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A public policy blog from AEI
Make room! The current world population of roughly 7.2 billion will rise to 9.6 billion by 2050 and then to 10.9 billion in 2100, according to the most recent United Nations projections.
Wait, don’t make room. Demographer Sanjeev Sanyal of Deutsche Bank thinks the UN is way off. His calculations find the world’s overall fertility rate falling to the replacement rate in 2025, although global population will continue to expand thanks in part to rising longevity, for another few decades. Then comes the Big Shrink. Sanyal:
We forecast that world population will peak around 2055 at 8.7 billion and will then decline to 8.0 billion by 2100. In other words, our forecasts suggest that world population will peak at least half a century sooner than the UN expects and that by 2100, and that level will be 2.8 billion below the UN’s prediction. This is obviously a radically different view of the world.
The missing 3 billion. Below are two charts, the first with the UN’s projections, the second with Deutsche Bank’s:
In a recent DB report, Sanyal says even a cursory glance at UN projections reveals oddities. For instance, the UN projects Nigeria’s population to soar to nearly 1 billion by 2100 versus 160 million today. But that assumes Nigeria’s fertility rate stays locked at current levels even though other emerging countries like Iran and Bangladesh have experienced large declines in their once-high fertility rates. Sanyal sees Nigeria’s population growing only half as much.
Or look at the United States. The UN projects the US population to rise to 462 million from 314 million today, despite a fertility rate already below replacement. Can immigration really make up the difference? Sanyal points to a recent study by Pew Research, which found that the US birth rate fell to a record low in 2011 with immigrant women experiencing the sharpest declines. And of course most immigrants are already coming from countries with low and falling birth rates.
Also strange: the UN projects a huge population increase while at the same time also projecting the share of the world’s population living in cities to rise from today’s 52% to over 67% by 2050. Urbanization is the “the strongest contraceptive known to man,” the researcher says, and along with rising per capita income and female literacy should cause a large decline in the world’s birth rates.
Sanyal outlines some major societal and economic implications:
1. Aging societies will have to adjust soon to the fact that it is not possible for economies to sustain a retirement age in the early sixties. With people routinely living well into their eighties, it will soon be common for people to extend their working life into their mid-seventies … Societies that cannot make the socio-political adjustment to this new reality will struggle in the 21st century and will unduly burden the shrinking base of young people entering the workforce.
2. An aging does not imply a boom in retirement homes and an ever expanding medical sector. Yes, there will be more people in their sixties and seventies, but they will largely be fit and working. While there will be some increase in the medical support needed to keep this cohort going, it should not be blindly extrapolated from the past. Meanwhile, as anyone with children will know, falling birth rates will reduce demand for medical care from a high maintenance segment of the population. This implies a change in the mix of medical care rather than a spiraling increase in per capita medical support .
Thus, the main impact of aging will be the extension of active, working adulthood rather than a situation where large portions of the population are living is a prolonged geriatric twilight. In turn, this will impact consumption patterns, urban real estate and even the education system. For instance, university systems will have to be reoriented to deal with middle-aged workers who need to update their skills over a 50- year career or perhaps want to completely change their profession. In contrast, the intake of younger cohorts will ease off due to the shrinking pipeline coming out of secondary schools. This implies a big change in the way education systems are set up.
3. The global demographic shift is not a developed country issue since the shift has been faster for many emerging markets. Russia already has a shrinking workforce and many Latin American countries, contrary to popular belief, have TFRs that are at or below the replacement rate. … The rapid shrinking of China’s workforce from 2020, which is now unavoidable, will have a major impact on the dynamics of the world economy (even allowing for some older workers working longer). As argued in an earlier report in this series, China will transform itself from being the “factory to the world” to becoming the “investor to the world.” This will create opportunities for younger emerging markets like Indonesia, Philippines and, most importantly, India to enter market segments being vacated by China. In turn, they will be followed by even younger countries like Nigeria. Nonetheless, it should be emphasized that demographics alone is not sufficient to generate growth and cannot substitute for sensible policy leadership.
4. Some developed countries may do surprisingly well. The one developed country that stands out in our model is the United States. Even though our population growth projections are more moderate than those of the UN, the US can be expected to continue to enjoy an expanding working-age population till the 2050s (i.e. longer than many emerging economies). Germany’s low birth rate implies a declining population but we feel that it will be much more successful in absorbing immigrants than anticipated by the UN. Thus, its demographic trajectory may not be quite as dire as generally believed.
The geoeconomic and geopolitical ramifications are vast. Shrinking, aging populations are likely bad news for economic growth and innovation. And the Deutsche Bank report is even gloomier than Jonathan Last’s great book on the topic, What to Expect When No One’s Expecting: America’s Coming Demographic Disaster. The subjects of fertility, aging, and population growth are worthy ones for US policymakers.
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