Population Crash; Economic Crash, By Mrs Vera West
Just how bad will the birth dearth of crashing birth rates be? According to a recent report by the McKinsey Global Institute, Dependency and Depopulation? Confronting the Consequences of a new Demographic Reality (January 5, 2025): https://www.mckinsey.com/mgi/our-research/dependency-and-depopulation-confronting-the-consequences-of-a-new-demographic-reality, most advanced industrial countries will be on the road to "population collapse, with by 2100, 75 years away. Some countries would see a population decline of 20 to 50 percent, with an economic crash ensuring. Here is the summary of the report, from the report:
"Falling fertility rates are propelling major economies toward population collapse in this century. Two-thirds of humanity lives in countries with fertility below the replacement rate of 2.1 children per family. By 2100, populations in some major economies will fall by 20 to 50 percent, based on UN projections.
Age structures are inverting—from pyramids to obelisks—as the number of older people grows and the number of younger people shrinks. The first wave of this demographic shift is hitting advanced economies and China, where the share of people of working age will fall to 59 percent in 2050, from 67 percent today. Later waves will engulf younger regions within one or two generations. Sub-Saharan Africa is the only exception.
Consumers and workers will be older and increasingly in the developing world. Seniors will account for one-quarter of global consumption by 2050, double their share in 1997. Developing countries will provide a growing share of global labor supply and of consumption, making their productivity and prosperity vital for global growth.
The current calculus of economies cannot support existing income and retirement norms—something must give. In first wave countries across advanced economies and China, GDP per capita growth could slow by 0.4 percent annually on average from 2023 to 2050, and up to 0.8 percent in some countries, unless productivity growth increases by two to four times or people work one to five hours more per week. Retirement systems might need to channel as much as 50 percent of labor income to fund a 1.5-time increase in the gap between the aggregate consumption and income of seniors. Later wave countries, take note.
In confronting the consequences of demographic change, societies enter uncharted waters. Absent action, younger people will inherit lower economic growth and shoulder the cost of more retirees, while the traditional flow of wealth between generations erodes. Long-standing work practices and the social contract must change. More fundamentally, countries will need to raise fertility rates to avert depopulation—a societal shift without precedent in modern history."
While this is all accurate, the problem lies with solutions to this problem. I was hopeful I could find some gems in the report, but did not find anything new. The concluding paragraph sums up the underlying attitude that this problem may be unsolvable: "The uncertainties of demographic change will persist for decades, and societies will need to wrestle with them. Meanwhile, the world will need to learn to live with the change, at least in the short term, and policy makers and civil society will need to inform and guide choices that society at large must make over the coming half century."
"Forget fiscal deficits. Much of the world is facing a "youth deficit" as people have fewer children, setting up top economies for massive population declines, according to a study from the McKinsey Global Institute that was published on Wednesday.
Countries need a fertility rate of about 2.1 kids per family to maintain a stable population. But two-thirds of the world's population already lives in countries where fertility is below this so-called replacement rate.
"Falling fertility rates are propelling major economies toward population collapse in this century," McKinsey predicted.
Some of those economies are on track to see 20%-50% population declines by 2100, requiring big changes to societies and governments operate.
But if the demographic trends continue, younger people will endure slower economic growth while supporting bigger cohorts of retirees, eroding the historic flows of generational wealth, the study warned.
"The current calculus of economies cannot support existing income and retirement norms—something must give," it said.
To be sure, some countries are in worse shape than others. China's population is projected to crash 55% by the turn of the next century. Italy's will sink 41%, and Brazil's will drop 23%.
But helped by immigration, the U.S. should see an increase of 23%. Still, even the U.S. must grapple with the growing costs of Social Security and Medicare.
The primary driver isn't longer lifespans, McKinsey said. Instead, it mostly a "youth deficit," meaning fewer young people.
To illustrate the growing burden on younger people, the study noted that the world's support ratio was 9.4 in 1997, or more than nine working-age people supporting one older person. The ratio is down to 6.5 today, and will drop to just 3.9 by 2050.
"Absent changes, increasing numbers of seniors will cause government deficits and debts to continue rising," the study said.
Not only will that challenge a country's debt sustainability and social contract, it could throw off the global geopolitical balance and even efforts to fight climate change. McKinsey said its research has found that sustained economic growth is necessary to pay for the net-zero transition.
To avoid seeing per-capita GDP growth slow, countries must boost fertility, labor intensity, and productivity, the study said. But that will be challenging as there are no clear instances of a country successfully increasing its birth rate, while productivity has slumped around the world (though the U.S. has seen a recent uptick).
Either way, it will take time to reverse the demographic trends, so governments and economies must start adapting to them now, according to McKinsey.
For example, businesses will have to adapt to seeing older people comprising bigger shares of their workforce and costumers. The use of artificial intelligence can also help improve labor productivity.
Despite the immense challenges ahead, McKinsey sounded optimistic about the future.
"Humanity has demonstrated incredible resourcefulness throughout its history, and no doubt will find opportunities to thrive amid the challenges that a worldwide change in demographics poses," it said.
The population warning comes as countries struggle to encourage more people to have kids, while the likes of Elon Musk and others in the tech sector have warned on shrinking populations.
In 2021, Musk called population collapse potentially the greatest risk to civilization's future. And in 2023, he urged people in Italy and other developed countries to have more kids.
And while stumping for Donald Trump on the 2024 campaign trail, he said people should have more kids without stressing too much over the costs associated with rearing children.
"I think people worry too much about having kids, and it's sometimes difficult to make ends meet and whatnot," Musk said at a rally in Harrisburg, Pa., in October. "But honestly, there's really no time like the present. Just have kids. You won't be sorry. It'll work out."
On this, Musk is surely right.
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