1 by 2050. The consequences of this will be dire, and while our children may be the future, they will be growing up in a geriatric world, writes Afreximbank Chief Economist Hippolyte Fofack.
S
ince 2011, sales of adult diapers in Japan have outpaced those for infants, reflecting a decline in the country’s fertility rate (live births per woman) from 3.66 in 1950 to around 1.5 by the early 1990s. Since then, Japanese fertility has remained stuck far below the “replacement rate” (2.1), amounting to a mere 1.3 in 2021.
And geriatric Japan is not alone. Fertility rates have also dropped below the replacement level in all eurozone countries, and they are strikingly low in Hong Kong, Macao, Singapore, South Korea, and Taiwan—the five wealthiest East Asian economies, omitting China. At 0.81 and 1.38, respectively, South Korea and Hong Kong’s 2021 fertility rates are among the lowest in the world.
Moreover, China is likely to record an absolute decline in its population in 2023. Though the government ended its 35-year-old one-child policy in 2016, China’s fertility rate stood at just 1.16 in 2021, down from as high as 6.3 as recently as 1968. The United Nations has revised down its projection of the size of China’s working-age population (those between 15 and 64) in 2100 by a startling 201 million, from 579 million to 378 million. This trend poses a big problem for the Chinese economy. “Today, every 100 working-age Chinese need to support 20 retirees,” Oxford historian Rana Mitter wrote recently in The Spectator. “If trends continue, by the turn of the next century, every 100 workers will have to support 120 retirees.”
Meanwhile, the U.S. fertility rate has more than halved over since 1960, falling from 3.7 to 1.66 in 2021. And even an emerging-market powerhouse like India is experiencing a population decline, recording fertility rates of 2.03 in 2021 and 2.05 the year before, the first time the country had fallen below the replacement rate.
According to the UN’s World Population Prospects 2022 (WPP2022) report, the global fertility rate, which stood at 2.3 overall in 2021, will hit the demographic tipping point of 2.1 by 2050, owing to a globally synchronized decline in birth rates, including in Africa and Latin America.
Declining fertility rates have already shifted the age distribution of the population upward in many economies. According to the WPP2022, “Worldwide, persons aged 65 or over outnumbered children under five for the first time in 2018.” By the middle of this century, there will be twice as many senior citizens as people under five, and around as many as the total number of people under 12.
The consequences will be immense, particularly in high-income economies. In addition to straining pension and health-care systems, low fertility rates—in the absence of more immigration—will reduce the working-age population, in turn lowering household consumption and economic growth. Fewer workers also will lead to wage inflation, which could add to uncertainty and volatility in the global economy. Historically, per capita output growth has accounted for around half of average annual world economic growth, with the other half coming from population growth. But population aging risks upsetting this balance.
As low fertility rates become increasingly entrenched, many countries may adopt aggressively pro-natalist policies. Following Nobel laureate economist Gary Becker’s modeling of household behavior and family planning—which suggests that the demand for children responds to changes in the price of the “marginal child”—such policies tend to emphasize financial incentives, such as paid maternity leave, “bonuses” for couples that have children, monthly grants for mothers who take time off work to raise a third child, and personal tax deductions to cover childcare expenses.
But these inducements have not proven especially effective. France offers substantial support to families, but its fertility rate stood at just 1.83 in 2021. Adding to the challenge, rising per capita incomes and medical advances have increased life expectancy, tempering the historical “utility” of having more children as a kind of intergenerational insurance policy.
In the late eighteenth century, the clergyman and economist Thomas Malthus, worried about rapid population growth, posited two sets of factors that might stabilize it: “positive checks” that increase mortality, including wars, famine, and disease; and “preventive checks” such as celibacy, birth control, and attitudes toward family planning. In addition to advances in medicine, the rules-based international order that emerged after the second world war helped to diminish positive checks on population growth. But Malthus could not have imagined how effective the preventive checks of the last 70 years would be.
These developments were fueled by two key influences. First, changes in family-planning approaches can become quite “sticky” once they take hold as social norms, as the resurgent debate about access to abortion in the United States makes clear. Second, and even more consequentially, extremely low fertility rates exhibit a persistence effect, becoming increasingly difficult to reverse the longer they endure.
Throughout modern history, international migration from low-income, high-fertility countries to those with higher average incomes and lower birth rates has helped shield the latter from demographic headwinds. According to the WPP2022, high-income countries’ population growth between 2000 and 2020 was driven primarily by international migration, with net inflows (80.5 million) exceeding the balance of native births over deaths (66.2 million) by more than 20%.
Moreover, international migration is set to become the sole driver of population growth in these economies in the coming decades. That means there will be a swelling of high-income countries’ foreign-born populations, which accounted for over 14.7% of their total population in 2020—with higher ratios for some of the largest economies, including the U.S. (15.3%) and Germany (18.8%).
Despite the strict immigration policies that many governments have promoted in recent years, international migration has helped high-income countries sustain economic growth and ease the burden of supporting their growing elderly populations, including by keeping state pensions on a sustainable path. At a time of heightened geopolitical tensions and the risk of global fragmentation, it is more important than ever to recognize the mutually beneficial relationship that exists between low- and high-fertility countries.
Still, facilitating migration cannot be the sole long-term solution. If global fertility does fall below the replacement rate within the next 30 years, the consequences for the entire planet may be dire. Our children may be the future, but they will be growing up in a geriatric world.
Copyright: Project Syndicate, 2023.
