Memorandum
- From
- Caroline Mercer via TIME.com
- Date
- Filed
- Society·4 min to read
- Re
Two-Thirds of Humanity Now Lives Where Birth Rates Fall Below Replacement
ReTwo-Thirds of Humanity Now Lives Where Birth Rates Fall Below Replacement
Population aging and a shrinking working-age population cover most of humanity, but they carry not only risks but also possible benefits for the economy and well-being.
Population aging and declining birth rates already cover most of the planet. According to the data on which the review is based, about two-thirds of humanity lives in countries where the birth rate is below replacement level. This is changing the demographic structure of societies, the economy and politics but, as the authors of the material argue, the consequences are not necessarily only negative.
The key indicator here is the old-age dependency ratio, that is, the number of people of working age per person of advanced age. In Italy, this indicator is projected to rise from 39 percent to 50 percent by 2035. Greece, Portugal and Spain follow Italy. Latin America, including Cuba, Puerto Rico, Costa Rica and Colombia, is aging rapidly and catching up with Europe. China is expected to rise from 21 to nearly 34 percent by 2035, and in Hong Kong the indicator is projected to exceed 55 percent. In the United States, an increase from roughly 28.8 percent to 34 percent is expected by 2035. At the same time, American growth is estimated to be restrained primarily by immigration, and the result will largely depend on policy.
Economic risks are linked to the fact that, as the International Monetary Fund warns, economic output declines where labor force participation falls. Pension obligations in Italy, Portugal and Spain could exceed 15 percent of GDP by 2045. Aging also changes political weight: as the share of elderly voters grows, pension policy becomes more difficult. The age gap in voting is already evident in the example of the 2016 Brexit referendum in the United Kingdom. Separately, migration pressure is expected to increase as Africa's young population grows.
The historical experience of developing countries shows the other side of the problem. After the Second World War, declining mortality led to rapid population growth in many such countries. Larger young generations are associated with a higher risk of internal conflicts and civil wars. Thus, the populations of Ecuador, El Salvador, Guatemala, Peru and the Philippines grew sharply between 1940 and 1980, while Nigeria's population grew by approximately 150 percent over the same period, despite its oil wealth. The expected economic return from a larger population mostly did not materialize.
Aging countries, according to the cited data, respond to labor shortages by investing in automation, which raises productivity. Germany, Japan and South Korea increased exports in labor-intensive sectors in the 2000s and 2010s. The decline in birth rates over 70 years is associated with higher income per capita rather than with slower GDP growth. In US regions where birth rates fell more rapidly, wage growth was higher.
At the same time, the authors of the material emphasize the conditions under which these benefits are possible. Their outcome depends on continuous investment in technology and on strong institutions. The productivity effect of artificial intelligence has not yet materialized. High public debt in advanced economies limits the ability to respond to rising costs. Indifference to future problems in shrinking societies is named as a separate social risk.
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