In Eastern Europe, fertility has been below replacement rate for a generation already. (Click to see bigger image.)
As with all the benefits that come from closing the gender gap, the second good reason can be stated in both positive and negative terms. You can say “maintain growth.” Or you can say “avoid a total economic train wreck.” Why? Because the second reason is all about fertility decline in the industrialized countries–and the implications of this trend are potentially devastating. The solution is not to send women back to the kitchen, but to reform the workplace.
You see, the world economy is set up on the supposition that growth must be maintained. It is certainly possible to question whether we should be chasing growth (and we really must think more carefully about where that ends), but, under the present ground rules, ever-increasing value is the ultimate measure on which everything economic stands or falls. Whether you look at company performance or pension plans, the fundamental underpinning to this way of thinking is that the population (the market) is growing. You can seek more markets elsewhere–which is what drives globalization–but in the end, there have to be more people, one way or the other.
We need ever more consumers to purchase goods or we need ever more families who will buy houses or we need ever more workers to pay for pensions. Otherwise, companies can’t attract capital, the housing market collapses, or social support services go bust. It’s unfortunate that previous generations set things up this way, but there you have it.
Most of us have been droning along for decades now, thinking that population is growing too fast. The big bugaboo for years has been that we have too many people and so we are at risk of drowning in our own refuse. But, actually, while we were marching along with this assumption in mind, a new trend cropped up, with eerie suddenness, all over the world, practically at once. Population growth is going away.
Fertility is dropping rapidly everywhere, to a point where populations are actually contracting in some regions. The fertility rate reflects the long game: it is the average number of children females in a given place have during their lives. It is not a measure that can be characterized as a sudden or temporary dip and its trend cannot easily be reversed. To keep the numbers in a population stable, you need a fertility rate of about 2.1–that is each woman must replace herself and her partner, with a little extra overall to account for risk. At 1.8 or below, a population is clearly in decline. Much below that for very long and you can’t recover. Once babies are not born, you can’t reclaim them and if there are ever-shrinking numbers of potential parents, the whole situation starts to make a horrible sucking noise.
As of 2014 figures, 69 countries worldwide have fertility rates below 1.8, most of them in Europe. Indeed, the European Union average fertility rate is 1.55. The lowest numbers in Europe are in the eastern (Romania, Ukraine) or southern (Italy, Greece) areas. There are a few outstanding examples among the most prosperous Western European countries, such as Germany, with a 2014 fertility rate of 1.43 (a Danish friend said to me: “Yeah, yeah, we all know it: don’t buy real estate in Germany”). The Scandinavian countries are slightly better, between 1.75 and 1.85. The UK is hanging in at about replacement rate, mostly because there is a large immigrant population with higher birth rates (but this, too, is changing).
The East Asian outlook is the most dire: Japan (1.3), Taiwan (1.11), Hong Kong (1.17), South Korea (1.25), and Singapore at the very bottom (0.8). The US, like the UK, is maintaining replacement so far, but Australia looks bleak. Canada’s fertility has been dropping very quickly for the past five years (now at 1.61), but they have been well below replacement since at least the 1980s.
The blue line is the number of workers Poland will have if nothing is done to include women. Labor supply alone does not determine growth, but this is a very scary line. The middle line is how many more workers they would have if the female labor force participation rate began to converge with men’s. The top line is what would happen if females began working the same number of hours as well.
When you reach the bottom of the nation lists–where fertility is 1.50 or lower–the pattern is dominated by Eastern Europe. These countries have been in steep decline for a long time. Several also have outmigration issues. Most have a labor supply outlook that looks like the graph for Poland on the left, where the decline in labor is set to drag substantially on future economic growth. And, all could significantly mitigate against the trend of a declining labor force if they had more women in the workplace, as the OECD forecast depicted here suggests. So, as I said, you can argue for closing the gender gap in order to “maintain growth” or to “avoid disaster.” It’s just a matter of how you want to spin it.
Like Poland, all the Eastern European countries in the table below have low fertility rates. You can see in the first column that they also have low female labor force participation rates (for an industrialized country, you are much more likely to see a number like 70% or even 75%, so 40% to 50% is very low). I have put two measures for equality of compensation in the next two columns. These countries pay women an average of 60%-ish what they pay men, no matter how you measure it.
You might speculate that Eastern European women are not as qualified as the men. But take a look at the ratio of female to male enrollment in tertiary education. Women are far more likely to be educated than men. (If, for instance, women index at 130 compared to men, it means women are 30% more likely to be in college or similar upper level education.) The women are also quite a bit more likely to be in professional and technical jobs–in some cases, more than twice as likely (index 200 or more). However, notice that, despite their better preparation and propensity to be in skilled employment, women are far less likely to be in leadership positions (this measure covers government as well as private sector positions). In sum, despite better training and experience, women are less often employed, are paid less when they are (even for the same job), and do not have the same chances for advancement, as compared to men.
You’ve heard it a thousand times: the “explanation” for this inequality is that the women “choose” to have children, thus allegedly volunteering to put themselves at a disadvantage in the workplace. We might flip that self-justifying notion around and say that the workplaces in these countries are so unfriendly to families that women are forced to choose between setting aside all their training to have children or giving up family to pursue a career.
On a macro level, this forced choice results in both low fertility and low labor force participation. Please realize that, in these circumstances–where only 50% of the women work and the other 50% must have all the children–each non-working mother must have four children in order to replace the population. Well, how often does that happen? You can answer, I’m sure: not often. That’s why labor participation and the fertility rate suffer.
Yet we all know these family-hostile working circumstances are present, one way or another, most places. The situation is perhaps not as pronounced in the US or the UK as in Eastern Europe, but the women are sidelined on the basis of child-rearing in those countries, too–and it is reflected in their lower pay and poorer prospects. By making it difficult for mothers to work and penalizing all women just because they can have children, employers are creating the phenomenon of the “aging population”–in which the demographics shift from a situation where most of the people are young to one in which most of them are old.
People age inevitably, but populations do not. In the absence of plague or war, the only reason a population becomes disproportionately old is that women have fewer children.
Aging populations put a severe strain on economies because of the change in the dependency ratio