Sunday, February 28, 2016

On the demographic limits to future economic growth

On Thursday the 21st in The Globe and Mail, journalist Konrad Yakabuski had an article published, "Fewer economic miracles in a world with fewer demographic explosions". Drawing particularly on Ruchir Sharma's March/April 2016 Foreign Affairs article "The Demographics of Stagnation".

Ruchir Sharma, the head of emerging markets and global macro at Morgan Stanley Investment Management, warns that policy-makers have been looking in all the wrong places to explain what has become the weakest global economic recovery in postwar history. The causes aren’t high public and private indebtedness, income inequality or overcautious investors, although those factors don’t help. The real problem is a dramatic slowdown in labour market growth rates around the world.

It seems counterintuitive to be worrying about labour market shortages when automation is rendering more and more jobs redundant and unemployment remains at near-record levels in most of Europe. Even the U.S. unemployment rate, which is at an eight-year low of 4.9 per cent, cannot mask the fact that the participation rate (the percentage of working-age Americans in the labour force) is at a four-decade low, leaving millions of potential workers idling on the sidelines.

But by exhaustively tracking population and gross domestic product growth over one-decade periods since 1960, Mr. Sharma comes to a several sobering conclusions. One is that “explosions in the number of workers deserve a great deal of credit for economic miracles.” Another, he writes in an article published this week in Foreign Affairs, is that “a world with fewer fast-growing working-age populations will experience fewer economic miracles.”

Between 1960 and 2005, the expansion of the labour force and rising productivity determined growth rates almost everywhere. During that 45-year period, the global labour force grew at an average annual rate of 1.8 per cent. Since 2005, the rate has slipped to 1.1 per cent and is expected to fall further in all but a few outlying nations (such as Nigeria) as the consequences of a decades-long decline in fertility rates leave even emerging economies facing dwindling influxes of new workers.

[. . .]

“Over the next five years, the working-age population growth rate will likely dip below the 2-per-cent threshold in all the major emerging economies,” Mr. Sharma says. “In Brazil, India, Indonesia and Mexico, it is expected to fall to 1.5 per cent or less. And in China, Poland, Russia and Thailand, the working-age population is expected to shrink.” The most worrying slowdown is China’s, with “dire” implications for the rest of the world. In the past five years, Mr. Sharma notes, China alone accounted for a third of global growth.

This is the sort of scenario that long-time readers of Demography Matters have been forewarned about for some time, thanks to the insights of dear comrade Edward Hugh. The 21st century will be a world, it seems, where human capital, in relative abundance or otherwise, will play a critical role in determining the futures of world economies. Individuals, groups, entire communities or countries relatively well-positioned might well be strong. I suspect that in the coming decades, people with the right skills will prosper. Other regions, though? I can easily see any number of major economies not adapting well. Can Germany, locomotive of the Eurozone, really outlast sustained low fertility? What of China? What of ... ? One can only hope that the robots will come on stream at the right time.

Tuesday, February 16, 2016

Blogroll suggestions, anyone?

What demographics-related blogs would Demography Matters' readership suggest? I will be rebooting the site, and would like to be able to help point readers to new consistent sources of insight in demographic issues.

Wednesday, February 10, 2016

Some thoughts on the origins of low fertility in Germany in reactions to totalitarianism

In Europe, northern and western European countries have relatively high levels of completed fertility, higher than those of southern and eastern European countries. This is a generalization, and this generalization like all others is accurate until it is contradicted. The contradiction in this case comes clearly--and famously--from Germany, as shown in this Eurostat graphic.

This is a trend not concentrated in any one region of Germany. As the below map shows, sustained low fertility is a nation-wide trend.

One might think that fertility in Germany would look more like that in neighbouring western European countries like France and the Netherlands, or northern European countries like Denmark and Sweden. Instead, fertility in Germany has been consistently as low as--or even lower than--fertility in southern Europe. Why?

Back in 2009, I wrote a blog post called "On the contradictions between traditional family structures and high completed fertility in developed countries". In it, I briefly compared France with the former West Germany. Both territories are countries at similar levels of economic development with populations of similar size, yet completed fertility has consistently been stronger in France after the Second World War. Jean-Marie Le Goff's paper "Cohabiting unions in France and West Germany: Transitions to first birth and first marriage", in issue 7.18 of Demographic Research, examines the contrast in depth.

French total fertility rates (TFR) have traditionally been higher, on average by the value 0.3 to 0.7 since 1965 (Council of Europe, 2001). In 1965, the TFR was 2.7 in France and 2.4 in West Germany. In both countries, the TFR decreased drastically until the middle of the seventies and levelled off thereafter. In 1999, the TFR was 1.8 in France and 1.4 in West Germany. Moreover, pronounced differences in nonmarital births between France and West Germany have emerged since the beginning of the eighties. France witnessed a big increase in non-marital fertility rates; from roughly 11% in 1980 they reached 41% in 1999. In West Germany, the increase in non-marital births was less pronounced, from 8% to 18% (Council of Europe, 2001). In most developed countries, an increase in non-marital births occurred simultaneously with an increase in non-marital unions (Kiernan 2001a and b). France appears to follow this pattern, but West Germany constitutes an exceptional case.

