The world faces a pressing demographic challenge. In the case of Japan, the factors include low population growth rates and falling fertility rates. Some economists have always dreaded this scenario, pointing out that ageing populations can reduce overall employment, cause inflation to rise, affect the strong culture of consumerism, and overwhelm those programmes that started to support seniors. Such fears have been realised as a reality in contemporary society.
A published work by the Organisation for Economic Co-operation and Development reveals that the ageing population will dramatically shift the demographic structure of the largest economies within a decade as birth rates drop. Should the trends persist, 2064 is expected to be the first year in mankind’s history when people are expected to die more than to be born.
This demographic reality is already manifesting itself in globalised major economies. The global average of the total fertility rate in the 38 member countries of the OECD has dramatically reduced to only 1.5 children per woman in 2022 from 3.3in 1960. This rate is substantially less than the frequently cited “replacement level” of 2.1 children per woman to replenish the population, thus having a rapidly decreasing pool of workers.
Analysing data from the 1960s, one can conclude that there were six working-age people per retiree. Currently, this ratio has reduced to 3:1; projections for the year 2035 are 2:1. The implications are profound: those of constrained supplies, higher demand for labour, demands of higher wages, and, in essence, inflation rates higher than the selling prices. These worries were outlined by Simona Paravani-Mellinghoff, the managing director at BlackRock, in the analysis, stating that a decrease in the share of workers may result in inflation.
In the past, NET Immigration was observed to guard against demographic burdens in developed countries. However, the decline is worldwide now, and it is difficult for post-industrial economies to import workers by immigration or outsourcing manufacturing. By 2100, only six countries are projected to have birth rates high enough to sustain their populations: These are nations of Chad, Niger, Somalia, Samoan, Tongan, and the African nation of Tajikistan.
Analysts like Paravani-Mellinghoff recommend embracing inflation-indexed bonds and commodities, including energy, industrial material and agricultural productions, to fight these adversities. At the same time, top bosses and members of parliament are finally waking up to the looming “baby bust. ”
The world’s leading entrepreneur, Elon Musk, who has fathered 12 children, stated that a low birth rate would result in a civilisation ending not with a bang but with people languishing in diapers. The U.S. diaper market is dominated by players such as P&G and Kimberly-Clark; baby diaper sales have decreased while the usage of adult diapers has increased. In the same way, Nestlé has changed its concentration from its basic MAGGI brand to Foods and Nutrition for the over-50s.
Governments are also not idle; They are aware of the fact that the issue is a sensitive one. In the last week, French President Emmanuel Macron has come forward with a plan to achieve “demographic rearming” that consists of fertility checks and long paternity leave. In the U. S., for instance, the now ex-President Donald Trump has embraced what he calls baby bonuses to trigger a baby boom.
According to the CDC, the US birth rate in 2023 touched a record low, after which there was a slight increase during COVID-19. The CBO believes that for the first time in the next 15 years, deaths will be on the higher side of the demography than births, affecting the economic and budget estimation.
Mr Bernanke agrees with Ms Yellen that although expenditure on such plans as Medicare or Social Security is beneficial during the middle of a generation’s lifecycle, it becomes burdensome when that generation reaches the age where human and social needs have changed and require heavier spending. If no action is taken, the mid-2030s may expressly spend out the Social Security trust fund, bringing down the benefits to the retirees.
It is important to note that some business executives and technologists believe that artificial intelligence (AI) can help. According to Schmidt, the former Google CEO, AI could solve the problem of a shortage of people as he widely predicted that it could greatly increase efficiency. Research made by Goldman Sachs anticipated that generative AI technology could add 7% to the global GDP in the coming decade. At the same time, however, specialists warn that the role of artificial intelligence in foreign economies still depends on the outcome.
Stefano Scarpetta, the OECD director for employment, labour, and social affairs, recently said that gender equity and the fair distribution of work and parenting should be adjusted to contain low birth rates in the long term. This includes increased paid parental leave and additional financial assistance to families. In the meantime, Scarpetta calls on business and government to brace for what he terms a low-fertility future.
With such demographics slowly or rapidly unfolding across the globe, the calls for policies that can increase the birth rate or contain the ageing population are even more apparent.
