April 10, 2006

THE POPULATION BOMB IS AN IMPLOSION, NOT AN EXPLOSION (via Mike Daley):

Growing Old the Hard Way: China, Russia, India (Nicholas Eberstadt, April/May 2006, Policy Review)

Over the past decade and a half, the phenomenon of population aging in the “traditional” or already affluent oecd societies has become a topic of sustained policy analysis and concern.1 The reasons for this growing attention — and apprehension — are clear enough.

By such metrics as median age or proportion of total population above the age of 65, virtually every developed society today is more elderly than practically any human society ever surveyed before the year 1950 — and every single currently developed society is slated to experience considerable further population aging in the decades immediately ahead. In all of the affluent oecd societies, the proportion of what is customarily called the “retirement age population” (65 years of age or older) will steadily swell, with the most rapid expansion occurring among those aged 80 or more. Simultaneously, the ratio of people of “working age” (the cohort, by arbitrary though not entirely unreasonable custom, designated at 15–64 years) to those of retirement age will relentlessly shrink — and within the working age grouping, more youthful adults will account for a steadily dwindling share of overall manpower.

Whether these impending revolutionary transformations of national population structure actually constitute a crisis for the economies and societies in the industrialized world is — let us emphasize — still a matter of dispute. To be sure: This literal upending of the familiar population pyramid (characteristic of all humanity until just yesterday) will surely have direct consequences for economic institutions and structures in the world’s more affluent societies — and could have major reverberations on their macroeconomic performance. Left unaddressed, the mounting pressures that population aging would pose on pension outlays, health care expenditures, fiscal discipline, savings levels, manpower availability, and workforce attainment could only have adverse domestic implications for productivity and economic growth in today’s affluent oecd societies (to say nothing of their impact on the global outlook for innovation, entrepreneurship, and competitiveness).

But a host of possible policy interventions and orderly changes in existing institutional arrangements offer the now-rich countries the possibility (to borrow a phrase from the oecd) of “maintaining prosperity in an aging society” — and in fact of steadily enhancing prosperity for graying populations. Today’s rich countries may succeed in meeting the coming challenges (and grasping the potential opportunities) inherent in population aging — or then again, they may fail to do so. The point is that an aging crisis is theirs to avert — and they have considerable scope for so doing.

In contrast to the intense interest currently accorded the issue of population aging in developed countries, the topic of aging in low-income regions has as yet attracted relatively little examination. This neglect is somewhat surprising, for over the coming decades a parallel, dramatic “graying” of much of the Third World also lies in store. The burdens of pronounced population aging, furthermore, are unlikely to be born as easily by countries still poor as by countries already rich. Simply stated, societies and governments have fewer options for dealing with the problems imposed by population aging when income levels are low — and the options available are distinctly less attractive than they would be if income levels were higher.

Over the next generation, it seems entirely likely — indeed, all but inevitable — that a large fraction of humanity, peopling countries within the grouping often termed emerging market economies, will find themselves coping with the phenomenon of population aging on income levels far lower than those yet witnessed in any society with comparable degrees of graying. For such countries, the social and economic consequences of aging could be harsh — and the options for mitigating the adverse effects of population aging may be fairly limited. In some of these countries, population aging could potentially emerge as a factor appreciably constraining long-term growth and development. [...]

China’s impending aging wave is illustrated by Figure 2, which compares the country’s actual population structure in 2000 with its projected profile for 2025. China has evidently experienced subreplacement fertility levels since the early 1990s.7 Consequently, as may be seen from these projections, every age group under 35 years of age is anticipated to be smaller in China in 2025 than it was in 2000 — while all of the older groups are expected to be larger. China’s coercive population control program may have succeeded in limiting numbers for the country’s rising contingents of young people, but its elderly population will be exploding in the years ahead — waxing at an annual pace of something like 3.5 percent per year. Between 2005 and 2025, about two-thirds of China’s aggregate population growth will occur in the 65+ grouping — and that cohort will likely double in size, to roughly 200 million people. By 2025, under current un and Census Bureau projections, China would account for less than a fifth of the world’s population but almost a fourth of the world’s senior citizens. [...]

India’s population profile will age over the coming 20 years, but the country will nevertheless remain relatively youthful. Although projections indicate that India’s 65+ cohort is slated to double in size between 2005 and 2025, those elders account for less than 8 percent of overall population 20 years hence; the country’s median age then is only just over 30; and the psr is almost 9:1 — a level last witnessed in today’s more developed countries before the Second World War.