Women in France, Le Goff argues, have access to a whole variety of family structures, from the traditional nuclear marriage family to a family marked by cohabitation to single motherhood, with a relatively long tradition of recognizing the responsibilities of parents towards their children regardless of their legal status, with the idea of mothers working outside of the home not only being accepted but supported by any number subsidies to parents to affordable and accessible day care. In West Germany, social and policy norms tend to support traditional family structures. The result? In France, people are childbearing age are split between two sectors, one defined by marriage relationships and the other defined by cohabitation relationships. On the other side of the Rhine, people of childbearing age are split between people who have children and people who don't. Katja Köppen's Second births in Western Germany and France" (Demographic Research 14.14) further points out that whereas Frenchwomen seem to enjoy an institutional structure that encourages motherhood and there isn't a contradiction between high levels of education--hence employment--and fertility, there is such a contradiction in western Germany, with government spending priorities in the latter country being directed towards the support of traditional families. It's not too much of a surprise, then, that the German Federal Statistics Office reported that the proportions of childless women were rising, particularly in the former West Germany.

The number of childless women is increasing in Germany. As reported by the Federal Statistical Office (Destatis), in 2008 21% of the women aged 40 to 44 years had not given birth to a child. By contrast, 16% of the women who were ten years older (birth cohorts from 1954 to 1958) and only 12% of the women who were 20 years older (birth cohorts from 1944 to 1948) were childless. A share of 26% of the women aged between 35 and 39 years had no children yet in 2008. However, the proportion of childless women will still decline in this age group.These and more 2008 microcensus core results regarding childlessness and births in Germany were announced today by Roderich Egeler, President of the Federal Statistical Office, at a press conference in Berlin.In the eastern part of Germany, the number of childless women is by far smaller than in western Germany. While in the ‘old’ Länder, 16% of the women aged 40 to 75 years have no children, their share amounts to only 8% in the ‘new’ Länder. Regarding younger women, too, the difference is considerable. In the ‘old’ Länder, a share of 28% of the women aged between 35 and 39 years (birth cohorts from 1969 to 1973) have no children yet, while the relevant proportion amounts to not more than 16% in the ‘new’ Länder.

In the former East Germany, where in the Communist era different and decidedly non-traditional norms of family prevailed, rates of fertility are now noticeably higher than in the West.

Why was this the case in the first place? Why was West German family policy so much more conservative than in neighbouring western and northern European countries? Why does Germany not look more like France, or perhaps more plausibly given cultural similarities the Netherlands or even Nordic countries? In West Germany, as Toshihiko Hara suggests in the paper "Fertility Trend and Family Policies in Germany, Austria, Switzerland and the Netherlands", a reaction to the intrusive policies of the Nazis is responsible.

In Germany, any arguments and policies to promote births are tabooed still today due to nightmare memories about pro-natalistic policies which accompanied racial discrimination under the Nazi regime. For this reason, the basic stand point for family policy is that the government should be responsible for family according to constitutional prescription but act only in a subsidiary function to marriage and family and avoid any intervention in individual affairs. Thus, the family policies in former West Germany, historically have been designed to encourage and sustain the traditional, two parent family with an "at- home" mother caring for children, through financial measures to realize an equitable distribution of the burden of maintaining a family. However, with the social changes in the 1970s, i.e. legalization of abortion, the reform of divorce law, improvement of juristic status of extra-marital child, the family policy has become increasingly concerned with various family models. Then, since the 1980s, the weight of the family policy is shifting to the support for labor participation of mothers and for improving the child rearing environment, through the extended three-year parental leave with the child-rearing allowance, an acknowledgement of the rearing period in pension law and so on.

In contrast to former West Germany, the government in former East Germany performed a series of pro-natalistic policy measures from 1976 under the slogan of " build up the Socialist Nation" and they realized even a short term rise of fertility. The major purpose of this policy was to promote labor participation of women (and fertility) for expanding of labor supply source (in future) . In fact, they were supportive of labor policy rather than family policy. They have realized the high level of job participation in married women and the developed child care facilities. On the other side, they have increased the extra-marital births through the preferential dwelling support for single mothers and decreased the mean age of first marriage and birth, by giving the priority to married mother for using the child care center. These legacies remains still today in former East Germany long after unification.

A reaction, in West Germany, to the totalitarian motives of East Germany in deeply involving itself in family formation also seems to have played a role in dissuading West Germany policymakers from making institutional changes to the traditional social conservatism of the German welfare state. The eventual result of this sustained commitment to traditional family structures, as described in Jürgen Dorbritz's 2008 "Germany: Family diversity with low actual and desired fertility" (Demographic Research 19.17), was to accentuate the shift in Germany towards low fertility, with one notable theme being people who--given different policies--might have opted to form families with children in non-traditional families opting not to have children at all.

This anti-totalitarian reaction is understandable. I can readily believe that in democratic West Germany immediately after the horrors of the Second World War, the depoliticization of intimate life was a high priority. The sharp drop in fertility in Germany relative to its regional peers may well have been overdetermined. It should go without saying that keeping the reaction of the post-war years well after the reaction was useful has not been at all helpful. This can conceivably change over time, though, but there is still going to be a demographic deficit in the numbers of people of childbearing age in Germany, a consequence of the below-replacement fertility that has prevailed since the early 1970s. This will echo indefinitely, if and until we get sustained increases in completed fertility. Thus does history echo.

Saturday, February 06, 2016

"How the world went from 170 million people to 7.3 billion, in one map"

This video, publicized by Vox, does a nice job illustrating the general contours of world population growth in the past two millennia. I might find some issues with the video--population growth in the pre-Columbian Americas may be substantially underestimated--but the broad outline is correct