Dhruv Moondra
December 1 2024

The world is facing a demographic catastrophe. Never before has there been so many countries that not only fail to meet the population replacement level but fall short by extreme levels. Countries like South Korea, Japan and pretty much every developed country are grappling with this crisis and they are coming up with the most desperate strategies to reverse the trend. What does this mean for the world’s future, its economy and sustainability? Stay with us to find out more.

Before beginning, we must first understand why the global birth rate is on the decline. You see, ever since the 1950s the fertility rate has been on a continuous decline over fears that there will be a mass starvation and a dying planet due to overpopulation. These declining numbers were attributed mainly due to increased female education and participation in the workforce which prompted them to delay or forgo having children to focus on their careers. Another major factor that contributed to this trend was the shift towards urbanisation. This forced people to have smaller families due to higher living costs as well as the expectation to pursue higher living standards, making the idea of nuclear families more and more acceptable. 

While nowadays these factors are very much relevant, there are many more added concerns that make childbirth highly unattractive. The biggest of them all is rising costs: the costs of housing, healthcare and childcare has significantly increased due to the combination of a ballooning city population together with land scarcity driving up prices. One notable example today is Taiwan, whose housing prices increase by an average of over 10% annually, while the prices of services like private tutoring and extracurricular activities remain tremendously high. This explains why Taiwan’s birth rate is one of the lowest in the world.

Moving on, apart from the increasing inflationary pressures on raising children, the effect of economic uncertainty in many developed countries also plays a major role in the level of births. In nations like Italy and Japan, the economy has undergone prolonged periods of sluggish growth which has directly contributed to their birth rates being amongst the lowest globally. Additionally, there is also a growing fear about climate change threatening the decision to have kids. Statistics show that one in five female climate scientists are unwilling to have children because of the climate crises. What’s more, the increasing temperature and pollution in our environment is causing infertility since researchers have proven that an increase in monthly temperatures by 1 degree celsius brings down the fertility rate by 1 per cent. 

So what are the implications of this birth crisis?

Economic

For starters, a shrinking workforce is inevitable which will lead to a labour shortage, eventually pushing up wages. This could add to cost push inflation for consumers and reduced competitiveness in international markets owing to diminished profit margins. Furthermore, a reduced labour force would limit the aggregate output that can be produced due to a lack of labour resources, curtailing economic growth. In addition, the declining population/population growth could translate into fewer consumers and therefore lesser domestic demand and economic activity. The problems don’t end there, as the ratio between people of working age and those retired will plummet to two-to-one by 2035. This denotes a skyrocketing burden on social systems and healthcare by the government which will absorb a lot of taxpayers money away from developmental projects, putting a strain on public finances(so tax hikes). 

In fact, this is already happening in many countries. For instance, China, which is also facing a demographic crisis, experienced an annual average increase in healthcare spending of 11% from 2010 to 2020 and in countries like Germany the real wages grew by 3.1% this year despite an economic crisis.  

Social

With increasing life expectancies and decreasing birth rates, the dependency ratio is worsening as members of the workforce have to support more people(retired workforce) which reduces the standard of living as income is divided amongst more individuals. Moreover, a smaller population, especially among the younger generations may lead to social isolation, creating a sense of loneliness and a weakening community cohesion. Another side effect could also be a loss of culture since fewer people carry cultural traditions with them and there are fewer people to celebrate culture with. 

Lastly, society may lack investment in infrastructure and other segments of government spending because of the greater focus on social systems and healthcare, exacerbating the quality of life.

On the contrary, in sectors like education, there can be a more efficient per capita resource allocation, signalling improved education quality as the resources are spent on fewer students, possibly boosting economic growth and job prospects for the population as seen in South Korea. 

Environmental
From the environmental standpoint, since humans are the ones killing the planet, fewer humans would manifestly equate to lesser pollution and destruction of biodiversity. Studies already show that having one fewer child in high income countries can save approximately 58.6 metric tons of carbon emissions annually. Additionally, a lower population would mean reduced pressures on natural habitats and ecosystems allowing lost biodiversity to recover, reversing climate change. These effects have already been proven in Bulgaria whose population decreased 20.1% from 1990 to 2019, resulting in a reduction in greenhouse gas emissions of 44% within that time frame. 

However, there is a risk of per capita consumption increasing since reduced demand for resources due to a lack of consumers can push down prices,incentivising consumption that offsets the environmental gains. Besides, there is also the point of decreased investment in environmental projects because of a lower GDP. Thus climate change may continue to remain strong.