Economic Disadvantages Awaken as World Population Declines

Falling global fertility rates could have significant economic consequences due to labor shortages and reduced capacity for innovation.

In the 250 years or so since the Industrial Revolution, the world's population has exploded. But by the end of this century, the number of people on Earth could shrink for the first time since the Black Death in the 14th century.

The reason is not rising deaths but falling births. Across the world, fertility rates—the average number of births per woman—are falling. The trend is familiar, but its implications are unpredictable. The future of the global economy as the population shrinks is still an open question.

In 2000, the world's fertility rate was 2.7 births per woman, much higher than the "replacement fertility" (the fertility rate at which a woman, on average, gives birth to enough daughters to replace herself in her reproductive function and maintain the race) of 2.1, which helps the population to stabilize.

Today, the world's fertility rate is 2.3 and falling. The 15 largest countries by GDP all have fertility rates below replacement. This group includes the United States and most rich countries. China and India, which together account for more than a third of the world's population, are also on the list.

Two elderly people in China. Photo: UNFPA China — Two elderly people in China. Photo: *UNFPA China*

As a result, in many parts of the world, the sound of children’s footsteps is being drowned out by the clatter of walking sticks. Examples of aging populations include not only Japan and Italy, but also Brazil, Mexico and Thailand. By 2030, more than half of the population in East and Southeast Asia will be over 40.

If older people die and are not replaced, the population will shrink. Outside Africa, the world’s population is expected to peak in the 2050s and end the century smaller than it is today. Even in Africa, birth rates are falling rapidly.

Whatever environmentalists say, the reality is that population decline will create problems. The world is not yet fully prosperous, and the lack of young people will make economic life much more difficult. It is also clear that supporting the world's pensioners will become increasingly difficult.

Working-age people need to work to pay taxes. That income is used to pay pensions. Older people also need young people and relatives to care for them. In rich countries today, for every person over 65, there are three people between the ages of 20 and 64. By 2050, that ratio will be less than two.

The low ratio of workers to retirees is just one problem of falling fertility. Young people have a lot of something else important that psychologists call “fluid intelligence,” the ability to think creatively to solve problems in entirely new ways.

This youthful dynamism complements the accumulated knowledge of older workers. It also drives innovation. Patents filed by the youngest inventors are more likely to contain breakthroughs. Countries with older populations are less daring and comfortable with taking risks.

Older voters are also more politically conservative. Because they benefit less than younger people from economic growth, they are less interested in policies that support growth, especially housing. Blocking productivity growth could mean missing out on opportunities.

Given these implications, experts say it is reasonable to view low birth rates as a crisis that needs to be addressed. However, many of the underlying causes of low birth rates are welcome. For example, as people become wealthier, they tend to have fewer children.

In other words, economic development is likely to lead to a fall in fertility below replacement level. Many countries’ pro-fertility policies have had disappointing results. Singapore, for example, has generous subsidies, tax breaks, and childcare support, but its fertility rate remains at 1.

Rich countries are allowing record levels of immigration, helping to address labor shortages. But the fundamental problem remains that the global population is shrinking. By mid-century, the world could face a shortage of young, educated workers.

A more radical solution, then, might be to unleash the potential of the world’s poor to alleviate the shortage of educated young people without having more children. Two-thirds of Chinese children live in rural areas and have poor access to education. Or in India, two-thirds of 25- to 34-year-olds have not completed secondary school.

At the same time, Africa’s youth population will continue to grow for decades. Upgrading their skills could create more educated young migrants, the innovators of the future. But developing disadvantaged regions is a real challenge, while places that get rich early age quickly.

So, in the end, the world will still have to deal with fewer young people and a shrinking population. A timely solution is the recent advances in artificial intelligence (AI). An economy that uses high-productivity AI can easily support more retired people. AI can generate ideas on its own, reducing the need for human intelligence. Combined with robots, AI can also help care for the elderly. There will certainly be a high demand for such innovations.

If technology does indeed enable humanity to overcome the crisis of population decline, it would fit with history. The dramatic improvements in labor productivity in recent centuries have helped avoid the mass famines predicted by the 18th-century British demographer Thomas Malthus. Fewer children means fewer human geniuses. But that may be a problem that geniuses can fix with technology.

Phien An ( according to The Economist )

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