Consequences of Current Demographic Trends

Major demographic trends are being observed globally.  They have enormous implications that are only now beginning to be grasped.  This paper describes some of the likely consequences and discusses needed responses.

Birth rates are falling below replacement level

Around the world, birth rates are falling below replacement level.  The current lifetime fertility rate in the United States is 1.62 births per woman.  The average Catholic majority country in Europe currently has a fertility rate of 1.3.   China is currently at 1.2.  The lowest birth rate being reported at this time is that of South Korea, at 0.72 births per woman.  In South Korea’s capital, Seoul, the rate is 0.55.  Even countries with previously high birth rates, such as India, are now at below replacement fertility levels.

Demographers calculate that a birth rate of approximately 2.1 births per woman is necessary to sustain a stable population.  The worldwide decline in fertility has been steep and sudden and has taken demographers largely by surprise.

A paper published in the Lancet medical journal in March of this year projected that 198 out of the current 204 countries will have fertility rates below sustainment level by the end of this century.

Reasons for declining fertility

A number of factors have been postulated to explain the recent rapid decline in birth rates:

• One factor is increased education for women and changing gender roles, leading to greater employment opportunities and consequent delays in marriage and childbearing. Associated with this are changing social norms, particularly reduced stigma for a woman being unmarried or childless.
• Another major factor around the world is the increased availability of effective contraception. Today, pregnancy is much more of a choice for women than previously.
• The increased costs of raising a child to adulthood are clearly a factor. This is coupled with general costs of living, which have been rising faster than income for most people.  In particular, housing costs are becoming very burdensome for most members of the younger population.
• General economic uncertainty and the rising inequality of income and wealth are general deterrents to having children.
• The growing shortage and cost of child care are other major factors limiting family sizes in developed countries.
• Efforts to criminalize abortion and investigate miscarriages may be deterring people from risking a pregnancy.
• Finally, a large fraction of the population is experiencing general apprehension about the future (such as worries about environmental degradation, climate change, social and political turmoil, and the increased likelihood of violence, even the possibility of Great Power war).

Socioeconomic class aspects

Both within and between countries it is widely observed today that those at the lower end of the socioeconomic class scale tend to have larger number of children.  This has the effect of increasing the fraction of the population needing public assistance at the same time the fraction of the population able to provide this support decreases.

Societal value system and economic level aspects

Fertility decline is most acute in economically-advantaged countries where women are educated and have rights.  Today, only those countries where the average citizen earns less than the equivalent of $5,000 per year still have fertility rates above replacement level.

Demographic competition

Groups that grow because they don’t give women choice about reproduction, or have cultural values prioritizing large families, will tend to have a competitive advantage over groups with shrinking population numbers.  Their group’s large votes will tend to prevail in democratic elections.

Decreased death rates and increased lifespans

At the same time that birth rates are declining, improvements in health care, sanitation, etc. are enabling people to live longer.  Unfortunately, much of the increase in years of life is coming in the older years, when people are experiencing reduced physical and mental capabilities.  There is a big disparity in lifespans across different social classes, with wealthier and better educated people living longer.

Population age distribution changes

The combination of these trends in fertility and longevity is very consequential.  Cohorts (people born in a common year) are going to get progressively smaller over time.  The age distribution pyramids in societies are going to become inverted, where there are more people in older age groups than in younger age groups.  This will lead to a progressively older overall population.

Family support impacts

Families are going to become smaller on average, with fewer siblings and cousins for each child.  While in earlier times the expectation has been that people will be taken care of in their older years by family members, there will be fewer of such available in the future.  In addition to caring for their own children, a couple could be faced with caring for four aging parents.  They could possibly even need to support grandparents at the same time.  Such a demand on their time and energy will tend to further depress the number of children a couple will want to have.

Efforts to keep population numbers up

Up until recently, advanced societies such as the United States with below-replacement-level internal birth rates have been able to keep their population numbers up by allowing immigration from other areas with higher birth rates.  However, those areas are experiencing falling birth rates themselves, so the pool of possible immigrants will be shrinking.  At the same time, many societies are increasingly resisting immigration because of cultural stress and other factors.

Wherever they have been tried, government programs aimed at boosting fertility rates, such as direct payments to families for additional children, have been relatively unsuccessful.  As women become empowered, they have less interest in producing numbers of children, or even any children at all.

Consequences for social resource allocation

One overall effect is that societies are going to have to allocate increasing fractions of their resources to take care of their old and unwell population.  By itself, this may further depress the birth rate among young people, who will likely feel burdened by having to work to support those no longer contributing.

Current U.S. social support programs (Social Security, government and corporate pensions, Medicare, Medicaid, etc.) are structured in a way that is not sustainable with an increasing number of beneficiaries and a decreasing number of contributors.  These programs will need to be modified in a major way to continue to be viable.

