Demographic Doomsday
Birth rates are falling faster than anticipated, threatening the economy and social welfare
The front page of The Wall Street Journal announced Monday this week: "Suddenly There Aren’t Enough Babies. The Whole World Is Alarmed." This is not a surprise, at least for those of us who follow the subject closely.
Here's what's happening.
In a decades-long seismic demographic shift, the world is hurtling towards a new milestone: fertility rates are plummeting to levels below what's needed to sustain population numbers worldwide. This is already the case in several leading economies, including Canada, the United States and all of Europe. Italy and other economies, including China, Japan, and Korea, are losing population, too.
"Since 2008 until today we have lost around 200,000 (Italian) newborns," according to Sabrina Prati, the general director of the Italian National Institute of Statistics, in an interview with euronews. this year. "Two-thirds of them are due to the fact that potential parents are missing. That’s because of the decline in births that dates back to 30 years ago." So, in effect, today, fewer people born decades ago are now of childbearing age and are having even fewer children than their parents.
The United Nations estimates that the global population will stop growing by 2086. However, this estimate is conservative and likely out-of-date. Other organizations, like the Club of Rome, believe that a decline could happen as soon as 2050, predicting that the global population will peak at 8.6 billion people that year.
Big Time Implications
This profound decline in fertility is sending shockwaves across economies and societies. It’s remaking global power dynamics and marking an unprecedented point in human history. Only a few times in history have the global population reversed, including the Black Plague and World War II. However, those were not due to a birth rate decline—this is a first.
The birth rate decline is pervasive from high-income nations to developing countries, transcending income levels, education, and workforce participation. Even countries like India, which recently became the world's most populous nation, are grappling with fertility rates below replacement levels. In 2021, it dropped below the 2.1 rate needed to maintain its population.
"While these challenges are still a few decades away for India, we need to start acting now with a comprehensive approach for the future," Poonam Muttreja, chief of the Population Foundation of India, said in a statement. "Economic policies stimulating growth and job creation, alongside social security and pension reforms, will also be essential in adapting to and mitigating the impacts of declining fertility rates."
Government leaders worldwide are now sounding the alarm, recognizing the far-reaching implications of this “demographic crisis.” Shrinking workforces, sluggish economic growth, strained pension and heathcare systems, and concerns over national vitality are top of mind for policymakers worldwide. As populations dwindle, the prospect of diminished global influence looms large for major powers like the U.S., China, and Russia—it’s a national security issue.
The Second Demographic Transition
Despite concerted efforts to reverse birth rate decline through pronatalist policies like parental leave and child-care subsidies and even car giveaways, governments have struggled to make a dent. Japan, in particular, has implemented several initiatives over decades, yet its fertility rate continues to spiral downward. The same is true for European nations, especially those in the Nordic countries.
The root causes of this demographic shift aren’t fully understood. However, they are complex and likely reflect broader societal changes that have occurred over decades.
Shifting attitudes towards marriage and parenthood, increased education and workforce participation among women, and economic pressures reshaping traditional family structures all play a role. This phenomenon, often dubbed the "Second Demographic Transition," underscores a broader societal reorientation towards individualism and smaller families.
“The Second Demographic Transition is characterized by rises in divorce rates, single living, and cohabitation, as well as delayed and extra-marital fertility,” notes Elyakim Kislev, author of Happy Singlehood: The Rising Acceptance and Celebration of Solo Living. “These processes all started after World War II, leading up to the 1970s.” And they continue today.
Testing New Approaches
According to Japanese Prime Minister Fumio Kishida, “It is now or never when it comes to policies regarding births and child-rearing — it is an issue that simply cannot wait any longer.”
The birth rate challenge has forced countries to experiment with various incentives, from "baby bonuses" to tax benefits, in a bid to encourage childbirth. However, evidence suggests these measures yield only short-term gains, leaving long-term demographic challenges unresolved. Small-scale interventions, like those in Nagi, Japan, have shown long-term promise by increasing birth rates. Yet, they’ve not scaled to the regional or national level.
Some businesses, like Porsche and Starbucks, are pivoting to the new demographic reality by reconsidering and extending the age profile of their workers or creating new products and services for or inclusive of older adults. Some companies are testing artificial intelligence to solve their labor woes, and some nations, like France, have increased their retirement ages.
“Populations are aging; work lives are lengthening. Fewer young people are entering the workforce, due partly to lower fertility rates, partly to longer education,” noted Bain and Company in their 2023 report Better with Age. According to OECD data, a long-term trend toward earlier retirement is slowly reversing, which could help the economy and social welfare programs.
Yet, if nothing is done on either front, labor shortages will worsen, and healthcare and retirement systems will strain, if not break, under the weight of an aging population. Without decisive interventions, the repercussions of declining fertility rates will reverberate for generations to come, reshaping economies, societies, and the global geopolitical landscape.
“The economic and social forces behind declining births are unlikely to be reversed in the long term,” noted the Financial Times Editorial Board earlier this year. “Ultimately, the rich world will have to get used to having fewer youngsters around. That means older workers, AI and automation will have to pick up the slack.”
How is you or your organization building resilience in the face of the Second Demographic Transition and our shift to a world with fewer children and more older adults? Reach out to to share innovative recruitment and retention strategies or product and service design approaches.
Stunning insights and I am so grateful you are sharing them. We have to read the writing on the earth.
Mega changes are happening and we must adjust. If we do, mega opportunities exist especially for our “olderhood” phase of life which is also going thru mega changes creating opportunities.