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Is low fertility really a problem? Population aging, dependency, and consumption.

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Population aging due to longer lives and low fertility presents challenges. Analysis shows moderately low fertility and population decline favor the broader material standard of living, despite impacts on government budgets.

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Area of Science:

  • Demography
  • Economics
  • Public Policy

Background:

  • Global population aging is accelerating due to increased longevity and below-replacement fertility rates.
  • Concerns exist regarding the adverse effects of population aging on public finances and living standards.
  • National Transfer Accounts (NTA) data provides a framework for analyzing intergenerational resource flows.

Purpose of the Study:

  • To analyze the impact of different fertility levels on government budgets and living standards.
  • To determine the optimal fertility rate for economic well-being considering demographic shifts.
  • To provide evidence-based insights for policymakers addressing population aging.

Main Methods:

  • Utilized National Transfer Accounts (NTA) data from 40 countries.
  • Modeled the effects of varying fertility rates on age structure, government finances, and per capita consumption.
  • Incorporated the costs of capital for a growing labor force in the analysis.

Main Results:

  • Fertility well above replacement level (2.1 births/woman) benefits government budgets.
  • Fertility near replacement level optimizes living standards when family and government effects are considered.
  • Fertility below replacement level maximizes per capita consumption, accounting for capital investment needs.

Conclusions:

  • While low fertility challenges government programs and very low fertility lowers living standards, moderately low fertility and population decline support the broader material standard of living.
  • Policy implications suggest a nuanced approach to fertility targets, balancing fiscal health with overall societal well-being.
  • The study highlights the complex relationship between fertility, age structure, and economic outcomes.