One for mum, one for dad & one for our ageing population
When Peter Costello famously encouraged Australian families to have a child for Mum, one for Dad and one for the country, he was focused on a significant national challenge, the ageing of the population.
Population ageing is the product of two demographic trends, longevity and a declining birthrate. It is a challenge for many western nations, including Australia.
Australians are living longer, on average, than at any time in the past. While this will increase costs, especially for aged and health care, it is not an insurmountable problem. It is the combination of longer living and declining fertility that threatens the economic growth of the nation.
According to the OECD, the ratio of older people to those in the workforce in 1990 was 19 per cent. By the year 2030, this dependency ratio will double to 38 per cent across OECD countries.
In a study of global fertility rates, the Australian demographer Peter McDonald concluded that if the current levels of fertility were maintained in many western nations, they are so low that they would threaten the future existence of the nations concerned: “In an era in which we have come to understand the momentum of population increase, it is remarkable that we are yet to appreciate that the same momentum applies to population decrease.”
The concentration in media headlines on the total size of the global population continues to mask the depopulation momentum in many nations.
“Perhaps people used to living for the here and now may have difficulty appreciating the long-term consequences beyond their immediate horizon,” noted the Australian demographers, John Caldwell and Thomas Schindlmayr, in their study of 28 countries where the fertility rate has fallen to less than 1.4.
As the experience of Singapore illustrates, once the birthrate falls below about 1.4 children per woman, it is extremely difficult to grow it again.
One of the most rapidly ageing societies in the world, Japan, provides a glimpse of the demographic decline underway. While the Japanese are living longer, the number of young people never marrying has also increased significantly. The National Institute of Population and Social Security Research forecasts that the population will decline from 127.7 million to 86.7 million by 2060, and fall again to 42.9 million by 2110 “if conditions remain unchanged.”
The economic impact will be significant. Using data from two countries that have experienced population contraction – Russia and North Korea – economist Sanghan Yea states that population decline will have a more damaging impact than we expect presently: “Depopulation not only stops economic growth completely, but also reverses it.”
Not only is there less demand for goods and services, the reduction in new entrants to the labor force may decrease flexibility and productivity. The world’s working age population grew by 1.3 billion, or 40 per cent, between 1990 and 2010, but is expected to increase by only about 900 million between 2010 and 2030.
Future growth in the workforce requires a prior investment in children. In the US, it has been estimated that the investment in human capital has amounted to two-thirds of the nation’s economic growth historically.
Demographic patterns are not easily reversed. Even if nations introduced policies today to address these trends, it would likely take two generations for an impact to be observed. It is also easy for nations in the early stages of fertility decline to be seduced by the phenomenon known as the “demographic dividend.”
This occurs when birth rates first fall, allowing more people, especially women, to enter the paid workforce. Individuals are able to spend and invest more, including in the education of fewer children. The phenomena occurred in Japan and other Asian countries from the 1960s, and are occurring in China currently.
But the dividend must be repaid. As the population ages, there are fewer workers and the numbers of dependent aged grows, there is a drain on resources. Japan is already experiencing the impact, and China will in the coming two decades, as it enters long-term depopulation.
Australia ignores these trends at its peril.
That is why Wayne Swan’s attack on the baby bonus is misguided. Not only does it undermine many families that are already struggling with cost of living pressures, it diminishes a measure that helped to maintain a higher birthrate. Over the decade from 2001, the birthrate grew from 1.72 to about 1.9.
NATSEM research published this week indicates that single-income families suffer the highest rates of poverty when their youngest child turns three because of the ending of benefits like the baby bonus. It is hardly the time for Labor to be hitting them again.
Kevin Andrews MP is the Shadow Minister for Families, Housing and Human Services and the author of Maybe ‘I do’ – Modern marriage and the pursuit of happiness.
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