The average trend of falling birthrates and rising life expectancy masks considerable diversity, even in the western hemisphere. Consider this:
In the richer parts of Asia the populations of Japan, South Korea and Taiwan are already old and will rapidly get even older. Europe is split several ways: Germany, Italy and Spain, for instance, now have tiny families and are therefore ageing fast, whereas France, Britain and most of the Nordic countries have more children to keep them younger. In eastern Europe, and particularly in Russia, birth rates are low and life expectancy has also taken a knock. America, thanks to a resilient birth rate and high immigration, will still be fairly youthful by mid-century.
Which goes to show that government policy and incentives hold huge sway on reproductive behaviour.
Extensive research in 16 OECD countries has shown that there is a strong correlation between high female employment rates and large government cash transfers to families, generous replacement pay during parental leave, the availability of plenty of part-time work and lots of formal child care. Where all these things are present, fertility rates tend to go up. France and most of the Nordic countries have embraced such policies and been rewarded with a rise in fertility close to replacement level. It does not come cheap: the OECD reckons that they spend 3-4% of GDP on direct benefits to families, far more than do Germany, Japan and southern Europe.
Alternatively, a flexible labour market is just as effective of a carrot.
The odd ones out are America and Britain, which both have lots of women at work and fertility rates close to replacement level (with immigration making up the rest). Neither of them exactly spoils its families with financial inducements or state-provided child care, but their flexible labour markets make it easy for women to get back into work after childbirth, and public opinion approves of working mothers. They also have high levels of teenage pregnancy that help bump up the figures.
And what does this mean, in terms of sustainable economic growth and quality of lives?
1. As more people retires and few taking their places, the labour force will inevitably shrink, leading to lower output. Unless productivity makes a sharp turn upward, output growth will fall.
2. Ratio of working to retired people will decline. At the moment, Japan holds the world record for the lowest workers to pensioner ratio, at a dismal 3:1. Over the next three decades, age related decline could potentially cut OECD growth by a third.
3. If the life-cycle of savings theory is proven correct, then savings might get run down, potentially leading to some form of “asset meltdown.” This has yet to happen.
4. In terms of public finance, this means that public health spending will continue its relentless march upward. And social security payments might face cuts, although political resistance is likely to be high (older people vote more).