Category: Economy

The Impact of Faster-Declining Fertility

SAMI J. KARAM

Jesús Fernández-Villaverde and Patrick Norrick published a paper earlier this month titled Terra Incognita: The Economics of a Shrinking World. Fernández-Villaverde is a professor of economics at the University of Pennsylvania. Norrick is a research associate at Northwestern University.

Terra Incognita, which means unknown land or uncharted territory, refers to the fast coming new world of declining demographics. The title means that recorded humanity has never been in a similar situation. Outside of wars and pandemics, we have never had such low fertility rates, and have never experienced a decline in the global population.

Demography analysts, including myself at populyst and elsewhere, have flagged this issue for over a decade, but the new paper features several new ideas worth mentioning here.

First, Fernández-Villaverde and Norrick (FV&N hereafter) state that we have already passed the point at which the world population is growing below replacement. In other words, the global total fertility rate (TFR) is already below 2.1 children per woman, the level needed to maintain the population steady (more precisely, the authors place the replacement rate at 2.2). This view differs markedly from the UN Population Division’s projection (chart) that the TFR will remain above 2.1 until around 2050. In fact, FV&N cast doubt on the reliability of UN projections beyond the near-term. See Appendix B of their paper for their theoretical and empirical evidence.

Second, as a result of lower TFRs, FV&N expect the world’s population to peak at roughly 9 billion in 2056. This is 1.3 billion fewer people and 28 years earlier than the UN’s projection that it will peak at 10.3 billion in 2084.

Third, FV&N point out that the math on fertility can shift the fertility rate by a big number even if three-quarters of women do not change their behavior. Here is how they put it (brackets and emphasis added):

Imagine a cohort of 100 women. Fifteen end up with no children, a share in line with the completed fertility of recent cohorts in Europe and the U.S. Of those 15, around 5 are childless by choice, for professional, affective, or religious reasons; another 5 never find a partner or postpone childbirth until it is too late; and the remaining 5 want children but cannot have them for medical reasons, theirs or their partner’s. Of the remaining 85, 10 have one child, 60 have two, 10 have three, and 5 have four. We stop at four to keep the example simple; very few women in younger cohorts have five or more children, and the arithmetic could be adapted to include them.

The 100 women in this population have 180 children, for a CFR [completed fertility rate] of 1.8, roughly the rate in many advanced economies until the early 1990s and in the U.S. until around 2008. And yet we are 30 children short of replacement. Look at what this population is doing: only 5 women in 100 choose to remain childless, three-quarters of all women have two children or more, and one mother in six has three or four. To reach 2.1, a population needs many families with three or more children. Families stopping at two do not deliver replacement.

Take another cohort, where the number of childless women rises from 15 to 26. Among the rest, 23 have one child, 46 have two, and 5 have three. None of the changes is dramatic: 11 more women at zero and 13 more at one. Three-quarters of women still behave as they did at 1.8, and the median number of children is still two, although barely. And yet completed fertility is now 1.3, the conventional threshold for lowest-low fertility.

Dropping from 1.8 to 1.3, then, is not a drastic change in most families. Any explanation only has to account for the quarter of women who switch, not for the 75% who do not. The key is that children come in integers. A woman at two may easily switch to one, or from one to zero, in response to relatively small changes in relative prices or opportunity costs. The integer arithmetic of the replacement rate is unpleasant.

Fourth, FV&N argue that there is an inversion of the historical relationship between income and fertility. Until now, there was a widely accepted notion that richer countries have low TFRs and poorer countries have higher TFRs, but FV&N use the examples of Mexico and Tunisia to challenge this view:

Mexico’s total fertility rate (TFR) in 2025, 1.51, for instance, is likely to be below that of non-Hispanic whites in the U.S., 1.57, despite a GDP per capita at purchasing power parity (PPP) of only around 28% of the U.S. level. Even more striking is Tunisia, whose TFR in 2024 stood at 1.45 with a GDP per capita at PPP of 18% of the U.S. level.

Mexico and Tunisia are not anomalies. In 2025, Thailand was at 0.87, Colombia at 1.01, Iran at 1.35, and Brazil at 1.52, all at a fraction of U.S. per capita income.

