With falling births, pensions will suffer, taxes will rise – but the alternative is worse

Of note:

Birth rates are falling throughout the world. Some countries are losing population now, and the global population is projected to decline some time later in the century.

Many people are alarmed by this: people in China, Russia, Western Europe and even Canada, where the population growth rate would be close to zero were it not for substantial immigration. They want to reverse the trend, to raise birth rates.

They are wrong. Low birth rates and falling populations do, to be sure, create significant problems that we must face. Retirement, health care and other end-of-life costs will soar. The French government is proposing an increase in the retirement age, an unpopular decision that will likely spread to other countries. We will also likely need higher tax rates.

But the alternative – high birth rates and growing populations – would be much worse. We should welcome the falling birth rates. Here is why.

If the human race is to survive – indeed, if any species is to survive – its growth rate will be zero. Why? Because if the growth rate is positive, eventually there will be standing room only, an obvious impossibility unless we venture into the science fiction realm of space colonies. How long until we get to that point? It depends on the rate of growth, but with any positive rate we will eventually get there. In 1964, demographer Ansley Coale estimated that with an annual human growth rate of 2 per cent, standing room only would occur in just 650 years.

On the other hand, if the growth rate is negative, eventually the population will disappear.

Therefore, in the long run, if our species is to survive, our growth rate will be zero. Not zero every year, or even every century, but over the long haul. Any positive rates will have to be balanced by negative rates.

How to get to zero population growth? Easy. The birth rate has to equal the death rate.

Given that we want long, healthy lives for ourselves and for those we love, we must have low birth rates to balance that out.

With high birth rates, we will not be able to maintain low death rates. The proponents of higher birth rates don’t mean to put it this way, but they are actually prescribing an early death sentence for us.

What about the problems created by low birth rates?

The essence of the age-distribution problem is that we will have fewer working people to support more retired people. With falling populations, the incentive for investment will likely also fall. It will be harder to bring new technologies to market, and it will be harder to maintain a full-employment level of overall production.

We will thus need to find ways that working people can be more productive, that they can create more goods, services and income, so that they can provide more adequately for their own old age, and also afford higher tax rates to provide the funds for health care and other services for the elderly.

Many measures facing stiff resistance, such as the French government’s raising of the retirement age, will have to be part of the response – all of these changes are difficult and some of them are deeply unpopular. But they will turn out to be less unpopular than the early death needed to balance out high birth rates.

There is reason to be optimistic about this, however. Over the decades we have seen remarkable increases in productivity, and governments have a lot of tools to encourage this to continue. We will face many problems that public policy must address and mitigate, if not completely avoid.

In any case, the current population puts so much pressure on our limited natural resources and on our ecology that the geological, biological and chemical basis of our civilization may collapse. We could deal with these issues more effectively if there were fewer of us. That births in many countries are below replacement level means that we may be moving naturally to a more sustainable size.

What the optimum population size should be is debatable. What is not debatable, at least in my opinion, is that we very much want low birth rates.

John Isbister is a professor of economics at Toronto Metropolitan University.

Source: With falling births, pensions will suffer, taxes will rise – but the alternative is worse