But in many ways vast India is a sort of arithmetic expression that averages the sum of its many diverse components: so, too, with population aging. Closer examination reveals that with population aging there are in reality two Indias, with very different aging prospects and challenges: one that stays remarkably youthful over the next 20 years; the other already embarked on a very rapid graying.

As already noted, the pace and scale of aging tomorrow is always largely determined by local levels of fertility today. India’s total fertility rate has dropped by more than two-fifths over the past three decades — from about 5.4 births per woman per lifetime in the early 1970s to approximately 3.1 today — but the pace of change has varied strikingly from one region and setting to the next.

It will surprise some readers to learn that sub-replacement fertility today prevails in many of India’s huge urban centers — New Delhi, Mumbai (Bombay), Kolkata (Calcutta), and Chennai (Madras) among them.18 But even more surprising, throughout much of rural India — especially rural South India — fertility levels today are also near or already below replacement.

Dr. P.N. Mari Bhat of Delhi University’s Institute for Economic Growth has laid out the implications of these discrepant patterns for future aging in the supra-statal regions he labels “north India” and “south India.”19 Currently (2005), fertility levels for the roughly half-billion population of this “north” are almost twice as high as for the nearly quarter-billion people of this “south.” (India’s remaining 350 million people live in states and union territories not included in Mari Bhat’s “north/south” analysis.)

By 2025, “north” India’s population would still be very young. Its projected median age would be just 26 — and the 65+ group would account for less than 6 percent of total population. On the other hand, “south” India’s population structure in 2025 would bear unmistakable signs of population aging. There, median age would be about 34 (a level comparable to Europe’s in the late 1980s), and 9 percent of the population would be 65 or older (about the same share as Japan’s in 1980).

Mari Bhat does not break down his 2025 projections to the state level, but Professor Tim Dyson of the London School of Economics has done so for India for 2026.20 His projections differ from Mari Bhat’s in some particulars (most importantly, in positing a slightly faster pace of fertility decline over the next generation), but his calculations similarly depict a growing “aging gap” between north India and south India — with aging by 2026 already having progressed considerably in a number of southern states. In each of India’s four southernmost states, median age would be over 35 — and over 37 in both Kerala and Tamil Nadu. (For reference, think of Western Europe around 1990.) In these projections, Kerala and Tamil Nadu’s proportion of persons 65 and older both exceeded 10 percent by 2025. (Think here of Japan in the mid-1980s.)

A generation before Western Europe’s median age reached 35, however, the region’s gdp per capita was in the range of $6,000–$8,000 (at 2000 prices and exchange rates); a generation before Japan’s share of 65+ to total population hit the 10 percent mark, the country’s per capita gdp (at constant 2000 exchange rates and prices) was likewise around $7,000.21 In 2001 — that is to say, 25 years before the two states in question are projected to comport to those same demographic specifics — exchange-rate-based gdp per capita was less than $450 a year in both Kerala and Tamil Nadu. By any international or historical benchmark, indeed, many areas of India are facing the onset of rapid population aging on current levels of per capita output that are astonishingly low.

Posted by Orrin Judd at April 10, 2006 11:17 PM
Comments

Holy Cow, the full article should be required reading.

That's the most comprehensive treatment of the topic that I've ever seen.

But it does tend to vindicate Malthus, doesn't it ?

Posted by: Michael Herdegen [TypeKey Profile Page] at April 11, 2006 5:20 AM

Michael:

No, it turns Malthus upside down. Declining population is the crisis, not rising.

Posted by: oj at April 11, 2006 6:47 AM

But the crisis is that the population of China will be too large to be supported by their available resources.

I suppose that one could then argue that by the time the crisis hits full-force, the generation that's going to die prematurely would have already died naturally in Malthus' day anyhow, so all that it proves is that advanced technology won't always make up for bad decision-making.

Posted by: Michael Herdegen [TypeKey Profile Page] at April 11, 2006 7:28 AM

No, the crisis is that the population has stopped growing. It coul be supported easily otherwise.

Posted by: oj at April 11, 2006 7:38 AM

This shows that Malthusian prophecies can come true if the increasing population that comes with agricutural advances isn't given free rein to invent, create and act freely.

Posted by: Ali Choudhury at April 11, 2006 10:18 AM
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