Consequences for disadvantaged geographic areas

Disadvantaged geographic areas are going to be hit hard as a result of these demographic changes, particularly rural areas with narrow economic bases.  Governments there will face severe challenges to continue to function.  As their resident population shrinks and gets older, they will have increasing numbers of empty houses.  School class sizes will decline.  They will have decreasing tax bases to support government services of all kinds.  They will experience difficulty servicing existing debt and will struggle to issue new bonds.  Areas with declining populations will find that key services such as local health care will leave.

Amplifying feedback loop effects will be observed.  For example, educated young people with saleable skills will move away from declining regions, leaving a population growing steadily older with increasing needs for care.

Consequences for national security

The demographic trends are going to concern governments for the national security implications.  Finding sufficient numbers of young people to perform military service will be increasingly challenging.

Consequences for employment

Jobs that normally employ large numbers of younger people at low pay are going to have difficulty filling positions.  Examples of such jobs include agriculture, retail, food services, caregiving, and transportation and delivery.  A natural response of employers will be to attempt to automate these jobs using robotics and advanced artificial intelligence.

The end of growth

Conventional economic wisdom up until now has regarded growth as an imperative.  Lack of growth is seen as failure.  Note that a large fraction of total economic activity is demand consequent on growth.  A steady state economy has demand driven by replacement needs.  With a shrinking population, replacement needs will decline.  This will be accelerated by a population that is aging, with reduced consumption needs.

In an environment with a shrinking and aging population the strategy of growing out of trouble is not going to work. Big national debt and the use of deficit funding for everyday operations are going to cause existential difficulties for nations around the world.

Capitalist economics is fundamentally challenged by persistent contraction.  What is critical is to take action early to avoid a hard landing in the face of this.  In particular, it will be essential to avoid political instability as populist demagogues try to take advantage of peoples’ displeasure in order to gain power.

Technological change impacts on careers and life trajectory planning

Technological changes are making working careers in a particular field ever shorter.  The half-life of the knowledge gained in one’s education continues to shrink.  This career compression makes it ever harder for working people to save sufficient funds for retirement.  The costs of raising children make long-term saving particularly hard.

Challenges for young people

Today it is really difficult for a young person to actually succeed in life in the way that used to be the norm—to finish college and graduate school, start work, establish a stable career with good pay, marry, buy a house, and start raising a family, while saving diligently for retirement.  Young people now typically start out with a large amount of educational debt and can’t get enough money together for the down payment on a house. Today a remarkable fraction of young people are moving back in with parents after college graduation because of this.

Simultaneous adverse environmental effect trends

The demographic trends described here are going to take place at the same time as environmental degradation effects accelerate.  These include pollution, drought and water shortages, heat waves, rising sea level, strengthened storms, ecosystem damage, and many other conditions that will make life more difficult for human populations everywhere.  There will be fewer young people available to work to mitigate these environmental changes.

Long term consequences for the planet

Over the long term, having many fewer people is unquestionably a good thing for the health and stability of Planet Earth.  It is well established that the current human population exceeds the long term planetary carrying capacity.  The challenge will be getting to a sustainable human population size without causing some form of societal implosion in the process.

Some economic questions

What does housing have to look like adapted to this coming contraction?  There will be a reduced demand for family housing and an increased demand for housing suited for elders.  What homes should society be building now, given the longevity of housing?

What do investment portfolios need to look like for these coming conditions?  Note that public company stocks have values priced in the expectation of future growth, and that growth may now become negative.

What planning should be done for infrastructure systems in the case of a declining population?  Should we be building more transportation facilities such as roads, ports, airports, etc.?  What about energy production and energy distribution system capacity? 

Questions about governance

How can governance be managed in an environment of contraction?  How can wise decisions for the long term be made, considering the parochial politics we now experience?  Is some authoritarianism inevitable to manage the required long-term changes?  Can governance in a democratic framework deal with all the issues discussed here?  Current governance dynamics emphasize short-term considerations, focusing on the next electoral cycle. However, key decisions about adapting to demographic and economic contraction necessarily have a long-term horizon to consider.

In conclusion

The demographic trends described here are worldwide. They are accelerating, and they have great momentum.  They are not likely to be reversed or stopped any time soon.  The trends will have major impacts on virtually every aspect of society.

Policy makers need to think through how to accommodate shrinking and aging populations without causing essential societal institutions to collapse.  This effort needs to be done urgently, as major effects of these demographic trends will be felt very soon.  Great insight will be needed to get things right the first time.  Policies that are developed in error will be very hard to correct.

In most societies of the world today, what is actually done is primarily driven by the pursuit of commercial profit.  In the emerging demographic conditions, profit will be increasingly hard to come by through growth.  Instead, profit will need to be obtained through increased efficiency, better use of resources, reduced waste, and wise foresight.

Reactions to these trends will be inevitable.  People will not like many of the effects of population and economic contraction.  A strong focus on the common good will be essential, so that people do not fall into fighting over a shrinking pie.