Sunday, November 06, 2011

Demographics, Shmemographics

I don't quite get it.From time to time you occasionally see articles like this one and this one on the world's changing demographics. Birth rates are dropping, not just in the developed world, but also in middle and even low-income countries. At current rates, the world population is likely to stop replacing itself by 2020 and will eventually peak (thanks to increasing life expectancies) around mid-century.

You'd think that might be a good thing, as it might help avoid the Malthusian crisis where the population overshoots the environment's carrying capacity. An end to population growth should reduce some of the drivers for climate change and the "peaking" of various natural resources.

However, articles such as these raise alarms about the prospect of population stabilization because it will reduce the number of "workers" as a proportion of the population:  

The consequences of rapid aging are manifold: a shrinking workforce and a narrower pool for entrepreneurship, which undermines prospects for economic growth; a looming threat to the sustainability of “pay-as you go” public pensions systems; and increased health-care and other costs associated with an elderly population.

This doesn't seem to fit the story we constantly hear (in reports such as this one)  that widespread unemployment and stagnant wages are due to technological change and globalization. In short, workers are being replaced by machines and increasingly forced to compete with one another on a global level.  If this story is broadly true*, then a relative decrease in the supply of workers should be a good thing. Increased competition for human labour should both increase wages and incentivise further innovation.

If productivity has increased because of technological change, and presumably will continue to do so, then why do we need the same ratio of "young workers" to "dependent older people" as in the past? People increasingly remain healthy and active into later in life.  And as the articles note, the kinds of work demanded in a technologically and demographically different society -- such as health care -- might be appropriately carried out by older people**.

That's not to overlook the specific issues with the projected demographic transition. The societies that age earliest -- such as Europe -- are going to have to adjust better to immigration if they're going to maintain some sort of balance. The serious gender imbalance predicted for China and India (a shortage of females) could have explosive consequences. And experience suggests that demographically younger places tend to be brighter and more hopeful, whatever their material circumstances: the obverse being the kind of malaise that some attribute to contemporary Japan.

Nevertheless, the "hump" of older people will enventually pass and the demography will correct itself. Meanwhile, if humanity is to remain anything like a sustainable venture, the predicted trend is surely the preferable one.

*If this is all a fiction and all the value really is produced by the young workers, then they're being roundly exploited, in which case shouldn't we have a revolution or something?

**The "narrower pool for entrepreneurship" also seems like a misguided concern: there were plenty of new ideas and inventions in the 19th century when the absolute numbers of potential entrepreneurs was much lower than it will be in thirty years.

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