The impact of today’s empty cradle goes far beyond a generic reduction in labor supply.
The first problem, as always, is that neither author realizes the difference between the fertility rate and the birth rate. Fertility, as the average number of children born to a woman over her lifetime, is a long-term measure that takes decades to reach the lows we are seeing. The birth rate is just an annual measure that may be affected by things like recession, but can bounce back very quickly. It takes many years of consistently low birth rates to get to the low fertility rates we are now seeing around the world. And it would take many years of consistently higher birth rates to recover. If the long term roots of this spiral go uncorrected, there will ultimately be no recovery because, in the very long run, lower fertility means there are fewer mothers to give birth. So, for the record, a sudden and slight uptick in the European economy is not going to solve this problem. The cause goes too deep.
The economic implications of the birth dearth are often shrugged off with a superficial, “Oh well, we will just improve productivity or import more immigrants” judgment. The scope of this problem goes well beyond a reduction in total labor supply and the resulting negative impact on GDP. Anyone who got a passing grade in Econ 101 can come up with that analysis—there are other, more intractable implications—but let’s just take these two simplistic suggestions one at a time.
The black line is the replacement rate, 2.1 births per female over her entire child-bearing years. The later the first birth, the smaller the number of years left and, usually, the fewer births women will have.
First, what does immigration look like as a solution? These writers do not seem to realize that the birth bust is not confined to a handful of European countries plus Japan, but is a long term global trend. Canada, for instance, has a fertility rate lower than Denmark, the country featured in both articles for allegedly changing its sex ed curriculum to encourage pregnancy. Singapore, Taiwan, and Hong Kong are even farther down the fertility toilet than Japan. And this is not to mention one-child-rule China. The only places still pumping out babies at a high enough rate to have a surplus of people for actual “export” are poor, conflict-ridden countries, mostly in Africa.
Bear in mind also that we are not looking at a generic labor shortage, but a future with a vast skills gap. The biggest need will be in managerial posts. Most jobs will require a university education and considerable familiarity with technology. Already, 60% of new jobs require skills that only 20% of the world population has. In the countries that still have high fertility rates, most of the children don’t even go to secondary school. So the “extra” people in Africa (or South Asia or wherever) are not going to fill the bill, even if the Western nations could be convinced to shrug off their current xenophobia and stop trying to seal their borders.
Instead, what the low fertility countries will need is more educated workers. For that, women willing to pop out babies is not enough. You need parents who can afford to bring children up and educate them. It has become outrageously expensive to rear and educate children to a university level. Two incomes are required to pay the freight for bringing even one child to that point, never mind the two children needed for a society to stay at replacement rate. It takes money, but it also takes time.
In this one, the black line is equality with men. So, if you are reading that, in every EU state, women enroll in higher education in equal to or greater numbers than men, you have it right.
Employers penalize young women because they anticipate that the time to cultivate children will somehow hurt their bottom line. (Like, maybe she will have to go home after working 9 hours instead of 12.) This conflict lies at the core of the baby bust: parents can’t afford to have a child without a second income, but companies are hostile to working mothers.
So, what happens is that couples put off having children longer and longer, trying to establish the woman’s career before taking the long-lasting financial hit that comes with the mommy track. Otherwise, the women will never realize the value of their education, never mind achieving their dreams.
Importantly, this failure to realize the investment in education hurts nations as much as it hurts families. A substantial number of the developed countries actually have more females than males currently enrolled in tertiary education. The failure to fully include these highly-skilled workers into the economy wastes resources and, thus, reduces national competitiveness. Yet employers are so prejudiced against women that they would rather import educated males from another country than to treat a highly qualified local labor resource fairly.
These are the same guys who will tell you that the “explanation” for why women are paid less and don’t advance is that women have children (as if they are actually blaming the women for making this choice). I will never understand why people can’t see that if having children is the accepted “explanation” for poor career prospects, the obvious solution will eventually be not to have them—or to put having them off until it’s too late.
