Does the economy need more people?
In the age of technological disruptions and climate change, the case for a young and fast-growing population driving India’s economy is growing weaker
The decision of some state governments to incentivise smaller families and penalise larger ones has widely been critiqued as being politically motivated. Maybe so. The fact is no country (or state) in the world lacks political or economic motivations for managing population sizes — whether this policy is influenced through birth control or immigration.
If you do want to inhibit a population expansion, there is only one way to do it right: Women’s empowerment. Educate, skill and employ more women in the workforce, and your population growth rates will start falling. If you want to do the opposite, ie, grow the population, you again incentivise women to have more babies by giving them time and money to do so.
There are good reasons to curtail population growth in some parts of the world, especially Africa, West Asia and the Indian sub-continent. Malthus was wrong to claim that population growth will outstrip resources. We have the opposite problem: That resources will be found by doing greater damage to the earth’s future. But there is a bigger issue. Growth no longer requires large labour resources. Higher youth populations are not always needed to drive growth. This has happened for two main reasons: One is the increasing contribution of capital and technology to growth, and the other is rapid “dematerialisation” of most things produced. The term dematerialisation means that most physical products made today (not to speak of virtual and digital products) use less and less materials and energy than they did before. Cars use less steel and aluminium than they did a few decades ago. Most gadgets use less energy than they did earlier. This rapidly growing trend towards the use of less and less materials and energy per unit, when mapped against the worldwide trend towards a population that is already levelling off in the richer parts of the world, means that even demand for raw materials will not remain that strong in future. When you take these factors together — tapering demand for materials and energy, a levelling population, and increasing contributions from capital and technology to growth — what is the merit in the old paradigm that population growth in the right demography is the key to growth? We can grow and generate wealth and income without that many people. Technology can even substitute for a young population, as a society grows greyer.
On the other hand, as the world has become more and more dependent on sophisticated technologies, the market for skills has polarised. There is a huge need for highly skilled people, and also for low-skilled people, but demand for middle-skilled, middle-class, middleincome professions is shrinking. Technology eviscerates the middle functions earlier done by humans.
At the bottom end, technology reduces the level of skill needed to hold a basic job. Consider how easily new Uber and Ola drivers, with practically no knowledge of city topography, navigate roads using Google maps and apps. Consider how easy Ikea has made it for people to assemble their own furniture. Consider also how easily we bank today using a mobile phone with no need for the people manning bank branches.
The problem: While low-skill jobs, which may not be what one aspires for, will be aplenty, the formal and comfortable mid-skill jobs will reduce steadily. If we state the problem differently, it implies that you can hold on to your middle-income job only if you upskill, which may not be an easy thing to do for mid-career slower learners. Can a banker suddenly become a cyber-security expert? And what if lakhs of them actually do? Cyber security professionals will then not earn significantly more than Swiggy delivery boys.
Also consider how countries with a falling population are coping without the so-called demographic dividend aiding them. Japan, China, South Korea, Singapore, Taiwan, and some parts of northern Europe are facing population declines in future since their total fertility rates (TFRS) are well below replacement levels. But while their growth may indeed falter, technology is stepping into the breach to maintain lifestyles. Even with a rapidly ageing population, most countries are able to get what they want done without excess immigration or higher birth rates.
The real problem is for countries like India, where too TFRS are reaching replacement levels but the working population numbers are so huge as to make it near impossible to find them even deadbeat jobs. We can continue to upskill, but upskilling is a double-edged sword: The more you upskill, the lower the relative wages of those upskilled. Today, a basic graduate degree will not get you any job that earns substantially more than what a highly productive Flipkart delivery person does. If you learn basic coding, you will get nowhere in software services, for this part of the job is being automated. You need to grow higher and higher skills at a faster rate to stay in the upper 10 per cent of jobs.
In a world of skill polarisation, staying on top is a continuous learning challenge, and only those with resources can achieve this. In this context, having a huge youth cohort is hardly an advantage, especially when the skills you can learn by expending a reasonable amount of time and resources are always the next ones to be automated.
Issues like dependency ratios — proportion of dependents to working population — may not be that relevant when jobs are anyway going to be automated. What needs done will get done by a bot or robot, and may not always need a young man or woman to do it.
There is also a significant threat if populations continue to bulge in the most vulnerable parts of the world: Climate change and a deteriorating environment. Dealing with these existential crises needs us to moderate consumption, and that means a slower growth in population. Young people need more resources than older people and the planet cannot afford a rapidly rising rate of consumption in its poorest countries. India cannot aspire for a first world lifestyle without damaging the world. China was the last big country to get past that gate.
The case for a young and fast-growing population is growing weaker in the age of technology-driven growth and climate change. We do need some babies to be born, but the old TFR goal of 2.1 live births per woman no longer holds. We need to bring down population rates faster, and the best way to do it is by focusing on women. Nothing else matters. If we don’t restrain population growth, nature will.