By: Earl Spring
In late January, the Chinese Year of the Rabbit officially kicked off. And, I say:” Not one second too soon!”
We badly need the year of the rabbit! In fact, in most parts of the world, people need to be procreating like rabbits! The problem is: many nations are facing declining birth rates and aging populations. There is a massive demographic shift taking place and this will bring a whole new set of problems. This is transformational. It’s a game changer!!
So, turn on the music. Play more love songs. Put on some “Bad Bunny”. Spray romantic scents everywhere! Get naked!! Where are the flowers? We need more babies – badly!
The global decline in birth rates in advanced economies has been confirmed now for two decades. It is not a temporary phenomenon. It is accelerating at a dramatic pace. In many countries like for example South Korea, or Japan, it has plunged to almost half the replacement rate (i.e., below the death rate).
In France, recently, over a million people marched against the government’s decision to increase the retirement age to 65 from 62! Like France, most governments have no choice. A change in retirement program is inevitable given low birth rates and aging populations. Longer life spans, along with a significant reduction in the available workforce, means fewer people will be feeding into social security systems while greater numbers will be drawing out retirement funds. It’s simply unsustainable.
In China, for the first time in 60 years (since Mao’s Great Leap Forward) its population declined – just as it is leaping towards becoming a super-power. Without a Machiavellian (“Covidian”) hand by the west, raw demographic shifts (i.e., internal change) will undermine Chinese strategic ambitions.
Next to Climate change, dealing with demographic change will be one of our generation’s greatest challenges. Every advanced economy is now witnessing serious economic decline as a result. While birth rates in some parts of the world will explode (where there are simply no resources).
Much like ‘Climate Change’ this transformation cannot be explained away simply. We cannot point to just one or two factors. This is a complex issue. And its consequences will be complex and profound.
So, what’s going on? Why is this happening?
First, in advanced economies, societies are facing new gender dynamics. Most significantly educational attainment amongst women has changed dramatically (especially in the past 20 years). As women become more educated, they also develop career ambitions, and as a result there is a new dynamic where marriage is postponed and with this, they also postpone pregnancies and generally plan to have fewer children. This has become very feasible due to much greater access to contraception (and abortion). The net result has been a significant reduction in birth rates.
There are also serious cultural shifts and biological change underlying shifts in gender dynamics. According to some recent studies, as much as 25% of young adults not able to define their sexuality in conventional ways. This means that the marriage (procreation) ‘pool’ is diminishing. Also, interestingly, in raw biological terms, sperm counts in young men has dropped by 40% (without any simple explanation) over the past 20 years.
People are simply not forming child producing, heterosexual relationships at the same rate as before; and those that are “bonding” are having children later (coupled with serious biological limitations impacting their ability to have children).
Not to be overlooked, are financial pressures on young couples.
The ‘sheer cost’ of childbearing and childrearing has made family planning a must. The decision to have children is a ‘huge’ commitment. Many couples not only defer pregnancies due to career ‘pressures’ but also because of the costs associated with raising children.
Not to be ignored, in this conversation, is the dramatic growth in divorce rates. Sometimes marriages, and pregnancies are followed by breakdowns in relationships and in turn – separation – and single parenting. This places further financial pressure on ‘single parents’ and increases childbearing risk. This risk, in turn, provides much less appetite for children.
Interestingly, and by contrast, in the global south – i.e., many countries in Africa, population is booming. Nigeria currently has a population of 215 million; but within one generation is forecast to exceed 500 Million i.e., 2 x its population today.
This is a global recipe for disaster. In most of the advanced world, this will lead to significant reduction in the number of people entering the workforce; and thus, reduced ability to manage economic systems that are fundamentally underwritten with the concept that there are (normally) at least two times more working adults. than retirees. And at the same time there will be population growth in areas that can least deal with it – i.e., provide resources for their population.
So, what are the consequences?
Demographics is everything. Changes in population structure have long-term implications. Declining populations can lead to serious shrinkage in workforce, and significant relative growth in aging populations. This in turn, has dramatic impact on government and organizational budgets who pay out retirement benefits. Retirement funding has always depended on much larger numbers of working adults working for longer periods (40 years or so) contrasted with non-working (retired) individuals who are expected to live no more (on average) than 20 years after retirement.