Fifth, the authors say that the “inversion of the historical relationship between income and fertility across countries also seems to be happening within countries,” meaning that wealthier people within countries are having more children than the average.

Sixth, FV&N speak of a first demographic transition in which lower mortality around the world brought down fertility rates, and of a second demographic transition where TFRs fall below replacement and deaths eventually exceed births.

Reasons for Declining Fertility

Finally, the researchers try to explain the reasons behind the continuous decline of fertility worldwide. They mention the following:

  • Economic fundamentals: the cost of housing and of health care, and other factors.
  • Government policies: the TFR of a country tends to rise when governments provide things like extended parental leave, cheap housing or bonus payments to large families.
  • Preferences and social norms: the authors itemize them as “the spread of individualism, secularization, women’s liberation, less interest in marriage, lower desire for descendants, or the rise of a parenting standard that makes each child more expensive in terms of time and worry.”
  • Smartphones: FV&N believe that smartphones accelerated the declines in TFRs but did not cause them in the first place.
  • Modernity: the authors write:Our conjecture is that a modern society makes the third child expensive and childlessness cheap, even when GDP per capita is only a fraction of the frontier (i.e., the U.S. level). Children are expensive because a child must be equipped to function in a world of formal knowledge and credentials, which takes years of costly investment. At the same time, children are no longer productive in the household, not even for smaller chores, having been replaced by “engines of liberation” such as the electric appliances now available even to poor households. Modernity also imposes tight career schedules, set by large-scale organizations, that collide with the biological clock and with the kin networks that used to share the work of raising children. And modernity makes childlessness cheap, because an impersonal society imposes next to no penalty on those who have no children: pensions and health care do the work that sons and daughters once did, and lineage counts for little.

Much of this aligns with my own views published last May in Explaining Lower Birth Rates in Poor and Rich Countries.

Good and Bad Consequences

I have discussed previously on this site some of the economic consequences of this new reality. They are not all negative. Instead they are a mix of opportunities and risks that will come to pass or not, depending on policy and initiative.

The Good News

FV&N write that one of the consequences of falling fertility is a 74% drop in teenage pregnancies in the U.S. between 2004 and 2024, and that this decline is welcome because three-quarters of pregnancies among American teenagers are unintended.

Other good consequences mentioned in the Terra Incognita paper are easier management of resources, and reduced pressure on infrastructure, housing and the environment.

The authors also write:

For emerging economies more generally, lower fertility opens a window of opportunity. These countries can educate smaller cohorts better, rebuild their infrastructure, and, before population aging fully takes hold, enjoy some fiscal space to facilitate structural reforms.

This refers tangentially to the potential for some countries to achieve a demographic dividend from the rapid decline in TFRs. When TFRs decline, dependency ratios also decline, as there are fewer dependents, and this in turn opens a window of opportunity for a demographic dividend. If FV&N are correct, TFRs are falling more precipitously than the UN has projected, and the opportunity window for a dividend will soon open for a large number of countries.

Readers of this site are familiar with this chart below that I first posted at populyst in 2015 and that summarizes the factors needed for a country to realize such a demographic dividend. Not all countries will be ready or able to do so, but we should hope that some probably will. I addressed this question three years ago in Demographic Dividend: Which Countries are Next?

The other good news we can derive from the Terra Incognita paper is that TFRs in Africa are falling faster than expected. This means that the working-age population of Africa will grow at a slower rate, and that the need to create millions of new jobs will be less acute than under the UN’s forecasts. In Africa: 800 million jobs needed, I discussed the enormous challenge faced by sub-Saharan economies to create adequate living conditions for the soaring working-age population. My numbers were based on the UN’s projections. The projections by FV&N mean that the challenge will be less daunting and could become more manageable.

A corollary of this is that illicit immigration from poor countries into the West could fade over the next couple of decades. If the economies of poor countries are better able to accommodate their new workers, there will be fewer people emigrating toward Europe or North America in search of jobs and better living conditions.

The Less Good News

The less good news resulting from lower fertility is that economic growth will be less robust. FV&N provide this equation:

With less demographic growth, there is less labor growth, and labor productivity growth will have to do more work in order to keep output growth steady. This could occur if AI delivers the promised gains in productivity. But the authors lean the other way, and write that labor productivity could instead decline:

Three reasons stand out. The first is the endogenous creation of ideas. The second is firm dynamism: an aging population starts fewer firms, and reallocation slows down. The third is the adoption of new technologies, which older workforces and older firms take up more slowly.

