Population shouldn’t be a Ponzi scheme
China’s shrinking population, we are told, poses an economic threat to that country, as well as an economic drag for us.
Here are the numbers: Deaths exceeded births in 2022 by 850,000. That leaves over 1.4 billion Chinese. That’s over four times the U.S. population occupying about the same land mass. More than 1 billion people would be a lot of people in anybody’s book.
Two reasons for concern are flawed. One is the idea is that an economy needs more people to grow. The other is that aging societies need vastly more young people to support their elderly.
Start with the notion that fewer workers restrain economic growth. That might hem in the gross domestic product, but what does that big number mean to the average worker? The GDP could stay the same, but if it was applied to fewer people, the average product per capita would go up.
Worries about worker numbers often ignore gains in productivity. Labor shortages often spur technological advances that let a worker produce more in the same amount of time. (In a fair world, the worker shares the rewards of improved productivity.)
Longer life spans mean there are more people we consider old, but they also reflect a slower aging process thanks in good part to modern medicine. Therefore, more people in their late 60s, 70s and beyond can remain in the workforce, especially in jobs that don’t require heavy lifting. Oddly, China has one of the world’s lowest retirement ages of around 60.
China’s falling population has several causes. The country’s one-child policy is, of course, a driver.
It was imposed several decades ago to stop an ongoing population explosion that could have led to mass starvation and related social chaos.
But another factor lowering birthrates — seen all over the industrial world — has been of people moving to cities and becoming richer. That helps explain why China dropped the one- child policy a few years ago but hasn’t seen a significant increase in births.
Somehow a falling population sounds more desirable than a massively growing one, especially in the country that is already the biggest emitter of planet-warming greenhouse gases. China produces almost twice the amount of carbon as the United States.
Some economists express alarm that we might lose China as the world’s biggest source of cheap factory labor. That could mean higher prices for the Chinese stuff we buy and thus raise inflation in this country.
But that doesn’t sound like a terrible thing for American workers, who lost their jobs to Asian sweatshops. And if both Chinese and American workers earn higher wages as a result, that would be good all around. In any case, the pandemic-related disruptions of supply chains have already started a trend whereby American manufacturers are bringing their operations back to these shores. Life has gone on, and despite that trend, inflation has started to moderate.
There are also quality- of-life benefits to a steady or modestly declining population. Was the U.S. a bad place to live in 1950, when there were half as many Americans as there are today?
Housing was certainly more affordable for average earners. Some fret about how a falling population would affect China’s crazy real estate sector, which has fueled much of the economy. But Chinese homebuyers might well appreciate lower prices for shelter.
The idea that prosperity must rely on strong population growth is greatly exaggerated. At bottom, it’s a kind of demographic Ponzi scheme, whereby the success of a society is fostered by an ever-larger younger generation supporting the smaller one before.
There are ways to provide for the unique challenges facing every generation. That should be true here, as well as in China.