Are we worried about the wrong demographic problem?
Economists, tech elites and politicians have expressed concern regarding the sharp decline in birth rates in many countries. Falling fertility rates in advanced economies and emerging markets (such as China) have generated widespread fears that the world is headed for a potential population cliff.
Economist Jesus Fernandez-Villaverde recently observed: “For the first time, humans aren’t producing enough babies to sustain the population. If you’re 55 or younger, you’re likely to witness something humans haven’t seen for 60,000 years, not during wars or pandemics: a sustained decrease in the world population.” Rather gloomily, he observes that while a “gently falling population could be good for sustainability...we’re facing population collapse and economic turmoil”
Such alarmist rhetoric, however, appears excessively dire. A recent UN report states that the “world’s population is expected to continue growing for another 50 or 60 years, reaching a peak of around 10.3 billion people in the mid-2080s, up from 8.2 billion in 2024. After peaking, it is projected to start declining, gradually falling to 10.2 billion people by the end of the century.” Even if the UN’s projection turns out to be overly optimistic, peak population is unlikely before 2054.
Economic theories offer somewhat mixed views on the relationship between population growth and income per capita growth (a widely used proxy for living standards). Some models (such as the Solow growth model) imply a negative relation between population growth and income per capita growth due to a capital dilution effect. Rising population is presumed to dilute the stock of physical (and human) capital per worker, which can adversely affect labor productivity.
Other models (such as the Romer model) suggest the existence of a positive link between population growth and innovation. New ideas are assumed to offer long lasting benefits to society. Stanford economist Charles Jones notes that “each idea only needs to be invented once, and then it is technologically feasible for the idea to be used by any number of people or firms simultaneously and repeatedly.”
The larger the population sample to draw from, the greater the probability of finding the next Isaac Newton or Albert Einstein, and, consequently, the greater the flow of fresh insights and new ideas.
While economic growth theories offer intriguing discussion points, they often fail to reflect the far more basic challenges that much of the world faces today. In fact, primary threats to maintaining global economic and political stability include insufficient job creation and mass youth unemployment or underemployment. The global migration crisis and the disquiet among the struggling youth in South Asia, Africa, the Middle East and elsewhere can be tied to the poor job prospects and bleak futures faced by many of today’s youngsters.
Even China, with its declining population, has millions of college-educated young men and women struggling to find decent jobs. In fact, the massive enlargement of post-secondary education — the magic elixir that was supposed to resolve most of the ills of societies worldwide — has often failed to deliver. Many are discovering that a college education does not automatically guarantee a pathway to well-paying white-collar jobs, even in rich countries.
Meanwhile, recent entrants to the catch-up growth process, which includes many nations in South Asia and Africa, are discovering that they are well and truly late to the party. In the past, moving tens of millions from rural and agrarian settings to urban and industrial environments allowed workers with even relatively limited formal education to work with tools in factory settings and generate decent productivity growth. This enabled them to achieve sufficient income gains to be able to join the middle class. The curse of premature deindustrialization and the rapid automation of various tasks has meant that the traditional manufacturing-led pathway to growing and establishing a middle class has largely disappeared.
As Africa and South Asia undergo a demographic transition, they are experiencing an extraordinary youth bulge. The median age in Sub-Saharan Africa is just under 20 years. To truly benefit from this trend and attain a demographic dividend, countries need to find productive employment for tens of millions of new job market entrants each year. Even India, the world’s fastest growing major economy, is struggling to generate the 10-12 million new jobs per year necessary to prevent the demographic dividend from turning into a demographic curse.
With AI-driven white-collar job dislocation on the horizon, it is hard to imagine that the biggest problem the world is going to be facing over the next few decades is an undersupply of labor. The real challenge may turn out to be the lack of proven and sustainable strategies for creating decent-paying jobs for the hundreds of millions seeking to attain the dream of joining the global middle class. Recent rise in populism, protectionism and geopolitical instability is just a preview of what is to come if we fail to address the true demographic challenges facing the global economy.
Economists and policymakers in advanced economies need to look beyond just the challenge of funding welfare programs for their retirees and consider the broader global implications of a push for a larger population (including environmental degradation and quality-of-life considerations).
Before splashing limited government funds on pronatalist programs, it may be worthwhile to remind ourselves that the current fears of a population collapse may turn out to be just as overblown as past fears of overpopulation.
Vivekanand Jayakumar, Ph.D., is associate professor of economics at the University of Tampa.