Remember that canon of alarmist literature from decades back about how the world’s population was spiraling out of control? There was the 1968 best-seller The Population Bomb and, perhaps most infamously, a 1972 report commissioned by the Club of Rome think tank titled The Limits to Growth. LTG—as it is called by the cognoscenti—posited that the world’s population was going to explode and then crash, essentially dooming the planet.
Of course, this notion of inevitable overpopulation went from wide acceptance—and having significant influence on global policymakers—to being the object of skepticism and now ridicule as annual global population growth has fallen by half over the past 50 years to around 1%, and, in a number of high-profile countries, turned negative.
The implications of this Depopulation Bomb are all over the map, but for those of us concerned with money and markets, the most salient issue is whether slow or no population growth will tank economic growth. Inquiring minds from Beijing to Berlin want to know.
Two factors drive a country’s population: There’s the natural increase (or decrease) in population, which is births minus deaths. Demographers say that 2.1 births per woman—the replacement fertility rate—is necessary to ensure a stable population. The other factor is net immigration, which, when combined with natural changes, equates to total population change.
According to William Frey, senior fellow at the Brookings Institution and author of Diversity Explosion (lots of bombs and explosions in this field), the U.S. averaged an annual natural increase of 1.5 million from 2000 to 2017, while the number of immigrants averaged 934,000. (The Census Bureau tries to count both legal and undocumented immigrants.) That produced an annual average population growth of some 2.4 million, a rate between 0.75% and 1%. Thereafter, though, population growth began to plummet due to restrictions on immigration and then Covid (which both reduced births and increased deaths). In the year ended June 30, 2021, the natural increase was only 146,000 people, plus only 376,000 immigrants, giving us a minuscule 0.16% population growth rate.
In a Brookings report out this past Thursday, Frey notes that now, more than two years later, new census data show the U.S. population growth has bounced back, but tepidly. For the 12 months ended last June, the U.S. population grew by some 1.6 million, or 0.49%, with 1.1 million coming from immigration and another 504,000 from natural growth—with the latter still down a shocking 73% from a peak of 1,879,000 in 2006-07.
“My view is that this decade, from 2020 to 2030, total population growth in the U.S. will be around 4.1%, which would be the lowest decade ever,” or at least since the first census in 1790, Frey tells Barron’s. “Even lower than the 7.3% total in the 1930s, when we had the Great Depression.”
That 4.1%, he says, will occur with normalized annual immigration levels of between 850,000 and 980,000 people. A scenario with fewer immigrants of between 350,000 and 600,000 annually—which occurred during the latter years of the Trump presidency—would cause the U.S. population to begin to decline in four or five decades.
Ah, immigration. Such a hot-button hot potato right now, the migrant mess at the Mexican border being Exhibit A. That’s certainly problematic in the near term, but Frey and others argue it may have even greater negative consequences down the road if it produces a backlash against immigration just when we need it the most.
Why so, I ask Frey? “Because population growth, in this case from immigration, keeps the labor force from declining,” he says. Increased immigration slows the nation’s aging population trajectory and increases younger members of the labor force needed to support more retirees and older folks.
Now consider China, where the population is cratering as a result of its misguided and now-abandoned one-child policy, implemented at least in part thanks to “population bomb” hysteria. (Also, significantly, the immigration of non-Chinese to China is essentially nonexistent.)
You may have seen this from a striking recent article in The Wall Street Journal: “With the number of babies in free fall—fewer than 10 million were born in 2022, compared with around 16 million in 2012—China is headed toward a demographic collapse. China’s population, now around 1.4 billion, is likely to drop to just around half a billion by 2100, according to some projections.” Now, it seems, China is discovering that the only thing harder than limiting child births is increasing them.
So why don’t young people want to have children so much these days? That’s one of the big questions of our time. Some of it has to be economic. Fifty years ago in Western societies, one income per household was sufficient for a family, and even provided for upward mobility. Today, two incomes seem to be required to achieve the same, making raising a brood that much more difficult. Anxiety and social issues must contribute too, although that’s even more difficult to quantify. Clearly, though, there is something in the global air. To wit, from that Journal article:
“Molly Chen, 28 years old, said the demands of caring for aging relatives and her job as an exhibition designer in Shenzhen leave no room for kids or a husband. All she wants to do in her free moments is read or scroll through pet videos.”
It’s worth noting that population growth by itself doesn’t necessarily confer economic growth. Countries with some of the highest annual population growth rates include Niger, Uganda, and Angola, which have mixed track records when it comes to growing their economies due to any number of factors, including political instability and a lack of infrastructure, technology and investment.
On the other hand, countries like Italy, Spain, and Portugal have managed to grow with decreasing birthrates, albeit slowly, with immigration partly or completely offsetting birthrate declines. Even Japan, the poster child of declining populations (like China, it also has essentially no immigration), has eked out some sporadic growth over the past 13 years.
“Economies can grow even if the population is not growing,” says Wes Peterson, professor of agricultural economics at the University of Nebraska. “We could still have productivity gains through technology that would lead to greater output per person as a result of innovation.” But Peterson says it’s tough to rely on that course and population growth is a better path.
Here’s the bottom line: 1) We don’t have to have population growth to achieve economic growth, but to do so would be like trying to grow with one arm tied behind our backs. 2) We are going to need a normalized influx of immigrants to make this happen, and we’re lucky to have that as a historical and cultural option and that people still very much want to come here. And 3) What we don’t need is a knee-jerk world-is-coming-to-an-end response to declining birthrates, a la China proposing something wacky like mandating that families had to have four children.
As for alarmist literature on declining populations, at least one work has already been published: The Birth Dearth, back in 1987, which, while prescient in some respects, also included some dire predictions that haven’t come to pass.
Write to Andy Serwer at [email protected]
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