What about the other idea? You know: “Oh well, no big deal. We’ll make it up with higher productivity.” People are already working 24/7/365, checking their email before they throw back the sheets in the morning and writing reports on the weekends. These folks are so “productive” we can legitimately question their clarity of thought.
People working harder is not the solution. Instead, this higher productivity is supposed to come from the all-purpose, present-day panacea, “technology.” Yeah, so better machines and super software may help maintain GDP, but such innovations do nothing for the young couple who still needs two pay checks to have a child they can bring up to run the machines, interpret the data, and so on. “Productivity” is a solution for companies, not families.
Well, so this is where some uninformed person writing in the comments will always say something like, “So maybe we just don’t need that many people because the machines can do the work instead. Maybe it’s ok to shrink the population. It will help the environment.”
Women’s Economic Opportunity (a composite measure designed by the Economist) tracks directly with national competitiveness (a composite from the World Economic Forum). This is true because national competitiveness is a measure that reflects how well a country uses its resources. Failing to include half your population–especially the more educated half–is a hugely inefficient use of resources.
The Econ 101 analysis really shows its limits here. The impact of the birth dearth will reverberate through the economy in many other ways besides shrinking the labor supply. It will challenge markets like nothing ever has. And it will affect the quality of life for everyone.
As I explained in a speech at the UN just two weeks ago, the coming change in the age structure will create dramatic shifts in family dynamics and purchase behavior. In some countries, like Germany, the population will morph over the next ten years into a place where most of the population will be past retirement age. The aged dependency ratio will rise to a precarious level.
The easy answers are on the tip of the tongue, right? Raise the retirement age or teach all the old folks to be entrepreneurs. But, actually, the bulk of the older cohort will be moving toward that phase of life where they can’t really even fend for themselves any more. (The peak of the Baby Boom is between 60 and 62 today. In ten years, they will be in their early 70s and the first half of the Boomers will be closing in on 80.) Mobility becomes problematic and so does memory. What were once routine physical or mental tasks present huge challenges.
Taking care of the aged makes raising children look like. . . well, child’s play. An older person’s needs are often just as great, but their larger size and remembered independence can make them very difficult to contain or even to assist. It’s a nonstop nightmare and can go on for decades.
There will be an enormous population stretching from retirement age up to their 80s and 90s. This huge cohort will have to depend on an age group that is much smaller, not only to pay wages into the system, but to run to the emergency room when they fall, refill their prescriptions, and keep them from wandering into the street. The I-don’t-know-what-I’m-talking-about answer to this problem is (Eureka!) robots. I’m sorry, folks, but robots are not to a point where they can responsibly watch a person with dementia who is determined to drive. This problem will be upon us too soon for that.
Here is the age structure of Yemen. Most very poor and conflict-plagued sites look like this. The women usually have few rights, no contraception, and suffer a high level of violence. Their powerlessness, which manifests in super high fertility rates, feeds the cycle of poverty and violence, which then further emphasizes this bottom-heavy pyramid by killing people off in young adulthood. So don’t even think about some Handmaid’s Tale solution to the baby bust.
The labor supply will then shrink even more because someone (probably the women) will have to quit work to take care of, oh maybe four elderly people at once (your parents and your partners’). So, it will be about half of the smaller cohort who will actually be working. And Grandma’s pension (much smaller than Grandpa’s though she will live longer) isn’t going to cover her costs. Men, you think you feel pressure to earn now? Wait ten years and check back in.
At that point, you can wave good-bye to the idea of babies. The concept of the “youth market” will be one of those memories you get tired of the old people re-telling. Indeed, consumer markets in general will be turned upside down. Repositioning Pampers as Depends won’t be the half of it.
Inevitably, this combination will reduce consumer spending. It will happen quickly and the decline will be steep. Consumer marketing companies and retailers (even the online ones) will be sucker-punched.
Japan. which has the worst gender inequality in the developed world, also has a fertility rate of 1.42 (a super low rate that actually looks pretty good compared to Singapore at 0.8.) This is what their age structure will look like in 15 years. So, keeping the women down has not helped them avoid this problem.
