The bright side of the population decline
For many, the recently released census, which shows China’s population growth rate continues to decline, is a warning of serious problems for the country.
But a comment posted on Weibo in China was more insightful. “The decline in the fertility rate actually reflects the advance in Chinese thinking. Women are no longer a fertility tool.”
China’s fertility rate of 1.3 children per woman in 2020 is well below replacement level, but so are fertility rates in all rich countries. Australia’s rate is 1.66, the United States rate is 1.64, and Canada’s rate is 1.47. In all developed economies, fertility rates fell below replacement level in the 1970s or 1980s and have remained there ever since.
When the US rate rose to just above 2.0 from 1990 to 2005, some commentators praised America’s greater dynamism and “social trust” in “old Europe”. But the increase was entirely due to immigration, with Hispanic immigrants initially retaining the higher fertility rates of their relatively less economically advanced home countries. Since 2000, the fertility rate for Hispanics in the United States has fallen from 2.73 to 1.9, while rates for whites have been well below 2.0 since the 1970s and for blacks since about 2000.
It is only in the poorest countries, concentrated in Africa and the Middle East, that we still observe much higher birth rates. In India, the more prosperous states, such as Maharashtra and Karnataka, have fertility rates below replacement level, with only the poorest states of Bihar and Uttar Pradesh still far above. And while the national rate in 2018 was still 2.2, India’s National Family Health Survey reveals that Indian women would like to have, on average, 1.8 children.
Half a century of evidence suggests that in all prosperous countries where women are well educated and free to choose whether and when to have children, fertility rates fall significantly below replacement levels. If these conditions spread across the globe, the world’s population will eventually decline.
A pervasive conventional bias assumes that population decline must be a bad thing. “China’s declining birth rate threatens economic growth,” the Financial Times said, while several comments in Indian media noted with approval that India’s population will soon overtake that of China.
But while absolute economic growth is doomed to decline as populations stabilize and then decline, it is per capita income that matters for prosperity and economic opportunity. And if educated women aren’t willing to have babies to make economic nationalists feel good, that’s a highly desirable development.
The arguments that stable or declining populations threaten per capita growth are grossly overestimated and, in some cases, outright false. Certainly, when the population stops growing, there are fewer workers per retiree and health spending increases as a percentage of GDP. But this is offset by reduced investment needs in infrastructure and housing to support a growing population.
China currently spends 25% of its GDP each year pouring concrete to build apartment buildings, roads and other urban infrastructure, some of which will be of no value as the population shrinks. By reducing this waste and spending more on health care and high technology, it can continue to prosper economically as the population shrinks.
In addition, a stable and possibly declining global population would facilitate the reduction of greenhouse gas emissions, help fight climate change, and ease the pressure that population growth inevitably places on biodiversity and fragile ecosystems. And the shrinking labor force is making companies more automated, while also pushing up real wages which, unlike absolute economic growth, are what really matters to ordinary citizens.
In a world where technology allows us to automate more and more jobs, the far bigger problem is too many potential workers, not too few. China’s population aged 20 to 64 is likely to decline by around 20% over the next 30 years, but productivity growth will continue to breed increasing prosperity. India’s population in this age group is currently growing by around 10 million per year and will not stabilize until 2050.
But even when the Indian economy is growing rapidly, as it did before the COVID-19 crisis, its highly productive “organized sector” of around 80 million workers (those who work for registered companies and government agencies with formal employment contracts) fails to create additional jobs. . The growth of the potential labor force simply swells the huge army of the “informal sector” of the unemployed and underemployed.
Indeed, fertility rates well below replacement level create significant challenges, and the Chinese mainland may well move in that direction. Many people expected that after the abolition of the one-child policy in 2015, the continent’s fertility rate, then around 1.65, could increase.
But a look at the freely chosen birth rates of ethnic Chinese living in advanced economies such as Singapore (1.1) has always made this questionable. Other East Asian countries such as Japan (1.38) and the Republic of Korea (1.09) have similarly low fertility.
At these rates, the population decline will be precipitous rather than gradual. If the Republic of Korea’s birth rate does not increase, its population could drop from 51 million today to 27 million by 2100, and the ratio of retirees to workers will reach levels that no automation can achieve. can compensate.
Additionally, some surveys suggest that many families in low fertility countries would like to have more children but are discouraged by high house prices, inaccessible child care facilities, and other barriers to work-life balance.
Policymakers should therefore seek to make it as easy as possible for couples to have the number of children they ideally want. But the likely outcome will be average fertility rates well below replacement levels in all developed countries and, over time, a gradual decline in populations. The sooner this is true around the world, the better it will be for everyone.
The author, former chairman of the UK Financial Services Authority from 2008 to 2013, is chairman of the Energy Transitions Commission and author of numerous books, including Between Debt and the Devil.
Opinions do not necessarily reflect those of China Daily.