Birth rate and ageing demands

In reality, when the fertility rate falls, the result is a decreasing workforce to support an increasing number of retirees. Rapid contraction of the labor force could have a negative impact on the economy, on growth, consumption and on the ability of current generations to pay for entitlements for older Trinidadians. Falling birthrate lowers demand for services and goods shrinks the housing market. What about the demand for schools? Does having fewer children mean smaller class sizes? Does it mean less demand for teachers?

It is important for the government and policy-makers to plan around fertility rates, as well as population ages, as these will tell them how to prepare for the future: how many schools they are going to need, the workforce available, pressures on the environment and transportation, and where the focus must lie. That’s how societies know what kind of retired population to plan for and what social programs could be needed. What about the fertility class: that is fertility rates for families in poverty and those heavily dependent on government welfare as opposed to the fertility rate for couples that can afford it? Would this have an impact on the quality of the workforce?

Robert Arnott, chairman of Research Affiliates, thinks policymakers don’t realise how much demographics will hurt economies now because they never appreciated how much they helped in the past. From 1960-2000, GDP per capita rose an average 2.6 percent a year in the big six developed countries. Since then, it has grown less than 1 percent a year. Arnott thinks the demographic drag is going to worsen, subtracting roughly a percentage point from the annual rate in the next few decades. That suggests living standards barely growing, or even falling.

Reiner Klingholz, head of the Berlin Institute for Population and Development, says societies are unsure of their goals now that easy economic expansion is over. “We have no plans for how to run a society without growth,” he says.

In aging societies, the big fear is that paying for benefits for the swelling number of retirees will weigh on economic growth. But even if benefits were fully funded, more retirees would practically guarantee slower growth for three reasons. First, retirees don’t really produce anything. So, a country’s output falls unless new workers producing the same value of goods and services replace them.

Second, retirees don’t save, invest and spend as much as workers with paychecks. That, in turn, cuts demand and slows growth. A third reason is less obvious: Productivity of workers, or output per hour, tends to peak as they reach their mid-50s. And the increases in productivity as they near that age tend to be small. And with economic growth, only the change in productivity from year to year counts, not the level.

We tend to think economic growth comes from working harder and smarter. But economists attribute up to a third of it to more people joining the workforce each year than leaving it. The result is more producing, earning and spending. Economists are worried not just because growth is stalling in working-age populations. Their numbers as a share of the total population in many countries is falling. Economists like to see this share of total population rise, because it means more people are earning money, expanding the tax base and paying for schools for the young, and pensions and health care for the old.

The United Nations defines a country as ‘ageing’ when 10% or more of its population is over the age of 60 years. In 2015, there are 901 million people aged 60 or over, comprising 12 per cent of the global population. According to data from the Central Statistical Office in Trinidad and Tobago, currently over 13% of the population is over the age of 60 years. According to the UN World Population Prospects (2015), the percentage of persons in Trinidad and Tobago aged 60 years and over is projected to be 28% in 2050 and will continue to grow.

In reality, we can only speculate as to what will happen in 50 or 100 years but we can agree however that very low fertility rates could lead to population declines, which could be bad for our economy. Equipped with the data and hard facts, how are we planning for this? What preparations are the government and policy-makers making? What are the policy decisions being made now? Or will the government continue to suffer from a lack of foresight and treat with this like the diversification plan? Then the aged population issue will be suddenly upon us and we will be unprepared… just like we were for a fall in oil prices.