In a nutshell, fewer births ultimately mean fewer researchers, fewer ideas and less of the kind of innovation that raises productivity.

Another part of bad news is the rise in the old-age dependency ratio (the ratio of elderly to workers) that will exert more pressure on government budgets, pensions, social security and late-life medical services. All countries with retirement support programs already have stretched budgets and difficult fiscal prospects. Faster-declining TFRs will complicate this picture even more. As we are already seeing, the effects of spiraling budget deficits and debt will have deep consequences for the financial markets and economy.

Policy Will be Key

The outcome of a faster-declining global TFR is not preordained. Economies and markets are human constructs, and this means that human design can shape the outcome. Poor countries can position to increase their odds of achieving a demographic dividend. Rich countries can dampen the impact of falling demographics by lifting productivity, improving government efficiency and lowering the cost of health care. But good governance is rare and sporadic. We will not get all of this, but we will get some of it.

READ MORE on the same topic from Hannah Ritchie at Our World in Data: Which countries have already passed peak population, and when will the rest do so?

In the article, Ritchie provides this interactive map. Move the slider to see when different countries will peak in population, based on OWID’s projections.

Explaining Lower Birth Rates in Poor and Rich Countries

SAMI J. KARAM

This text first appeared in The Wednesday Letter #325 at SK Blueprints. Subscribe for weekly posts.

Why are people having fewer children today than ten, twenty and fifty years ago? The answers differ for rich and poor countries.

Looking at poor countries, in sub-Saharan Africa for example, the total fertility rate (TFR, the average number of children per woman) is still relatively high, at 4.3, but it has fallen steadily from 6.8 in 1980, thanks to improvements in women’s health care and education. When women learn how to read, when they learn the basics of taking care of themselves and of their infants, when they have access to contraception and health services, infant mortality falls rapidly, and the TFR follows it lower. In a 2015 article, I identified female literacy as the primary mover of a falling TFR. Note in the chart the clear decline in TFR when literacy exceeds 90%. Falling TFRs eventually lead to declining dependency ratios, and open a window of opportunity for a demographic dividend. I described this dynamic in Achieving a Demographic Dividend.

The causes of declining TFRs are different in rich countries, where nearly all women are literate and have access to health care and contraception. In this case, the reasons are more complex, and there is considerable debate on why the TFR keeps falling. The replacement rate, the rate at which the size of the population remains stable, is 2.1 children per woman. All rich countries are well below 2.1. The US is at 1.8.

Last week, this Financial Times chart reignited the debate by claiming that the introduction of smartphones impacted birth rates. Not everyone is a believer in this theory. In fact, most demographers who have commented in recent days have rejected it. Although the correlation is undeniable, most view it as coincidental, not causal.

As many of you know, I started focusing on demographic research in the early 2010s and also started the populyst (population + analyst) website in 2012. So, this is a question that I have thought about for a long time. In my view, one reason for a falling TFR in North America, Europe, Japan and other rich countries comes down to this: children in the past were seen as an asset, and now they are seen by some as a liability.

This sounds simplistic until you consider each of the following items.

Mid 1900s, children were seen as an asset:

  • Lower urbanization. Children helped their parents on the farm or at a small trade in rural areas.
  • Less labor mobility meant that extended families remained in close proximity to each other and assisted in the rearing and supervision of young children.
  • Fewer women were working outside the home, and men had greater job security. Financial certainty and a stay-at-home parent made it easier to have children.
  • Greater social acceptance for households that were man-woman couples with children. There was a stigma hovering over childless and unmarried people.
  • Better job opportunities, better pay and faster promotions resulted from that greater social acceptance.
  • Low cost of education and of bringing up children.

Today by contrast, some people (thankfully, not all) see children as a too-high financial liability:

  • Greater urbanization. Children do not assist parents in urban jobs. Instead, they require costly childcare while the parents are at work.
  • Atomization of the family and higher labor mobility mean that the extended family is no longer available to assist in raising children.
  • More women are working outside the home, and men have little job security. Financial uncertainty and no parent at home make it more difficult to have children.
  • There is no longer a stigma over the childless or unmarried. Social acceptance has been extended to all groups and lifestyles.
  • There is no preferential treatment in hiring for individuals with large families. Every candidate is evaluated on his/her own experience and credentials, with little concern for family status.
  • Much higher cost of education and of bringing up children.

