Demography is Destiny
The global population inversion
by Marcus Roberts | April 15, 2019
A few days ago the BBC published an article on the state of the world’s population. In a sign of how the public debate has shifted over the last few years, the fact that the world’s population is set to hit 8 billion in a few years is noted halfway through the piece and does not headline it. The population bomb narrative is certainly weakening.
Instead, according to this article, the “bomb” to be concerned about is the “ageing time-bomb” which governments around the world are grappling with. The bomb of the article is the make-up of the world’s population rather than its size. Thus, the BBC’s headline is that there are more elderly people (aged 65 years and older) in the world than there are young children (below 5 years old). The global numbers are now 705 million elderly people and 680 million young children. By 2050 the gap between those two sets of numbers will have widened so that there will be double the number of over 65 year olds than there will be young children. Certain very important economies are dealing with an extreme version of this top-heavy population structure. Japan (which has recently raised its retirement age from 65 to 70) has a population which is 27 per cent composed of those over 65. Its share of the population under 5 years old is less than 4 per cent. China’s population pyramid is less top-heavy than Japan: its over 65s only account 10.6 per cent of its population but this is still nearly double its proportion of under 5 year olds. And it is still a developing, rather than developed, economy.
Generally, the reasons for this inversion of the normal population pyramid are twofold. One, we are living longer – since the 1960s the global life expectancy has risen from 52 to 72 years thanks to better healthcare and diets. Secondly, as we live longer, we are not reproducing as we used to. We noted a few months ago that a recent study concluded that half of the world’s nations are facing a “baby bust”: they are not naturally reproducing themselves. A fertility rate of 2.1 children per woman is considered the number at which populations replace themselves (not growing or shrinking). Only 113 countries around the globe procreate at that rate. And if the higher replacement rate of 2.3 is taken as the benchmark (which is higher to take into account developing countries’ higher child-mortality and lower life-expectancy) the number of countries which attain that fertility rate number only 99. Globally, the world’s total fertility rate has more than halved since 1960 from nearly five children per woman to 2.4. As people have become more prosperous and healthier, child mortality rates have declined and the cost of raising children has risen.
Certain nations (again important ones like Russia and Italy) are expected to see their populations shrink quite rapidly in the years ahead thanks to their failure to reproduce. And this will in turn lead to greater economic pressures: fewer people in the workforce, fewer taxpayers, fewer entrepreneurs, fewer consumers and more elderly people requiring government assistance. The IMF warned 6 months ago that the Japanese economy could shrink by over a quarter in the next 40 years. Options to mitigate these economic effects include keeping the elderly healthy so that they can work for longer, and ensuring that the workforce includes more women. The International Labour Organisation notes that the workforce participation rate for women was 48.5 per cent, 25 per cent below that of men. Of course, women aren’t working because often they are bearing and raising children. Having more of them participate in the workforce could further reduce many countries’ already anaemic fertility rates. A more diverse workforce might stave off the economic problems for now, but will it mean fewer workers and taxpayers in the future?
The world will be older and quite possibly poorer in the decades ahead. This is the demographic story of the twenty-first century.