Demography Is Destiny… Or Is It?
The idea that ‘demography is destiny’ is used a lot by economists to justify upbeat economic growth forecasts for a number of emerging nations, and pessimistic outlooks for several developed states. My colleagues and I at Business Monitor International (BMI) certainly keep demographic projections in mind when looking at long-term forecasts. Usefully, the UN World Population Prospects, US Census Bureau, and many national statistics offices compile long-term population forecasts.
However, I need to throw in some important caveats to the concept, for I feel that the phrase is too fatalistic. ‘Destiny’ implies a predetermined path of events which cannot be changed. Also, demographic projections are hardly fixed in stone.
Below are some reasons to be cautious about demographic forecasts and their implications.
Countries with rapidly rising populations:
· Total fertility rates (the average number of children a woman can be expected to have in her lifetime) can fall very rapidly. We have seen this in several pro-big family places, such as Quebec, and traditionally ‘family-oriented’ countries such as Italy and Spain, which now have very low birth rates. Urbanisation (which means less need to have kids to toil the land, and less space in the city to house kids) and improved women’s education and job prospects are major factors.
· Large, youthful populations like India’s are considered positive for growth, but this must be accompanied by concomitant job creation and opportunities. Otherwise, the demographic youth bulge will end up unemployed, become a source of social and political instability, and a drag on fiscal expenses.
· Large, youthful populations mean abundant labour and lower wages. However, this also means that there is less incentive for technological change through industrialisation and automation. The historian Fernand Braudel cites China’s large population as a reason why it failed to industrialise early vis-à-vis Europe.
· ‘Surplus’ workers can be ‘exported’ before they become socially problematic. The Philippines has sent 10% of its population abroad, and they provide substantial remittances. But this also encourages dependency on remittances and could stunt development.
Countries with stagnant or declining populations:
· People are staying active longer. You’ve presumably heard the ‘60 is the new 40’ paradigm. Today’s ‘old’ people are much more youthful than the previous generation. Thus, bleak economic forecasts based on ageing populations can be mitigated if people work longer. Going forward, advances in biotechnology and medical treatment may prolong human beings’ active life-spans.
· Advanced technology can replace workers. Automation and robotics can make a difference. Outside of automated factories, two examples off the top of my head include driverless trains on at least one line in Singapore’s Mass Rapid Transit metro system, and automated check-outs in Tesco (in the UK).
· There are big opportunities to tap the grey population. Some retirees accumulate significant savings, which can be spent on holidays and other leisurely activities. Those who choose not to do so will still need to spend on age-related products and services. This can generate economic activity.
· Immigration of young workers may not be a sustainable solution to offsetting ageing. Eventually, the immigrants will themselves age, thus adding to the grey population.
· Population decline is unlikely to be a linear phenomenon. Japanese demographers forecast the population falling by as much as 50% to 64 million by 2100. However, long before then, I suspect that a substantially less crowded (say 25%) Japan will result in more space for families to have children, and thus a recovery in birth rates. Therefore, the population could well start rising again between 2050 and 2100.
So, while demography is crucial to economics (since economies consist of people producing and consuming goods, saving and investing capital, and trading with one another), keep in mind that it is a double-edged sword.
August 14th, 2009 at 4:09 pm
The economist recently did a feature on a potential reversal of the demographic decline. Conventional wisdom is that, as living standards rise, fertility rates decline. Now, however, there’s some tentative evidence that when living standards improve to a certain level – the study looks at Human Development Index countries with a score above 0.9 – the demographic decline goes into reverse.
http://www.economist.com/sciencetechnology/displaystory.cfm?story_id=14164483
That said, it’s a tentative study, and the conclusions are doubted by some.
August 17th, 2009 at 8:31 pm
new study by demographers Roderic Beaujot and Juyan Wang of the University of Western Ontario provides some answers. They found Canada an ideal test case, since each province has distinct economic and social policies.
Your Quebec reference is out of date. From a recent study:
“In Canada, Quebec and Alberta, saw sharp fertility increases in recent years, from 1.45 to 1.65 children per family in Quebec and from 1.64 to 1.82 in Alberta. That is a bit of a mystery, since otherwise Quebec and Alberta couldn’t be more different. Quebec has a lavish social-security system; Alberta a very limited one. Quebec has had fairly high unemployment; Alberta almost none.”