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.
But, in many cases, demographic pressures could be addressed if countries in the developed world had the political will to reform public pensions and health care, and do more to draw the elderly into the economy. Political economist Nicholas Eberstadt recently wrote that we cannot “neglect the enormous economic potential of ‘healthy aging’: our older citizens are more robust, more educated, and better placed for productive work in older life than ever before. If our societies choose not to make use of that potential, that will be our political decision — not some consequence of inescapable demographic realities.”
But I’m not convinced that the political will can be found to address these demographic realities among many of the world’s leading economies. And in that case, to quote Eberstadt again, these demographic trends “portend ominous changes in [their] economic prospects: major increases in public-debt burdens, and slower economic growth.”
LOPEZ: Does anyone fully appreciate, or even know, how badly China may soon crash, given the demographic cliff they’ve been driving off for the last few decades?
WILCOX: No, I don’t think anyone does. But a number of scholars are raising the alarm over the economic implications of China’s current demographic course, where the workforce is poised to shrink 21 percent by 2050, in part because of China’s one-child policy. This demographic trend may put the brakes on China’s current dramatic growth rates.
For instance, a recent Rand report concluded that India, which has not seen its total fertility rate (TFR) fall below two children per woman (China’s TFR is about 1.5), may enjoy a higher growth rate than China in this century because it now has a “demographic advantage” — a growing workforce — over its neighbor to the north.
LOPEZ: “For men and women alike, marriage fosters financially prudent behavior, including higher rates of savings and greater accumulation of assets.” Should we be occupying broken homes? Seriously though, does this have anything to do with current economic issues?
WILCOX: Seriously, we know that adults are more likely to behave responsibly, from a financial perspective, when they get and stay married. We also know that children in the U.S. are more likely to graduate from high school, attend college, and be gainfully employed when they are raised in an intact, married family.
Finally, men work harder, work smarter, and work longer hours after they get married. This translates into a marriage premium of about 19 percent for men in the United States. Thus, marriage seems to draw men into a higher level of engagement in the economy.
So, the fact that the marriage rate has fallen by about 50 percent since 1970, and that about half of all American children will now spend time outside of an intact, married family. would seem to be of some consequence for the health of the American economy. We’re working on quantifying the effect of the nation’s retreat from marriage on various sectors of the U.S. economy, not to mention the economy as a whole, right now at the National Marriage Project.
LOPEZ: Isn’t the whole “marriage and the baby carriage” trope just conservative types trying to make statistics fit their worldview?
WILCOX: Certainly, some of my colleagues take this view. And it’s important to acknowledge that the size, strength, quality, and stability of the family are not the only major factors influencing the contemporary economy. Education, R&D funding, equality of opportunity, a just and efficient system of taxation, and affordable health care are other major factors that influence the health of the economy.
But insofar as the family is a major generator of human and social capital, and a major engine of consumption, I think it’s fair to make the case — as we do in The Sustainable Demographic Dividend – that strong families play a key role in “sustaining long-term economic growth, the viability of the welfare state, the size and quality of the workforce, and the profitability of large sectors of the modern economy.”
On the last point, we find that adults who are married with children generally spend significantly more on personal insurance, health care, groceries, household products, and juvenile products than do other adults, especially childless singles. So, companies as varied as Georgia-Pacific (paper products), General Mills (cereal), Kroger (groceries), Mars (candy), Mattel (toys), Northwestern Mutual (life insurance), Procter & Gamble (household products), and Target (groceries, household products) would seem to be in a position to improve their bottom-line performance when American families are strong.
LOPEZ: How can corporate America help families? Is that realistic? Is there anything happening along these lines already?
WILCOX: The report argues that companies that depend on strong families for their bottom-line performance should do at least four things:
1. Get behind non-controversial, positive social-marketing campaigns that educate the broader public about the range of benefits that accrue to children, adults, and communities when (most) adults get and stay married.
2. Make sure that their advertising dollars are spent on ads that, at the very least, don’t present negative images of family life and, more often than not, present positive images of family life.
3. Use their philanthropic dollars to support nonprofits and think tanks working to help strengthen marriage and family life in the U.S. and around the globe.
4. Make sure that their own internal work-family policies for their own employees are family-friendly.
We’re beginning to see more and more companies taking action on these fronts. For instance, Procter & Gamble and Walmart have gotten behind “Family Movie Night” — an innovative effort to produce family-friendly movies on network TV. And companies like IBM are taking the lead in providing their employees with flexible work hours — which, in many cases, seem to boost worker productivity and reduce office expenses.
I hope that more companies — especially ones that depend on strong families for their own bottom line — will follow suit. After all, it’s in their long-term interest to do so.
— Kathryn Jean Lopez is editor-at-large of National Review Online.