In TWL #284, I summed up these factors by arguing that “loss of status explains our demographic decline:”

“A married heterosexual couple with children and a secure job used to be the king and queen at the apex of society seventy or sixty years ago. Society was organized to accommodate this couple, and young people aspired to achieve the same status and level of acceptance. By contrast today, such a couple 1) are just another household who chose to have children and 2) face much higher costs and a lower standard of living than the single and childless. In other words, there used to be privileges and perks extended to people with children, and now there no longer are. Having children is no longer deemed “worth it” by a lot of people, socially, emotionally and financially.”

The University of Pennsylvania’s Professor Jesús Fernández-Villaverde lays out what he calls the “unpleasant arithmetic of the replacement rate.” He says that approximately 15% of US women have no children because they cannot or choose not to, and continues:

“Of the remaining 85, 10 have one child, 60 have two, 10 have three, and 5 have four… Hence, the 100 women in this population have 180 children, for a completed fertility rate of 1.8… To reach [the 2.1 replacement rate], you need a substantial share of women to have three or more children. Two as the “normal” pattern will not get you there. And modern society makes three or more a costly proposition for most families.“

Finally, another thing to keep in mind is that the highest ticket items for a household, the home and the car, can in most cases accommodate a family of four (two parents and two children) but only rarely a family of five or more. Most homes have three bedrooms, and most cars can comfortably seat four people. Having a third child adds another layer of complexity and expense.

From Baby Boom to Elderly Boom

SAMI J. KARAM

An American born in 1945 had at the time of his/her birth a life expectancy of 65.7 years, 62.9 for males and 68.4 for females. But if that American was still alive in 2010 at age 65, his/her life expectancy was at that point 13.5 years, 12.6 for males and 14.4 for females.

An American born in 2010 had at birth a life expectancy of 78.2 years, 75.8 for males and 80.5 for females. So, the likely lifespan of an American born in 1945, if they were still alive in 2010, was about the same as the life expectancy of an American born in 2010. Given that 2.1 million Americans born in 1945 out of 2.86 million total births, were still alive in 2010, it is probable that official life expectancy at birth in 2010 (and today) was also too low by ten or fifteen years.

After all, we are talking about the state of the art of health and medicine in the years 2070 to 2100, and we have no idea what that will look like. It is possible that medical advances will move at warp speed in the coming decades and that life expectancy will leap by another ten or twenty years. It is also possible that humanity will suffer a cataclysm, as it seems to do periodically, and that life expectancy will stagnate or decline as a result.

We are now eighty years from the start of the post-war baby boom, and we can therefore expect the number of US deaths to increase annually for the next decade or more. Here is a chart showing 1) in blue, the ‘number of people born 80 years earlier,’ and 2) in red, the ‘number of 80-year olds,’ excluding the foreign-born in both cases. The lines are not parallel because only 22% of Americans born in 1910 were still alive in 1990, whereas 52% of those born in 1946 are still alive today (eighty years later). This percentage is estimated to rise further into the future. Note the big jump in the mid 2020s, which is where we are now. The number of living 80 year olds will have doubled between 2020 and 2040, not including the foreign-born.

The folks born in 1946 were all born in the same year but their deaths have occurred in different years in the past eighty years and continuing into the future. Here is a distribution of age at death in the United States in 1950 (red) and 2015 (blue). The main point of the chart is not only that the distribution has shifted to the right, meaning that people are living longer, but also that it is narrower, meaning that more people can aspire to live close to their life expectancy. See more in this Stanford University research: Life Expectancy and Inequality in Life Expectancy in the United States.

Figure 1. Distribution of Age at Death in the United States, 1950 and 2015

I previously calculated that the increase in deaths and decline in births will bring about a period of zero population growth in the US in the 2030s and 2040s, except for immigration past and future.

Three listed companies that are engaged in death care services are Service Corp. International (SCI), Carriage Services (CSV) and Matthews International (MATW).

