Population Decline and the Great Economic Reversal

In recent weeks, we have been focusing on Greece,Germany, Ukraine andRussia. All are still burning issues. But in every case, readers have called my attention to what they see as an underlying and even defining dimension of all these issues — if not right now, then soon. That dimension is declining population and the impact it will have on all of these countries. The argument was made that declining populations will generate crises in these and other countries, undermining their economies and national power. Sometimes we need to pause and move away from immediate crises to broader issues. Let me start with some thoughts from my book The Next 100 Years.

These Are The Only Countries Whose Populations Have Actually Declined Since 1990

Here's a startling map from Michael McDonough that speaks volumes about the global demographics situation. It shows the only countries that have seen their populations decline since 1990.

Reversing Population Decline: Germany's New Immigrant Influx

Despite a low birthrate, the population in Germany is growing because of increasing immigration from other European Union countries. For the third year in a row, more people came to the Germany than left it in 2012. This development balances out the natural population decline from deaths and fewer births of about 200,000 a year. If the trend continues, population forecasts will have to be corrected upwards significantly. On average, immigrants are younger than Germans. And they are more likely to have a secondary education than they used to be. After they come, most look for jobs in the major cities and their surroundings.

The Economist: Demographics: Nonsense nonsense crisis

AMERICA and Europe face a troubling demographic future. Declining birth rates will probably result in an older population and a smaller share of the population working to pay for their retirement. Does this necessary spell doom and gloom?

Megan Mcardle reckons so, but Dean Baker dismisses such arguments as “nonsense”. He shows that if productivity continues to increase (even at a lower rate than we’ve experienced historically) then we can still expect rising levels of prosperity. But which factor will dominate, aging or productivity, is uncertain. History is on Mr Baker’s side. Since industrialisation, each new cohort was more productive than the last. The productivity of labour depends on capital and innovation. There are diminishing returns to capital, so sustainable increases in productivity come from new innovation. Ms McArdle, channeling endogenous growth models, is concerned there will less innovation in the future. Younger workers are more innovative and entrepreneurial; an aging labour force might mean much less or no productivity growth. Future productivity of labour will also depend on capital-intensity. An old population requires more people to work in labour-intensive jobs like elder care, there's not much scope to improve productivity of labour in such sectors—at least not in a humane way.