At the root of the constellation of problems discussed under the rubric of the "Global Aging Crisis" is another demographic phenomenon: "The Birth Dearth."
Briefly put, this is where we are as a species in the year 2000: Never have birth rates fallen so far, so fast, so low, for so long, in so many places, all around the world.
In 1998 there were 61 countries that had fertility rates below the "Replacement Rate" of 2.1 children per woman, required to keep a population from falling over time, absent immigration. The combined population of those countries (2.6 billion) amounted to 44 per cent of the global total. Another 34 countries, with almost a billion people, are now approaching the "Below Replacement" threshold, bringing about 60% of the global population to a demographic realm barely considered relevant until the last quarter of a century.
How does this relate to the aging crisis? One specific way concerns pension financing. It is sometimes said that "pay-as-you-go" retirement plans are "Ponzi schemes." Perhaps so, but life itself is a Ponzi scheme. Thus, typically, parents take care of babies. When those babies become adults they provide personal support for their own children, and public support for their aged parents, through payroll contributions to government. In one form or another that chain has existed through all of human history. Problems arise not from the nature of the human chain of life, but when one of the links is suddenly weakened. If births drop dramatically, then, as the low- fertility cohort matures over time, there will be fewer working age people to pay the costs for the elderly. This is happening now, in ways that no demographer would have imagined possible until quite recently.
But the demographic changes now in motion are so remarkable and so counter-intuitive that it would be a serious mistake to consider their effects solely in relation to pension planning. The potential implications--environmental, economic, cultural, geo-political and personal--are monumental, for good or for ill, quite possibly for both.
What is happening can be best seen in World Population Prospects: The 1998 Revision, the excellent reference book published by the United Nations, from which data used here is drawn.
Of most immediate interest to the United States are the rates concerning the "More Developed Regions," which include Europe, Japan and the United States. In the 1950-55 time period this region had a Total Fertility Rate (TFR) of2.7 children per women. By 1975-1980 the TFR had fallen to 1.9 children per woman, about 10% below the replacement level of 2.1 children. By the year 2000, in apparent free-fall, the TFR for the More Developed Regions was 1.6, roughly 25% below the replacement rate. The proportion of persons over aged 65 in these nations was 8% in 1950,14% in 2000, and projected to be 26% by 2050.
In Europe, Japan and Russia the TFR is now 1.4 children per woman, about a third below the replacement rate. Consider some specific countries. The dubious honor of the world's lowest fertility rate now goes to Spain with 1.15 children per woman, barely edging out Romania, the Czech Republic and Italy all with rates below 1.20. The Italian demographer Antonio Golini looks at these European numbers and describes the situation in one word, "unsustainable."
American rates, substantially higher than Europe's, have nonetheless been below replacement for 28 consecutive years, averaging about 1.9 children per woman over that time. At their trough the American TFR reached 1.7 in the mid-1970s. There was an up-tick in the late 1980s taking rates almost to the 2.1 level. Since then the TFR has dropped to about 2.0 and the National Center for Health Statistics has taken note of "the generally downward trend observed since early 1991."
Notwithstanding a TFR slightly below the replacement level, the U .S. will continue to grow, in large measure because of the arrival of about one million immigrants each year. Still, because there is a mismatch between the large "Baby Boom" cohorts and the "Birth Dearth" cohorts, America faces a pension shortfall in the out-years, which is substantial, but manageable.
The situation in Europe and Japan is much more serious. Demographer Samuel Preston estimates that even if European fertility rates would return to replacement level, there would be a 25% loss of total population by the year 2060.
Similar sorts of falling trends, from a higher base, are also apparent in the "Less Developed Countries" (LDC). The LDC fertility rate in 1965- 70 was 6.0 children per woman. In 2000 the figure is 2.9, and in many countries falling more quickly than anything seen in prior demographic history. The imbalance between the high fertility cohorts and the low fertility cohorts in the LDCs will yield problems similar to those faced now by the More Developed Countries, only delayed by a few decades.
There is some confusion regarding the present coexistence between the "population explosion" and the "birth dearth." Two powerful trends seem to be at war. They can co-exist, but only for a while. The "momentum effect" of the high fertility rates from earlier decades will likely yield a global population growing from 6 billion people to about 8 billion people with most of the growth occurring during the first few decades of the 21st century. But then the momentum effect of the birth dearth swings into play, slamming on the brakes, halting that growth, and most probably reversing it.
It is hard to grasp the full magnitude of the current situation. The Birth Dearth, like the population explosion, proceeds exponentially. In theory -only in theory -an on-going global TFR at Below Replacement levels does not yield ZPG. It yields ZP. Already, Japanese demographers are publicly speculating about which year in the Third Millennium the last Japanese baby will be born. The late Herbert Stein wisely noted that an unsustainable trend will not be sustained. Surely, that will be the case with the Birth Dearth. But when it plays out, we will be living in a very different world.
Perhaps the most important aspect of the new fertility patterns is this: We are in uncharted waters. The world has never seen what we are about to see. There are plausibly positive effects and plausibly negative effects to flow from the ongoing Birth Dearth. How it works out, no one knows. But, clearly, we would be well advised to pay attention now, rather than later.
Ben J. Wattenberg is a senior fellow at AEI.