Will Argentina and Chile’s Rightward Shift Lead to More Births?

SAMI J. KARAM

I mentioned last month in TWL #299 that the pink tide is receding in Latin America and that the continent’s political leadership was shifting to the right. On Sunday, the right-wing candidate (“far-right” according to people who only read The Guardian) José Antonio Kast won the presidency of Chile, ending the rule of socialist Gabriel Boric. When he was elected, Boric was hailed as a new page for Chile and for the continent, but his actions in office were less impactful than anticipated.

A conservative on social issues, Kast is a staunch opponent of abortion with no exceptions allowed for rape, incest, risks to the mother or viability of the fetus. Kast also opposes same-sex marriage, adoption by same-sex couples and “gender identity ideology”. Unlike his Argentinian counterpart Javier Milei who is single and childless, Kast has nine children from the same mother, lawyer María Pía Adriasola, to whom he has been married for 34 years.

A good question from my perspective is whether this rightward shift is merely the result of frustration about the economy or whether it signals a deep change of attitude toward social issues. When it comes to annual births for example, they have been declining in Chile since 1991, but they declined even faster starting in the mid 2010s.

As to Argentina, annual births have fallen off a cliff by a full third since 2015 (chart), mainly due to 1) a program initiated in 2017 to combat teenage pregnancy, and 2) the legalization of abortion in 2020.

The total fertility rate (TFR) has been falling for several decades in Argentina, Chile, and Latin America/the Caribbean, much as it has in the rest of the world. The ultimate social test of the rightward shift in politics is in the TFR and in annual births. If they stabilize or start to edge upward, we will know that the continent has turned a page, not only in politics and economics, but also in social attitudes. But because social notions are slow-moving and difficult to change, my guess is that we will not see meaningful reversals in annual births.

The majority of Latin American and Caribbean countries forbid or restrict abortions. Abortion was legalized or decriminalized in Cuba (1965), Uruguay (2012), Argentina (2020), Colombia (2022) and Mexico (2023). Other countries such as Chile, Brazil, Paraguay, Bolivia etc. allow abortions under very limited circumstances. But El Salvador, Honduras, Nicaragua, the Dominican Republic, Haiti and Jamaica have total or near-total bans.

About Nigeria Demographics

SAMI J. KARAM

The country has some, but not all, the ingredients needed for a demographic dividend.

A few days ago, President Trump posted the following in defense of Nigerian Christians:

They’re killing record numbers of Christians in Nigeria. They’re killing the Christians and killing them in very large numbers. We’re not going to allow that to happen… If we attack, it will be fast, vicious, and sweet, just like the terrorist thugs attack our CHERISHED Christians!

While it is true that Christians have been targeted by Jihadis in Nigeria, Muslims have also been targeted in large numbers. Groups like Boko Haram, ISWAP (Islamic State West Africa Province) and others oppose all forms of secularism, westernization, democracy and modernity. They seek to “purify” Nigeria by eliminating Christianity and non-Islamic practices, and by installing an Islamic regime. Boko is from the English word book, and Haram means forbidden in Arabic. So, Boko Haram means “western education is forbidden”, in particular as it applies to girls.

As shown on the map, Nigeria is both Christian and Muslim over a land area that is the size of California, Nevada and Utah combined. Approximately 46% of the population are Christian, including catholics and protestants, who tend to live in southern and coastal provinces. The other 54% are mostly Sunni Muslims who tend to live in the center and north, including in the provinces that are closest to Niger and Chad, two Muslim countries.

Trump’s implied idea that the US can be the protector of Christians in other countries is unprecedented for a US president. It is unlikely to sit comfortably with the other priorities of US foreign policy. It is also unlikely that Congress would approve military interventions or punitive missions of this kind. Christians are persecuted or face severe restrictions in a large number of countries, including most Muslim countries, North Korea and China. Here is a map of Islamist groups in Africa as of 2022, from the Italian Institute for International Political Studies (ISPI). It would be impossible to subdue all of them by force of arms.

That said, it is good that the President is paying some attention to Africa, because Africa will be the continent with the highest population growth for decades to come. Here is a chart showing Nigeria’s total population and its population aged 15 to 64. Nigeria’s population is the largest in Africa and it will surpass that of the US by 2040. Most critical is the fact that its working-age population (aged 15-64) will double by 2075.

