Last week, when reviewing some of the family talk on the campaign trail, I mentioned a new study co-authored by Brad Wilcox called The Sustainable Demographic Dividend. As many National Review Online readers know, W. Bradford Wilcox is director of the National Marriage Project at the University of Virginia. He is also the president of Demographic Intelligence, the premier provider of U.S. fertility forecasts and fertility analytics for companies in the financial-services, food, household-products, insurance, juvenile-products, medical, and retail sectors. He talks to National Review Online about what exactly fertility and marriage have to do with the economy. –KJL
KATHRYN JEAN LOPEZ: What is a demographic dividend? Why is it important to the economy?
W. BRADFORD WILCOX: Traditionally, a “demographic dividend” has been defined as the economic advantage that countries transitioning from a high-fertility regime to a low-fertility regime gain when the children that were born during the high-fertility years have entered their prime working years (15–64) but are not having many kids of their own. This allows countries to focus their human and financial capital on education and the market economy, rather than raising children, and — assuming policy conditions are right — enjoy a spurt of economic growth.
Economist David Bloom argues that more than 25 percent of the per capita GDP growth associated with the East Asian economic miracle of the late 20th century can be laid at the feet of the dramatic demographic changes that swept over East Asia in the last half century, when the total fertility rate fell from about six children per woman in 1950 to well below two today in most East Asian countries. These demographic changes freed up time, energy, attention, and capital on the part of men and, especially, women that could be focused on the economy.
In the short term, this demographic dividend can work out brilliantly, as the East Asian miracle attests. But in the long term, this dividend can turn into a demographic liability as birth rates fall well below replacement and a society ceases to produce enough people to work in the economy and pay for the welfare state. This is what is now happening in Japan, and a similar fate may befall other leading economies in the region — from Taiwan to South Korea.
In fact, just last month, a leading South Korean think tank predicted that the South Korean economy could face a major downturn within the next decade, because the country’s workforce is now poised to shrink as a consequence of long-term low fertility in the country. The bottom line: In the short term, low fertility can bring increased economic productivity and growth, but in the long term, low fertility may undercut growth if population trends prove unsustainable to the economy and the welfare state.
LOPEZ: Is demography destiny?
WILCOX: No, it’s not destiny, but demography does have a major impact on the economy and the state — especially when the state is in the business of providing public pensions or health care to the elderly.
We’re seeing this right now in the United States with our debates about the long-term solvency of Social Security and Medicare. And many countries in Europe and East Asia are now facing severe fiscal pressures related to their own patterns of sub-replacement fertility and population aging. Obviously, it is hard to provide generous pensions and health care to retirees when the working-age share of the population is stagnant or shrinking, and the share of dependent elderly is surging.