Historically many societies have intrinsic cultural systems that ensure parents live with their children (as their only viable means of guaranteeing long-term retirement care). But, in advanced economies retirees are taken care of by the government – that operates the social security (insurance) system. And this system is ‘underwritten’ by the ratio of the adult working population and the adult non-workforce population. This ratio is a derivative of birth rates and death rates.
The pool of money ‘collected’ in this ‘social security fund’ is also useful in funding government obligations. Governments often use these funds as ‘collateral’ for funding government debt and therefore supports other government expenditure. But shrinking work forces also means shrinking tax base, i.e., less revenue to support government expenditures, and in many cases, governments have been raiding ‘social security funds’ to simply pay their bills.
The “Real Problem”
In fact, the “real problem” cannot be expressed as the difference between birth and death rates – but more accurately – as the ratio of the adult working population (i.e., workforce participation) and the adult retired population (i.e., the population not participating in work who collect retirement/other benefits). In other words, the number of people paying into the ‘system’ and the number of people being paid out of the ‘system’.
In the United States this ratio has changed dramatically. By 2010 there were 135 million people working with 35 million people retired. In 2020 the number of retirees has increased to 49 million and is projected to grow to over 75 million in the next decade or so while workforce participation will increase modestly to roughly 150 Million adults.
Social security systems in most advanced countries will not have the income to support their aging populations. This is another way of saying governments facing population declines will be functionally bankrupt – with future obligations I.e., liabilities that they cannot fund (to their own citizens or voters). In effect they will have made promises they cannot keep.
Tied in with government bankruptcy in most advanced economies, is the fact that there is dramatic population growth in many parts of the world. Yet, those nations do not have the means to support themselves. They will need financial support from advanced countries. But advanced economies will not be able to be generous to help them with their population explosions. And even if these countries did manage to survive, there is real resource scarcity i.e., Food and energy constraints that will exacerbate poverty and hunger in those regions.
Managing demographic change is a critical global issue.
What Should Be done?
This is a complex issue and there is no one-size-fits-all solution. It will require a combination of cultural, social, economic and political factors to address root causes of this emerging problem. There simply needs to be sustained and managed growth in birth rates in advanced economies and some level of moderation in less advanced nations.
Many governments have implemented various policies and programs to encourage increased fertility rates and support for families. Improved access to childcare, family friendly work policies and increased investment in education and health have certainly helped address some underlying causes. But the problem keeps getting worse, and the needle has not drifted much.
Like climate change, there are numerous meetings discussing how to deal with this issue and here are some proposals that have emerged:
1) Increasing retirement age – politically difficult but doable!
a. In the US, there is already in force a slow steady drift towards changing retirement age to 67 for future retirees. In France they have now shifted to 65 from 60.
2) Continuous immigration – which may not be an option in many countries.
In the US there has been a steady influx of one million ‘legal’ immigrants per year But this is not an option in homogenous countries like Japan.
This can address some of the global imbalances but is a politically dangerous proposition. Immigrants are generally not well received in many parts of the world. But at the same time, immigration not only deals with population imbalances but a shift in resources with massive increases cross border remittances to home countries – i.e., parts of the world with resource constraints that provided the motivation to immigrate in the first place!
3) Serious change in Government policies in areas involving taxation (and culture promotion) to assist in family formation and care of children.
In some countries, new married couples are getting one time tax-reductions, which is further extended upon childbirth.
4) Reducing or banning abortions.
In the US there are roughly 600,000 abortions per year! This may – in part – explain the ‘tacit’ shift in the Supreme Court’s make up (and the theatrics in Washington that led to new Supreme Court judges and the systematic dismantling of Roe v Wade).
One thing is for sure: the development and maintenance of ‘family’ needs to become a primary element of policy makers around the world. There is simply nothing more important that maintaining a strong family nucleus to help stabilize every aspect of our society. This change in demographics is a derivative of a systematic breakdown of families and social cohesion – necessary for a functioning, balanced and well managed society. Women’s career aspirations should not stand in the way of creating and maintaining families.
In less advanced economies, there can only be one recipe for dampening massive growth rates in population – the empowerment of women, and the support for advanced education (especially for women). There is no anti-dote better than education to contain, dampen, or moderate birth rates!!
If we don’t want to have bankrupt governance, and wholesale shift in population from South to North, it is very clear what needs to be done. In so many ways, this issue is a fundamentally related to the role of women in society – and it is clear this is the place to start to address this issue. We must simply do it.
Can someone play some more ‘Bad Bunny’ please?!