The total fertility rate (TFR) of Nigeria is today 4.3 children per woman. This chart derived from the UN’s medium variant assumes that the TFR will fall to 2.1 by 2075. Should it instead remain at a higher level, the population growth will be even faster than is shown here.

If the TFR declines as envisioned by the UN, there will be in theory a historic opportunity for Nigeria to realize a demographic dividend and to improve its economic conditions. A demographic dividend occurs when the number of dependents to workers, the dependency ratio (DR), declines in a given country. The DRs of Nigeria and of sub-Saharan Africa are shown in the chart below. The UN medium variant expects them to fall from the high 70s (a ratio of 0.7) to about 0.5. I have argued elsewhere that China’s boom in 1990-2010 was greatly assisted by the fact that its dependency ratio fell by half. See How China Realized a Demographic Dividend. But I have also argued that many African countries will not be ready when the window of opportunity for a demographic dividend opens up. See Demographic Dividend: Which Countries are Next?

In Demographics, The Global Emergency, I identified the emergency as demographics that were too weak in rich countries and too strong in poor countries. I speculated that both rich and poor could solve their problems by working together.

The opportunity, the solution to the global emergency, is to help these younger countries improve their economies by providing them with capital and helping them strengthen their institutions. To the symbiotic solution, developed nations bring technology, capital and institutional expertise. Emerging nations bring strong demographics and a growing labor force. Working together would over time:

  • create large new demand markets for Western products at a time when domestic demand is weakening.
  • provide food, shelter, health care and jobs to growing populations in sub-Saharan Africa and other countries.
  • strengthen institutions, facilitate capital formation and investments, and increase transparency in governance in emerging markets.
  • mitigate disorganized migration, and lower the risk of instability.

This was written in 2015. The world has moved in another direction in the past ten years, with more confrontation than cooperation.

New Compilation: Demographics, The Global Emergency

SAMI J. KARAM

I finally selected and compiled my posts and articles in a new book, Demographics, The Global Emergency, which I am pleased to introduce here and now.

The articles deal mainly with the populyst three pillars of prosperity and good governance: Demographics & Health, Innovation & Productivity, Governance & Society.

Many were first published on this site. Others first appeared at other media.

Except for a brief introductory “Perspective from AI”, all of the posts and essays in the book were written the old-fashioned way, without AI assistance. Indeed, nearly all were written before ChatGPT and other LLMs even existed. Here is the Table of Contents. Thanks very much for your interest.

Copyright © 2025 populyst. All Rights Reserved.

Peak Child: The Number of Children Aged Under 5

SAMI J. KARAM

According to the UN, the global number of children aged under 5 has already peaked and is likely to fall for the rest of the century. But the number in sub-Saharan Africa will continue to grow until 2070.

Note: This article first appeared in The Wednesday Letter 206 earlier this month. Please subscribe to the substack to receive all Wednesday Letter postings including Geopolitics on Mondays and Twelve Charts This Week on Fridays.

How many children aged under 5 are there in the world? And is that number growing or falling? According to the UN’s “medium variant” estimate, it rose until 2017 when it reached 690.4 million, and has been falling ever since. The late Hans Rosling called this ‘Peak Child’.

The UN has several demographic scenarios for the future. The most probable is what it calls the “medium variant”. There are also, among many more, a “high variant” and a “low variant” derived from assumptions of higher and lower fertility. Here, in the first chart, is the global number of children aged under 5, with each of the three variants. According to the most probable scenario (the medium variant), that number will more or less flatline above 650 million until 2060 after which it will fade down gradually to 560 million in 2100. The less probable high and low variants are also shown, with the first racing to nearly 1.1 billion and the second falling to 250 million by 2100.

It is important to underscore that all three variants assume a continuing decline in fertility (the number of children per woman) around the world, in particular in sub-Saharan Africa where it remains elevated. Here is the same chart for sub-Saharan Africa. Under all three variants, the number of children aged under 5 will continue to grow until at least 2050 (low variant), 2070 (medium) or beyond 2100 (high). The numbers themselves are quite large, 185 million today, and 250 million in 2070 per the medium variant.

