Demographic Free-fall

Low Fertility and Economic Crisis

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By Father John Flynn, LC

ROME, FEB. 3, 2012 ( Sustainable development is the imperative of the 21st century and cannot be achieved without improving reproductive health: words expressed at a recent executive board meeting by UNFPA executive director Babatunde Osotimehin, according to a Feb. 1 press release.

UNFPA is the United Nations’ agency responsible for promoting family planning, including contraceptives and access to abortion. Reducing fertility is, according to the director, key to ensuring economic success.

But this is an affirmation increasingly contradicted by events. Japan is one of the clearest examples of this. The latest official figures show that Japan’s population is projected to fall by 30%, to below 90 million, by 2060.

By that date those aged 14 or under will be less than 8 million, compared to 35 million aged 65 or older, Reuters reported, Jan. 30.

The fertility rate, the expected number of children born per couple, is expected to reach 1.35 in 2060 from 1.39 in 2010, well below the 2.08 needed to keep the population from shrinking.

The projections are based on the 2010 census and there were three estimates: moderate, optimistic and pessimistic, made by the National Institute of Population and Social Security Research, according to a report published Jan. 31 by the Daily Yomiuri Online.

The forecast released corresponds to the moderate estimate and will see 39.9% of the population being 65 or over by 2060.

Even before the latest figures came out there was widespread concern over the economic implications of Japan’s low fertility rate. Moreover, what is happening in Japan is a foretaste of what will occur in other mature economies.

A Jan. 12 report by Reuters cited Ajay Kapur, a strategist for Deutsche Bank in Hong Kong, as saying that stock markets are worried about demographic trends in almost every developed market.

Not unique

He said it would be a crucial error to think that Japan’s economic stagnation in the last two decades was something unique.

«In the next five years, all of the 18 developed countries for which Deutsche has property market data going back more than half a century will see a decline in their working age population ratios,» the Reuters article noted.

A combination of fewer people in the workforce and high levels of indebtedness leads to a very adverse economic environment, Kapur warned.

The aging population means that a serious reform of the social security and tax systems will be needed in Japan, said Chief Cabinet Secretary Osamu Fujimura at a press conference held Monday, according to a Feb. 1 report by the Daily Yomiuri Online.

In 1960 one retiree was supported by 11.2 workers. In 2010, one retiree was supported by only 2.8 workers. By 2060, it is expected there will be just 1.3 workers per retiree.

Many other countries are struggling to deal with the consequences of a below-replacement fertility rate.

Taiwan’s president Ma Ying-jeou, warned that the country’s lack of children is «a serious national security threat,» the Guardian newspaper reported, Jan. 23.

In 1951, the average Taiwanese woman had seven children. In 2010, the fertility rate was 0.89. While currently about 14 of the population is over 65, this number could double in just a couple of decades.

Currently seven working people support one retiree, but by 2045 this will have plummeted to just 1.45, according to the Guardian report.

«Rapid ageing means declining labor input and, in the long term, suggests population will fall, which will slow the economy,» said Ma Tieying, an economist at DBS Bank in Singapore.

His warning came in a report on the dire economic implications of low fertility in Taiwan published Jan. 25 by Bloomberg Businessweek

One generation

Another expert who recently spoke out on the issue is Sarah Harper, director of the Oxford Institute of Population Ageing, University of Oxford. She said that the European Union will see an average increase of 23% in pension costs by the middle of the century, according to a Jan. 31 report by the Independent newspaper.

The greatest pressure, however, will not be on Europe, but on Asian and Latin American countries that are also experiencing rapid declines in fertility. Europe, Harper pointed out, has had over a century to adapt to these changes, but most developing nations will have just one generation.

The rapid decline in Latin America, in part thanks to the programs sponsored by the United Nations, is evident in two recent examples.

A Jan. 25 report published by Prensa Latina said that it is likely the population will be in decline by 2025. According to Juan Carlos Alfonso, director of the Population and Development Research Center, by that time 26% of the population will be in their sixth decade.

Meanwhile, a Jan. 15 report by U.S. National Public Radio, said that from an average of six children per woman 50 years ago Brazil now has a lower fertility rate than the United States, at 1.9 per woman.

Such rapid and dramatic declines will inevitably bring about severe economic and budgetary problems, a far cry from «sustainable development.»

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