They Ain't Making Babies Like They Used To
Declining fertility rates and ageing populations
Hi! I have been considering the decreasing fertility rates and what policies the government may introduce to address this. This then led me to contemplate the effect decreasing birth rates has on the working population.
This is a piece to just throw the topic(s) your way. It is a longer piece, but if you enjoy it please share!
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People are not making babies like they used to. Fertility rates around the world are dropping. Populations worldwide are ageing, and the average age for the working population gets older. Young people are being introduced into the workforce slower than before, which may require people to enter retirement later.
Politicians may revert to their old policy of raising the retirement age or incentivising child procreation through subsidies. However, as we enter this period of ageing populations and decreasing fertility rates, it may be time to shift the mindset and attempt strategies that have yet to be considered.
Declining Fertility
Across the world, people have fewer children. The decline in fertility rates has been a point of concern for several years. The universal method for measuring fertility is the total fertility rate (TFR). It measures the number of children a woman would have over her lifetime. While the metric is not perfect, it is considered the standard measure of fertility.
Developed Asian countries are seeing a decline to ultra-low fertility rates, with South Korea’s dropping to 0.92 TFR in 2019. South Korea is an example of a country where deaths are outpacing births. While this is yet to be seen in western countries, it might not be too far behind.
Additionally, some of the world’s most populous countries are facing declining birth rates too, with their replacement rates lower than their birth rates. This is a worrying trend, as it could lead to a population decline in the long term. For instance, Japan's population is already projected to decrease by 30 million people by 2060. Similarly, Germany's population is estimated to shrink by 15 million people over the same period. This could result in a shortage of workers and an ageing population, which could strain their respective economies.
Fertility rates are declining due to several socioeconomic factors such as increased access to contraception, labour market instability for both men and women, and changing values and preferences. Additionally, traditional workforce practices, falling or stagnating earnings, and income for young people are making it more difficult to reach the material standards necessary to have children; that is, people are more aware of the world they want to bring children into.
Furthermore, women are increasingly entering the workforce, and many choose to prioritize their careers over having children. This leads to smaller family sizes, as people may decide not to have children or opt for one child instead of a larger family.
While this is not an exhaustive list of reasons, they are a few of the core factors that contribute to declining fertility rates. With fertility rates declining, the government may be required to implement policies to protect its ageing population.
Older working population
The world's population is getting older. Over time, people are living longer due to improvements in healthcare, better diets, more information, and technological advancements. Despite all these advancements, living expenses are increasing, making it difficult for people to afford homes or even electricity in their homes.
An ageing population pushes to the forefront many challenges for policymakers in relation to employment, working conditions, living standards, and welfare. This is more of a concern when fertility rates are declining.
In a study by Maestas, Mullen, and Powell (2016), the authors estimated that population ageing is expected to slow U.S. economic growth. The study found that a 10% increase in the share of the population that is aged 60 and above decreases growth in GDP per capita by 5.5%. Additionally, the authors found that population ageing is linked to slower earnings growth across the age distribution in their study, suggesting that ageing leads to declines in productivity in all age groups.
Furthermore, the authors concluded that population ageing is associated with an increased risk of poverty among older adults. This is because age-related health and disability issues can affect an individual's ability to work, and as a result, their income security.
Moreover, the effects of population ageing on GDP growth are not limited to the United States - it is a problem that is being experienced by many other countries as well. For instance, it is estimated that by January 2050 there will be fewer than two working-age adults for each older person. Hence, policies to address population ageing are needed in order to mitigate its adverse effects on economic growth and productivity.
The shift to an ageing population also brings about a new set of issues for businesses. These include the need to adjust workforce structures and find new ways to attract and retain older workers. Businesses too must be proactive in addressing the changing demographics of their workforce.
Tackling The Issues
Ultimately, policies by governments will need to be introduced to combat both declining fertility rates and an older working population. There are a number of possible solutions to consider. For me, what comes to mind is focusing on artificial intelligence (AI) and machines. Not to replace workers, but to enhance their output. When people get older, their output will decrease. Hence, with the possibility of people working past 65, it would be beneficial to support these workers with systems and tools which will not diminish their output.
Another policy would be to increase the retirement age. While every country has a different limit around when people retire, the standard seems to be 65. Increasing the retirement age might not only assist the economy but also the people who may need to work longer. However, this is not always the most people-pleasing policy, as seen in France.
Finally, I always stand behind increased immigration as a policy. It not only allows for increased labour-force participation but also positively impacts fertility rates, as immigrants tend to remain in the countries where they work and build their lives.
Machines, AI, older people working longer, and immigration are policies which may be limited. These policies may have unintended consequences such as increased competition for jobs, increased inequality, and a lack of cultural integration. Eventually, no matter how many robots or people are brought into a country, a point of diminishing returns will be reached. These policies are limited in nature, but they drive the conversation forward.
Ideally, the policy would be to incentivize people to have more children, but it is too costly and intricate to do properly for now.