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A 2022 tweet from Elon Musk reads: “Population collapse due to low birth rates is a much bigger risk to civilisation than global warming.”. However, as a new Lancet study finds, with the imminent threat of falling fertility rates worldwide, how relevant could this idea become to our developing global economy?
A recent study has found that by 2100, over 97% of countries will have fertility rates below the replacement level – which is the rate at which women give birth to enough babies to sustain the current population level. To some of us, this may sound surprising, especially as just a few decades ago, the biggest threat to the global demographic was seemingly its mounting population, and a little under 2 years ago, in November 2022, the world population reached 8 billion. New findings also indicated that between 1950 and 2021, the total global fertility rate plummeted by over half, and these seismic alterations in global birth patterns demonstrate an enormous shift in live birth by 2100, when over half of them will be occurring in 49 low- and lower-middle-income countries, predominantly in Africa and Asia.
These future trends in fertility are set to spearhead shifts in global population dynamics, propagating changes in international relations and urging tailored fiscal action in both high- and low-income countries. These include policy interventions that bolster access to contraception and reproductive education to level off exponential birth rates, such as in Niger, and encourage marriage, parenthood, and childbearing, such as in China.
Pro-natal policies in China include subsidies, benefits, and even a cash reward of $137 for couples who get married if the bride is under 25 is being offered by a county in eastern China. The latter is said to ‘incentivise age-appropriate marriage and childbearing’. (Business Insider, 2023) The introduction of these interventions came after China’s population, the world’s second-largest, fell for a second year straight in 2023. However, on a bleaker note, young people are still not particularly keen – spurring the closure of numerous maternity hospitals in China between 2020 and 2021, according to the most recent available official data.
When interpreting these studies, it’s vital that we consider the impacts of declining fertility rates on the economies of individual countries and the global economy. The example of maternity hospitals in China being forced to close because women are simply choosing to not have as many children, mainly relating to the cost and commitment involved with childbearing, evidently emphasises the concept of the multiplier effect. The multiplier effect is the multiplied impact on a country’s aggregate demand (AD) spearheaded by a change in one of the determinants of AD.
In this case, the closure of maternity hospitals reduces the demand for healthcare workers, such as midwives and doctors, leaving them with less disposable income to spend on the scale of the microeconomy. With little to no stream of income, healthcare workers who are no longer working in maternity hospitals are forced to cut back on consumption, perhaps the most important component of AD, and thus spend less money in local supermarkets and shops. This would have a multiplied domino effect on cities and counties, as local businesses experience lower sales and profits, potentially fuelling further layoffs and closures. The cyclical impacts of the initial nosedive in consumption translate to a decline in output, lower income tax revenues, and increased unemployment, all of which put further economic strain on an economy and encourage its shrinkage. When we consider the fact that fertility rates are set to fall below the replacement level in all but 6 countries by 2100, we can instantly see the negative and likely, global, consequences of such a concept. Suddenly, Elon Musk’s tweet seems not too foreign a notion.
The perception of a future declining population has connotations which reverberate throughout other aspects of countries’ economies – for instance, long-term impacts of fewer babies being born today include a declining labour force, and a higher future dependency ratio – particularly as the lower number of babies being born today will be forced to support a higher number of elderly people in the future, straining resources and social services further – and even a slowdown in worldwide entrepreneurial advancement, according to the human capital theory. The human capital theory highlights the value of a vast population entering the workforce with fresh ideas and innovative spirit when it comes to driving economic growth.
Looking into the future, nations are attempting to grapple with these new projections, having highlighted just how critical women’s rights and access to reproductive health programs are in shaping the trends of the future global demographic. It is without a doubt that the introduction of policies which encourage the births of more children in the countries with the lowest fertility rates, such as Japan and Croatia (Statista, 2023), is indispensable. However, governments must also plan for potential economic threats, such as those to food security, health, and geopolitics, as these demographic trends are set to alter the long-term worldwide economy.
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