“The demographic clock is ticking for the West.”
China announced earlier this year that for the first time since the 1960s, deaths outnumbered births and its population slipped in 2022 by 850,000 to 1.41 billion.
COVID-19 brought this event forward a few years. More fundamentally, the legacy of China’s now-abandoned one-child policy and the high cost of raising and educating children in a more technology-intensive, urban society discourages a birth rate equal to what is necessary to sustain a population.
Going forward, China will suffer from fewer workers, fiscal challenges to support more seniors and higher capital costs as resources are diverted. But pronouncements of China’s economic decline and dropping out of the race for global supremacy are terribly overdone.
China for years has been moving up the technology ladder — with strengths in green energy, computer chip-making and now a world-class electric-vehicle industry. Such higher-value activities mean that China’s economy can still grow with fewer workers.
Western governments will be further challenged to finance investments to mitigate climate change, infrastructure, investments in R&D and defense without imposing declining living standards on the working age population through taxes or inflation.
Textbook policy remedies — from subsidies to support more children to government-financed and industry-mandated childcare — haven’t worked. Meanwhile, apocalyptic prophecies and myopic prescriptions plague well-meaning public policymakers, because policy analysts too often see the world 25- or 50 years from now in terms of the constraints, technologies and socisal arrangements we have today.
Until the early 19th century, economic growth was slow and largely determined by population growth — the productivity gained through the invention of the wheel, the three-part plough, breakthroughs in navigation and the like were gradual and absorbed into paying for the monuments and follies of religion, aristocracy and aggression — cathedrals, palaces and armies.
Only with the Age of Invention, the Industrial Revolution, and widespread development of modern financial markets to move capital to its most productive uses did we see economic growth per-capita take off. This resulted in the emergence of a large, empowered middle class — first in the West and now increasingly elsewhere.
Aging and changing
How we think about aging will change. The global headcount now stands at 8 billion and will peak above 10 billion late in this century. To raise the half of humanity living in poverty with the requisite goods and energy, avert or mitigate flooding coastal cities and severe weather and sustain living standards in developed economies, two things appear clear — people will have to work longer, and a smaller population consuming fewer resources will be a welcome development.
The retirement age, as defined by full benefits, in China, the U.S. and Europe, ranges between 60 and 67. Whenever a leader attempts to raise the age, as France’s President Emmanuel Macron tried recently, all hell breaks loose. Progressives tell us how working longer may be fine for the New York-Washington “Acela class” — doing corporate deals and typing on computers — but cleaning people can’t be on their knees into their 70s.
The Japanese already have faced the problems of an aging population and declining workforce. Japan has sustained per-capita incomes by accepting immigrants from poorer nations, working smarter— redesigning physical tasks so that older workers can do them — and flexing their superior acumen with robotics.
For the inexorably increasing share of workers in front of computer screens, some form of mental decline and problems with focus, memory and processing speed is the challenge to working longer.
Until now, treatments have focused on removing plaque from the brain after dementia begins. But medical researchers are closing in on the equivalent of statins, which often avert heart disease before it can develop, for the brain. We could take these medications in our 50s to keep us working at near top-level well into our 70s.
In modern societies based on intellectual as opposed to physical labor, children cost too much to raise and educate. One-child marriages are becoming more prevalent in the West. Schools and universities simply take too long and use too many resources to educate the young. We need to bring forward vocational and professional training to start earlier in schools. For example, law and medical training start earlier in the U.K. than in the U.S.. For less-demanding occupations, training and internships could be moved into the final two years of high school.
By extending the working life at each end, we can manage an aging population and prosper.
Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.