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Falling fertility rates will hit the economy hard [Infographic]

One of the drivers of Australia’s economy and our property markets is our growing population.Australia Economy Concept

We’re growing faster than any other developed country due to a combination of natural population growth (we’re making more babies than there are people dying) and immigration (which is slowing.)

But what will happen as all our Baby Boomers retire?

If we too have many elderly dependents and not enough workers, the burden on economic growth will be difficult to overcome.

Well this could be a global problem according to Visual Capitalist who suggest that total fertility rates, which can be defined as the average number of children born to a woman who survives her reproductive years (aged 15-49), have decreased globally by about half since 1960.

Here’s what they had to say:

 

Global Fertility Rates

Fertility rates start to decline

First, it’s important to address some of the reasons for these falling fertility rates.

In developed nations the introduction of commercially available birth control has played a large role, but this also coincided with several major societal shifts.

Changing religious values, the emancipation of women and their increasing participation in the workforce, and higher costs of childcare and education have all factored into declining fertility rates.

Birthrates wane, economy gains  
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Initially, reduced child dependency rates were actually beneficial to economic growth.

By delaying childbirth, men and women could gain an education before starting a family.

This was important in a shifting labor market where smaller, family-run businesses were in decline and a more skilled and specialised labor force was in demand.

Men and women could also choose to start their careers before having families, while paying more in income taxes and enjoying the benefits of a higher disposable income.

Increased spending power creates demand, which stimulates job growth – and the economy benefits in the short-term.

A global phenomenon

46% of world population is in countries with rates below replacement

Worldwide fertility rates began to fall substantially in the mid-1960s.

While each country has its own underlying causes for this, it is interesting that in developed and developing nations, the downward trend is similar.

Part of this is due to developing countries’ own efforts to rein in their rapidly expanding populations.

In China, the One Child Policy was introduced in 1979, however fertility rates had already dropped significantly prior to this.

India’s government was also active on this front, sterilising an estimated 8.3 million people (mostly men) between 1975 and 1977 as a method of population control.

The age imbalance

So here we are now, with a global fertility rate of just 2.5 – roughly half of what it was 50 years ago. city family urban suburb

Today, 46% of the world’s population lives in countries that are below the average global replacement rate of 2.1 children per woman.

Because these countries (59 to be exact, including BRIC nations Brazil, Russia, and China) are not repopulating quickly enough to sustain their current populations, we are beginning to see a substantial imbalance in the ratio of elderly dependents to working-age people, which will only intensify over the coming decades.

Aging Population Map

By 2100, the U.N. predicts that nearly 30% of the population will be made of people 60 years and older.

Life expectancy also continues to increase steadily, which means those dependents will be living even longer.

Between 2000 and 2015 the average global life expectancy at birth increased by around 5 years, reaching an average of 73.8 years for females and 69.1 years for males.

Economic Reversal

What does this mean for the economy?

As this large ageing population exits the workforce, most of the positive trends that were spurred by declining fertility rates will be reversed, and economic growth will face a significant burden.

Working Age Population

The global increase of elderly dependent populations will have serious economic consequences.

Health care costs for the elderly will strain resources, while the smaller working population will struggle to produce enough income tax revenue to support these rising costs.

It’s likely this will cause spending power to decrease, consumerism to decline, job production to slow – and the economy to stagnate.

Solutions

Immigration has been a source of short-term population sustenance for many nations, including the U.S. and Britain. map world population people

However, aside from obvious societal tensions associated with this strategy, immigrants are often adults themselves when they relocate, meaning they too will be elderly dependents soon.

Several nations are already experiencing the effects of a large proportion of elderly dependents.

Japan, with one-quarter of its total population currently over the age of 65, has been a pioneer in developing technologies, such as robotics, as a solution to ease strained health care resources.

Many countries are restructuring health care programs with long-term solutions in mind, while others are attempting to lower the cost of childcare and education.

Source: Visual Capitalist

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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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