Sub-Saharan Africa is the most demographically dynamic region of the world. Europe is the least dynamic. Here is the chart for Europe. The number of children aged under 5 peaked in 1962. Note the big dip in the 1990s after the fall of the Soviet Union. European fertility has been well below replacement for a long time, which means that both the overall population and the working-age population will shrink. This retrenchment is not all due to Eastern Europe. The rest of Europe is also in demographic decline. The numbers are relatively small, 35 million children under 5 today and 25 million by 2100 per the medium variant.

Now here is something to make you pause. If we take the last two charts and combine them in a ratio of sub-Saharan to European children aged under 5, we see that this ratio (the number of sub-Saharan children under 5 for every European) rose from less than 1 to 1 in 1950 to 5.3 to 1 in 2023. Under the medium variants for both regions, it is expected to rise to 7.6 by 2050 and 9 by 2075. The consequences of this change will be significant. We are seeing them already with increased migration numbers from south to north.

If you are wondering about North America (includes the US and Canada but not Mexico), here is the chart. The number will remain essentially flat between 20 and 22 million. However, this does not account sufficiently for illegal immigration. It is likely that the number of children aged under 5 will rise to above 25 million in some future years. All the same, North America numbers are small compared to the boom that is taking place in sub-Saharan Africa and parts of Asia.

China After the Dividend

SAMI J. KARAM

This article is the second in a series and was published at Exante Data’s Money Inside and Out. Read the first of the series, How China Realized a Demographic Dividend.

Will it overcome its demographic decline?

In a recent post, we described China’s unprecedented success at realizing a demographic dividend starting in the 1990s until around 2010. We discussed the confluence of factors that made this dividend possible. In this post, we look at present conditions and try to discern what is in store for the future. We use our usual approach and look at the three main pillars of wealth creation: Demographics & Health, Innovation & Productivity, Society & Governance.

Demographics & Health

The first thing that is evident is that demographics is no longer a positive vector of economic growth. 

The tailwinds created by a falling dependency ratio have died down and are now expected to turn into headwinds (see chart in our first post). The dependency ratio fell between 1970 and 2010 and was a key driver in the country’s GDP acceleration in that it opened a window of opportunity to realize a demographic dividend. China was able to realize that dividend because 1) it had liberalized its economy and opened up to trading with the world, and 2) it had improved its levels of education and infrastructure. As things stand today, the dividend has been fully realized and is behind us. There is instead a risk of a reverse demographic dividend, in which deteriorating demographics create a drag on growth, if China is unable to implement counteracting measures.

This risk is illustrated in the first chart below which shows the Chinese population by age groups. The population aged 15 to 64, aka the working-age population, soared between 1965 and 2015 and is now set to decline, slowly for the next decade but more rapidly thereafter. Meanwhile the population aged 65 and over will more than double between now and 2055. Finally, the youngest group aged 0-14 will taper off for decades to come.

Using the same data, the next chart shows the difference between the number of workers (those aged 15 to 64) and the number of dependents (those aged less than 15 and more than 64). The coming decline is as dramatic as the rise was in past decades. In 2015, there were 636 million more workers than dependents. But by 2055, this figure will fall to 189 million, or about the same as in 1980. Yet during this period, 1980-2055, the total Chinese population will have grown from 1 billion to 1.37 billion. (See in this article how the working-age population of other countries will have evolved between 1960 and 2050).

In addition to the longer term rise in the dependency ratio, China is seeing more recently a decline in its birth rate. China’s total fertility rate (TFR) fell to 1.09 children per woman in 2022, a new low in a recent downtrend that started after 2017. The next chart shows the evolution of the TFR since 1950. Note that it had fallen from over 6.0 to 2.75 before China enacted its one-child policy in 1980. Between 1991 and 2019, the TFR hovered between 1.5 and 2.0 but it fell below 1.5 in 2020 and fell again in 2021 and 2022.

Read more →

How China Realized a Demographic Dividend

SAMI J. KARAM

This article was first published at Exante Data’s Money Inside and Out.

China was ready for its historic opportunity.

