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Can a nation prosper in zero population growth?
By:China Daily
update:May 07,2022
 
A family pose for a photo at the Central University of Finance and Economics in Beijing. [Photo provided to China Daily]
 
The annual sessions of the National People's Congress and the National Committee of the Chinese People's Political Consultative Conference in March addressed the question of how to ease the financial burden on parents in order to encourage them to have more children. There have been discussions on proposals such as giving monthly subsidies to families with more than one child and providing free kindergarten care for the third child of every household to increase the fertility rate.
 
Indeed, such measures will alleviate families' financial burden, somewhat easing their worries about raising children. And providing quality nursery care services for parents will help improve women's participation in labor and thus mitigate the labor shortage problem due to the Chinese mainland's rapidly aging population.
 
But will such measures really help increase the fertility rate?
 
All these measures are good but-based on overseas experiences and our empirical studies and given that small household is now the norm in China-they may help increase the fertility rate only slightly.
 
Also, the number of marriages registered in 2021 was at an all-time low. Along with this, delayed marriage and the trend of remaining single are not conducive to increasing the fertility rate.
 
While it is necessary to take all possible measures to increase the fertility rate to counterbalance the effects of the fast rising aging population and prevent a drastic labor shortage, the authorities could explore other ways to increase the low fertility rate.
 
Perhaps they should focus on how to make the country prosper in a low- or zero-population growth environment as we have seen in developed countries such as Japan, Denmark and Sweden. Zero population growth is attained when the population is stabilized by balancing the death and birth rates. It happens only when births and immigration equal deaths and emigration year after year.
 
Zero population growth has huge implications for overall GDP growth, and consumption and investment levels. And the average global GDP growth rate will decline from the current 3.5 percent to 2.4 percent by 2040, showing a long-term trend to "regress to the mean".
 
Owing to a decline in disposable income, there would be a shift in consumption patterns, perhaps with the aging population spending only on necessities. A stationary population also translates into fewer young people devoted to research and development, thereby slowing down the technological progress. As a result, we could enter a condition of secular stagnation at risk of economic recession and low investment incentives.
 
Zero population growth influences not only population size but also the age structure that constitutes an essential decline in labor participation rates, labor supply and productivity. And the fall in the global labor participation rate by 1.6 percent from 2015 to 2030 will trigger a large-scale labor shortage.
 
Furthermore, an aging workforce drags down average productivity due to lower adaptability to innovations and a decline in both cognitive and physical capacities. Fewer young people entering the labor force also means smaller "stock of knowledge" and a declining rate of increase in human capital, offsetting, to some extent, the productivity gains.
 
Also, the growing number of non-taxpaying senior citizens would need more social security schemes, higher health expenditure and pensions, greatly increasing the financial burden on governments. For example, higher rates of disabilities and morbidities of age-degenerative diseases explain the skyrocketing health spending in Japan, where the government deficit reached 10 percent of GDP in 2020 and could keep increasing in the coming years.
 
Therefore, to sustain its development in a zero-population growth environment, a country has to improve workforce participation.
 
Providing better support for childcare services is important, while strict laws against sex discrimination could create more opportunities for women workers, and working arrangements such as part-time options and work-from-home practices could help new mothers strike a balance between career development and childbearing.
 
As for older workers, policies such as advancing the retirement age, providing continuous vocational training, and having flexible working hours could incentivize senior workers to stay in the workforce and help society to extract their comparative advantages.
 
There is also a need to develop laborsaving devices and machines using artificial intelligence, which could enhance productivity in sectors such as supply chain management, logistics and manufacturing. True, automation is a double-edged sword, but while it eliminates jobs, it can also free up human resources to focus on high-order nuanced tasks.
 
It is vital to recognize the technological divide and job polarization of low-skilled workers, and work out policies to manage the distribution of gains and help the vulnerable groups to harness the benefits of technologies.
 
With limited empirical evidence, issues wrapped up in zero population growth remain ambiguous, but research tends to shed more negative light on its incomparable effects on population composition and structure.
 
Aging population comes at a price; it impacts economic sustainability, technological progress, the workforce and public spending. So the authorities should plan ahead and readjust policies appropriately to deal with the effects of an aging population. This demographic transition could pose a huge challenge, and whether it leads to another crisis or new breakthroughs would depend on governments' response and adaptability.
 
Nicole Chung is a researcher at the Faculty of Social Science; and Paul Yip is the chair professor (population health) at the Social Work and Social Administration Department at the University of Hong Kong.

By Nicole Chung and Paul Yip 

 
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