By Adair Turner in Financial Express
Population Prophecies
In a World where technology enables us to automate everyjob , the far bigger problem is too many potential workers, not too few
China's recently published census showing that its population has almost stopped growing brought warnings of severe problems for the country. "Such numbers make grim reading for the party" wrote The Economist."This could have a disastrous impact on the country" wrote Huang Wenzheng, a fellow at the centre for China and Globalization in Beijing, in the financial times.But a comment posted on China's Weibo was more insightful " The declining fertility rate actually reflects the progress in the thinking of Chinese people - women are no longer a fertility tool".
Chinas fertility rate of 1.3 is well below the replacement rate but so is it for all adavcned economies.Australias rate is 1.66 and US rate is 1.64.In all developed economies the fertility fell below 2 in the 1970s and 80s and have stayed there.
When the US rate returned to around 2 in 1990 to 2005, some hailed it as "social confidence" versus "old europe". Infact, the increase was largely due to immigration with Hispanic migrants maintaining the high fertility rate of their less succesful economies. Since 2000, the Hispanic fertility rate has fallen form 2.73 to 1.9, while the rates for white people have well below 2 since 1970s and for african americans since 2000.
In India, more prosperous states have fertility rates well below replacement level with only UP and Bihar still well above. The national average in India was 2.2 in 2018 and the National family health survey finds that Indian women would like to have on average 1.8 children.
A half 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 well below the replacement level. If those conditions exist across the world the global population will eventually decline.
A pervasive conventional bias assumes that population decline must be a bad thing." Chinas declining birth rate threatens economic growth" opined the Financial Times, while several comments in the Indian Press noted approvingly that India's population would soon overtake China. But while absolute economic growth is bound to fall as populations stabilise and then decline, it is income per capital which matters to prosperity and economic opportunities.And if educated women are unwilling to produce babies to make economic nationalists feel good,that is a highly desirable development.
True when population age there are fewer workers per retiree and health care costs rise as percentage of GDP. But that is offset by the reduced need for infrastructure and housing investment to support a growing population. China currently invests 25% of GDP each year on pouring concrete to build apartment blocks, roads and other urban infrastructure some of which will be of no value as the population declines. By cutting that waste and spending more on health care and high technology it can continue to flourish economically.
In a world where technology enables us to automate even more jobs, the far bigger problem is too many potential workers and not too few. China's populaion aged from 20 to 64 will likely to fall by around 20% in the next 30 years but productivity growth will continue to deliver rising prosperity. India's population in that age band is currently growing by around ten million per year and will not stabilise till 2050.
But even when the Indian economy grows rapidly as it did during the Pre Covid era, its highly productive "organised sector" of about 80 million workers - those working in registered companies and government bodies on formal contracts failed to create additional jobs.
True below replacement level fertility rates create significant challenges and China seems to be heading in that direction.Many people expected that when the one-child policy was abolished the Chinas fertility rate would increase. But if you look at the freely chosen birth rates of ethnic Chinese living in successful economies like Taiwan (1.07) and Singapore (1.1) makes the expectation doubtful.
Moreover some surveys suggest that many families in low-fertility countries would like to have more children but are discouraged by high property prices, inaccesible and costly childcare and other challenges in combining work and family life. Policymakes should therefore seek to make it as possible for couples to have the number of children they ideally want.But the likely result will be average rate below replacement level for all developed countries, and over time, gradually falling populations. The sooner that is true worldwide, the better for everyone
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