Although a widely used aphorism, “demographics is destiny” is not strictly true in the modern era. Long gone are the days when troop size could on its own determine the outcome of a war, or when deploying manpower on a massive scale could result in a decisive economic advantage. Brute force just isn’t what it used to be. Today, thanks to advanced technology, small groups can inflict enormous damage in war, and a handful of software programmers can create billions in new wealth.

That said, demographics remains an important part of destiny in combination with other non-demographic factors.

Some of these factors can mitigate, or even completely counteract, a deteriorating demographic picture. Others can multiply the positive effects of demographics. This distinction—between demographics as a leading determinant of national stature vs. demographics as merely one of several components —can be illustrated by the following two opinions.

The first is a view promoted among others by Fareed Zakaria in his book The Post-American World (2008). Here is Zakaria in a 2008 Newsweek column The Rise of the Restrepeating the theme of his book:

It is an accident of history that for the last several centuries, the richest countries in the world have all been very small in terms of population. Denmark has 5.5 million people, the Netherlands has 16.6 million. The United States is the biggest of the bunch and has dominated the advanced industrial world. But the real giants—China, India, Brazil—have been sleeping, unable or unwilling to join the world of functioning economies. Now they are on the move and naturally, given their size, they will have a large footprint on the map of the future.

The second is from Winston Churchill’s speech Fifty Years Hence. It is from 1931 but remains as pertinent as ever:

When we look back beyond a hundred years over the long trails of history, we see immediately why the age we live in differs from all other ages in human annals. Mankind has sometimes traveled forwards and sometimes backwards, or has stood still even for hundreds of years. It remained stationary in India and in China for thousands of years. What is it that has produced this new prodigious speed of man? Science is the cause. Her once feeble vanguards, often trampled down, often perishing in isolation, have now become a vast organized united class-conscious army marching forward upon all the fronts towards objectives none may measure or define. It is a proud, ambitious army which cares nothing for all the laws that men have made; nothing for their most time-honoured customs, or most dearly cherished beliefs, or deepest instincts. It is this power called Science which has laid hold of us, conscripted us into its regiments and batteries, set us to work upon its highways and in its arsenals; rewarded us for our services, healed us when we were wounded, trained us when we were young, pensioned us when we were worn out. None of the generations of men before the last two or three were ever gripped for good or ill and handled like this.

Zakaria was not wrong about the growth of China, India, Brazil and others (he was after all writing in 2008 when that growth was already evident) but he gave demographics more weight than it deserves. Zakaria saw the overwhelming success of the less populous West as an “accident of history” while “the real giants – China, India, Brazil – have been sleeping, unable or unwilling to join the world of functioning economies.”

By contrast, Churchill saw the West’s advance as no accident and as the logical result of scientific progress. Note in the excerpt Churchill’s mention of India and China, to emphasize that demographics had been overtaken by science.

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Demographic Dividend: Which Countries Are Next?

SAMI J. KARAM

Sub-Saharan Africa is nearing a historic opportunity, but most of its nations are not ready.

Published on Africa Day 2023.

The population of India will have surpassed that of China by the end of this year, with each country counting 1.43 to 1.45 billion people. This milestone has led several observers to wonder whether the Indian economy can achieve a demographic dividend in the same way that China did after 1990. There is however widespread misunderstanding around the question of what constitutes a demographic dividend. This recent statement from a leading Indian daily is typical but inaccurate:

“A high population, especially in a younger age cohort, is generally seen as an asset rather than a liability for the economic fortunes of a country. The simple reason for this is that more people also means more working hands.”

The Financial Times similarly published “Can India Unlock the Potential of its Youth?” in which it discussed India’s prospects of deriving a demographic dividend from its youth bulge.

“More people” or a “youth bulge” could in theory mean “more working hands” but only if there is a sufficient number of jobs being created. The fact that tens of millions of new young cohorts will come of age every year and will need to take jobs to make a living does not automatically mean that those jobs will be there for the taking. A benign economic outcome cannot be taken for granted merely because of a shift in demographics. If for example investment is weak or if literacy is low, having more people may result instead in greater poverty and other deteriorating conditions. In addition if there is a too-large “younger age cohort”, there may be new headwinds slowing the economy in cases where the number of dependents (the young and elderly) overwhelms the number of workers. All of this is to say that while the sheer total number of citizens is important, it is less important than the age distribution of the population and other non-demographic factors.

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