The upside of population decline


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,” reported The Economist. This “could have a disastrous impact on the country,” wrote Huang Wenzheng, a fellow at the Center for China and Globalization in Beijing, in the Financial Times.

China’s fertility rate of 1.3 children per woman in 2020 is well below replacement level, but so, too, are fertility rates in every rich country. Australia’s rate is 1.66, the US rate is 1.64, and in Canada it is 1.47. In all developed economies, fertility rates fell below replacement in the 1970s or 1980s and have stayed there ever since.

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 significantly below replacement levels. If those conditions spread across the world, the global population will eventually decline.

A pervasive conventional bias assumes that population decline must be a bad thing. “China’s falling 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’s. But while absolute economic growth is bound to fall as populations stabilize and then decline, it is income per capita which matters for prosperity and economic opportunity. And if educated women are unwilling to produce babies to make economic nationalists feel good, that is a highly desirable development.

Meanwhile, arguments that stable or falling populations threaten per capita growth are hugely overstated and, in some cases, plain wrong.

Meanwhile, a stable and eventually falling global population would make it easier to cut greenhouse-gas emissions to avoid climate change, and alleviate the pressure that growing populations inevitably place on biodiversity and fragile ecosystems. And contracting workforces create stronger incentives for businesses to automate, while driving up real wages, which, unlike absolute economic growth, are what really matter to ordinary citizens.

But even when the Indian economy grows rapidly, as it did before the COVID-19 crisis, its highly productive “organized sector” of about 80 million workers – those working for registered companies and government bodies on formal contracts – fails to create additional jobs. Growth in the potential workforce simply swells the huge “informal sector” army of unemployed and underemployed people.

True, fertility rates far below replacement level create significant challenges, and China may well be heading in that direction. Many people expected that after the one-child policy was abolished in 2015, China’s fertility rate – then around 1.65 – might increase. But a look at the freely chosen birth rates of ethnic Chinese living in successful economies such as Taiwan (1.07) and Singapore (1.1) always made that doubtful. Other East Asian countries such as Japan (1.38) and Korea (1.09) have similarly low fertility.

Moreover, some surveys suggest that many families in low-fertility countries would like to have more children but are discouraged by high property prices, inaccessible childcare, and other obstacles to combining work and family life. 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 result will be average fertility rates well below replacement level in all developed countries, and, over time, gradually falling populations. The sooner that is true worldwide, the better for everyone.

Adair Turner, Chair of the Energy Transitions Commission, was Chair of the UK Financial Services Authority from 2008 to 2013. He is the author of many books, including Between Debt and the Devil.

Copyright: Project-Syndicate, 2021.

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