And then there’s real estate. We have all come to see real estate as the One Sure Thing. Get this: “Don’t buy a house in Germany,” where the fertility rate is low enough to make your eyes water, is already a common joke in the rest of Europe. Young couples will not be nesting in places big enough for children, in part because they won’t have any but also because they can’t afford the houses their parents had. Old people will be unloading their homes under stress to move into nursing facilities and pay for long-term care. All this while retail spaces disappear into a wasteland, not only from consumers moving ever more online, but from the simple tightness in incomes. I don’t see how these factors can fail to push the value of space down.
The logic of the consumer market is, in the final analysis, built on the expectation of a growing population. The big brands, almost 100% penetrated, need households to grow so they can. What happens to the stock prices of those companies who depend on increasing numbers of shoppers buying their everyday products? Oh, yeah. Right. These companies are all supposed to stop making things people need and start inventing apps no one wants.
And what about new construction? What will happen to housing starts as a “leading economic indicator”? This familiar index will be out there where the “youth market” went, I guess.
You get the picture, I hope. The easy answers—immigrants, productivity, even robots—will not address the question. Yet that is what passes for media analysis of what may be the most urgent crisis of our time. Yes, as bad as climate change. And coming faster.
As if this analysis were not injury enough, both Slate and the New York Times add insult by making a bunch of lame sex jokes. Park benches that curve so that couples have to sit closer. Advertising campaigns that encourage young couples to go away for “sexy weekends.” And, for god’s sake, sex education for adolescents that teaches teens to think getting pregnant can be good.
Does anybody really think the solution here is for the women to loosen up and have a little more nookie? Really?
OK, so I get it that the point of departure for both these stories was a bit of fluff about sex ed in Denmark. And stupid little puff pieces, especially with sex jokes, are thought to bring in readers. The offensive part is the way a bunch of equally silly economic observations are shoved in there as if they were informed expertise and pontificated to calm the unwarranted hysteria. This very serious social and economic crisis gets a fluffy, ha-ha half-hearted response because it’s a women’s issue. So, hey, it can’t be serious, can it? And that’s the insult.
If you think your country is exempt, think again. The US, the UK, and France are just below replacement rate, held up for a while by births to immigrants. The UK is already in decline (at 1.9 in the latest CIA Factbook). Will the US and France follow? Almost certainly.
I was reassured to see that neither the Times nor Slate drew the conclusion that women should just stay home and have more babies. Experts are pretty much in agreement that the solution is exactly the opposite: we need to make it easier for women to work—and even to advance in their careers—as well as have families. That’s because the decline stems from the impossibility of having a family and also having a job. And this is a widespread, structural issue that, while it plays out a little differently in each country, is fundamentally the same everywhere.
In some countries, like Italy, the pattern is for both labor force participation rates and fertility rates to be low. That’s because the situation in the workplace is just that bad. Women are forced to make a choice between having a job and having children. So, half of them stay at work and have no kids. But the other half does not then have twice as many children to make up for the ones their working sisters gave up. To do that, these stay-at-home moms would have to have four children each. Forget it. It’s not going to happen. It’s too expensive.
But what about Denmark? They have a high female labor participation rate and all that good Scandinavian daycare and maternity leave. Why is their fertility tanking? Well, because the whole daycare business is just a symptom of a darker issue that Scandinavia shares with the rest of us. Employers actually do not pay or promote mothers equally, are constantly demeaning and blocking them, throughout their careers, even when the children are old enough to go to school. By the time the kids have left home, Mom has been left behind, long ago penalized for having taken the leave or used the flex time or worked from home or whatever. As I wrote for the World Economic Forum, the presumption that what women are supposed to do is have children is brought to bear as a prejudice against every person born with a womb. And then they wonder why there are no babies.
Continuing to scoff at this problem, making dumb sex jokes about it or proposing half-baked solutions is not going to make it go away. For whatever reason, the pundits seem to think relying on vague future technologies and immigrants who don’t exist (or even building robots to empty bed pans) is better than simply creating a fair and humane workplace.