A new study claims to have found “no evidence” that ageing or declining populations are linked to worse economic or social outcomes and said that fears over these phenomena are often based on oversimplified economic understanding.
Examining global data and using nine different indices of socio-economic performance, the researchers concluded that long-term prosperity is less dependent on how many people societies have than on how societies invest in education, skills, and technology.
According to researchers Corey Bradshaw and Shana McDermott, countries with low or negative population growth perform better on average across all indicators.
The nine indices implemented for the research were domestic comprehensive wealth; income equality; research and development expenditure; patent applications; human capital; corruption perception index; freedom; planetary pressure-adjusted Human Development Index; and healthy life expectancy at birth.
“Concerns about human population decline are often rooted in fears of economic slowdown or collapse,” the introduction to the study reads.
Typical arguments, according to the authors, make the case that declining populations result in fewer working-age adults, which sees a fall in productivity, economic growth, and ultimately living standards.
“This is typically framed through gross domestic product, even though that metric is a blunt measure of economic health and does not fully capture national wealth or well-being,” it reads.
Proponents’ concern is that diminished GDP would lead to poorer innovation, while also straining public finances and lower living standards. They also suggest that older populations have different spending patterns than youthful ones, which may detrimentally impact domestic consumption and further slow growth.
The authors, acknowledging that population size and composition can influence the economy, point to other factors highlighted by some classic economic growth models that also play an important role, such as “the amount of capital and knowledge each person possesses rather than sheer headcount,” and “an assumed rate of technological progress”.
Similarly, the authors state that macroeconomic research indicates that long-term economic output depends “less on population size and more on capital per person (both physical and human) and technological progress”.
“Yet these nuances are often lost when the ideas are picked up in policy debates or the media, where population growth is framed as an axiomatic engine of prosperity or as a justification for certain political actions or movements,” the authors write, noting that “policy reaction has been notable — 55 countries had instituted explicit measures to raise birth rates as of 2019”.
Following their analysis of the national data at a global scale across the different indices, the researchers found that slower or negative population growth is not “inherently harmful” to economic performance, productivity, or any of the other factors dependent upon those metrics, such as the well-being of citizens.
Older populations were found to correlate with better outcomes across a number of domains, the results detailing that most countries with relatively older populations are those with the highest national per-capita wealth on average. Similarly, all three productivity indices (R&D expenditure; per-capita patent applications; and human capital index) revealed a “strong positive relationship to the dependency ratio”.
‘Within-country time series’ (a chronological sequence of data points collected over time for a single country) indicated that for eight of the nine main responses, more than half of the countries considered had better outcomes as their populations aged.
“Only the corruption perception index had a slight majority (54%) of countries where there was a worse outcome with an increasingly older demographic,” the authors state.
In discussing the results of their research, they state that their findings contribute to the “mounting evidence” that the positives of smaller populations outweigh the negatives, “in sharp contrast to the unsubstantiated political rhetoric of ‘baby busts’ and an ensuing economic Armageddon”.
Investment in the health, training, and education of older, experienced workers in particular increases human capital, the report states, which results in a more productive workforce.
The only mention given to the role of immigration in ageing societies comes when the authors attribute labour shortages not to a lack of suitable workers, but to inadequate immigration policies that “limit or deny the movement of capable, working-age people from elsewhere to fill local demand”.
“Indeed, none of the existing credible population projections predicts a decline in the global population,” they write.
In conclusion, it’s acknowledged that changing age structures will “inevitably” present fiscal challenges, but adds that there are solutions to those challenges such as educational investment targeted to expand the workforce, delaying retirement age and reworking pension schemes.
Necessary adjustments are “entirely realistic in the low-corruption, high rule-of-law countries” managing greying populations, the authors write.
“These results suggest that rather than treating demographic change as a threat, policymakers and the public would benefit from focusing on how to adapt economic and social systems to thrive under different population trajectories,” Bradshaw and McDermott note in conclusion.
The paper can be accessed here.