Bye-bye baby – how falling birth rates are leading to economic disaster

Forget climate change: population decline is, say some, the most pressing potential catastrophe facing humanity. Ed Cumming talks to the experts

‘Ihad always known I didn’t want to have children, but why?” says Ruby Warrington. In her 40s, happily married and child-free, Warrington is a journalist whose new book, Women Without Kids, mixes her personal experience with an anthropological look at why the global birth rate has dropped.

“I had always accepted that there was something wrong with me for not wanting children,” she says. “Then I reached my early 40s and started looking ahead to the menopause. I felt no panic and realised I was quite excited. I realised that all the selfdoubt and shame I’d felt about not wanting to have children had come from external conditioning.”

She realised she was part of a global trend of women – and men – deciding not to have children. “I can look back and see that my parents divorced when I was young, and being raised by a single parent was difficult financially. I knew from an early age that I wanted to earn enough to support myself. So I prioritised my career and found more satisfaction and fulfilment in work than in family life. Our economy has created conditions which make it hard for people to live a comfortable life and do the labour-intensive, resourceheavy work of child-rearing.”

The simple question at the heart of Warrington’s book speaks to humanity’s most urgent problem. For James Pomeroy, the most alarming spectre stalking the globe sounds almost boring: demographic change. As a global economist for HSBC, his job is to squint at the tea leaves and tell his bank’s staff and clients what they might expect in the future.

When he looks at the numbers, he is worried. “I’m an optimist,” he says, “but this is one area where the data continues to go in the wrong direction.”

The economic prosperity enjoyed by the vast majority of the world’s population over the past 150 years or so was based on – among other things – a growing population. More people meant more labour, bigger markets, improved competition and innovation, and economies of scale. Average earnings, life expectancy and the range of goods and services available have increased dramatically all over the world. The US does not have a much higher GDP per capita than some

European countries; but it has a much larger population. China has a lower GDP than many of its neighbours, but the weight of population makes up for it, even after the ill-fated one-child policy.

In some countries, such as South Korea and Singapore, a well-timed “demographic dividend” in the second half of the 20th century gave them a terrific prosperity boost. That boom is over. Birth rates have been falling for decades, as women have become more educated, joined the workforce and decided the costs of having children – physically and financially – are not offset by the benefits.

The key number is 2.1, the “replacement rate” – the number of children women need to have on average to maintain the population when you take into account mortality.

Anything below 2.1 means a falling population for a country, if it is not countered by immigration. A smaller young population means a smaller workforce, not to mention a greater imbalance between net contributors and recipients from the economy. In 2022, the birth rate in the UK dropped to the lowest level in two decades, with 605,479 live births in England and Wales, down 3.1 per cent from 2021. With an ageing population that needs caring for, the burden on the working population is heavier than ever.

“Demographic change is up there with climate change as the biggest threat to human civilisation,” Pomeroy says. In Britain, he says, the number of people who died as a result of Covid-19 was less than half the number of babies not born as a result of the falling birth rate during the pandemic. According to ONS projections, the UK population will increase by 6.6 million in the 15 years from 2021 to 2036, but net migration will make up more than 90 per cent of this.

“In the UK, the difference between the good and bad scenarios [in birth rate] amounts to about 0.3 per cent on GDP growth every year until 2050,” Pomeroy continues. “There is no other variable that could have as much of an impact on underlying growth in the UK between now and then. I’m surprised it’s niche news, and not on the front pages.”

The public service paradox

The UK has long benefited from a growing population. “We haven’t replaced ourselves by births alone since 1976,” says Prof Sarah Harper, the director of the Oxford Institute of Population Ageing. “But, like France, we’ve always had a very healthy immigration policy. Since the Second World War we have exported economic capital to the Global South, and imported human capital. The EU gave us a further boost because we were part of that freely available influx of workers.”

Recently, however, the link in the UK between an increasing population and economic prosperity appears to have broken. Despite high levels of net migration, Britain’s average earnings have remained stagnant for more than a decade. A report by the think tank Centre for Cities, released last month, found that poor and rich parts of the country had been equally affected by this stagnation since 2010. Even London, traditionally Britain’s powerhouse, had levelled off. “The UK hasn’t struggled to create jobs, which is very welcome,” the report said. “It does, however, appear to have struggled to generate ‘good’ jobs.”

If the connection between immigration and prosperity has frayed, however, what remains obviously true is that a growing population requires more public services and more housing, which are already stretched to breaking point. Paradoxically, though, without an increasing working-age population to fund them, that same infrastructure and those same public services grow worse. As Prof Harper says: “The idea that you stay in education until your mid-20s, retire in your 50s, and live until you’re 90, so you pay taxes for 30 years of a 90-year lifespan, is unsustainable.”

Bezos, Musk and Macron

Pomeroy is far from the only one worried about the links between population and the economy. Amazon chairman Jeff Bezos has persistently voiced his concerns. In December, at an event organised by the Italian prime minister Giorgia Meloni, Bezos said that “it is important to have children and create the new generation”. In 2022 he warned that the “underpopulation crisis” was “the biggest danger civilisation faces”.

His words echo comments by Elon Musk, who last year tweeted, in response to falling Chinese birth rates, that “population collapse due to low birth rates is a much bigger risk to civilisation than global warming”.

In a speech earlier this month, Emmanuel Macron promised to offer more “natalist” policies to counter his country’s plummeting birth rate. With generous pro-family policies, France is usually thought of as having a healthy birth rate, compared to Italy, Germany and Spain. But last year fewer than 700,000 babies were born in France, the lowest number since the Second World War.

Though drastic pro-birth policies are more frequently associated with nationalists like Hungary’s Victor Orbán, Macron promised to improve parental leave and access to fertility treatments. It might be seen as an attempt to shore up support from conservatives, where his vote is under threat from the France-first policies of Marine Le Pen. But it reflects a growing global anxiety about birth rates. In South Korea it is down to 0.72, a record low. Jaemin Lee, a professor of law at Seoul National University, describes it as a “national emergency”. At the current rate, he says, the population will have halved by 2100.

Daniel Hess – who runs the X (formerly Twitter) account More Births, which shares information on birth rates – believes South Korea is a warning about where the rest of the world is heading. Hess, a father of six, points out that the global birth rate, not just the rate in developed countries, will soon tip into decline.

“I’m watching carefully for something that might be announced in days, or maybe put-off by a year, is whether the whole world falls below replacement,” he says. In crude terms, the global average is a shootout between sub-Saharan Africa, where birth rates have so far failed to fall as quickly as they have in other parts of the world, and India, which has a vast population but a rapidly falling birth rate. “India is already below replacement, but if its number comes in at 1.9 we’ll still be a hair above replacement [in total]. If the number comes in at 1.8 or so, the whole world will be officially below replacement. That’s an iconic step in world history.”

The end of innovation

With lower population comes the prospect of disastrous economic slowdown. Citing Robin Hanson, an academic at George Mason University, Hess argues that if population drops, innovation and invention might come to a halt too.

“So much of innovation is built on economies of scale,” he says. “Which are built on population. Innovation is the tip of the pyramid. But if the base of the pyramid is smaller, the pyramid can’t be as high. It could basically be the end of technological progress. It’s the biggest story in the world.

“Today an innovative city state can have the same output as a huge country. People are the resource. But that’s not widely understood.”

If developed countries risk stagnation, for poorer countries the decline in birth rates might mean they miss out on the chance to be the next Ireland or Singapore. Writing in

Bloomberg recently, the economist Tyler Cowen argued that “the very last chance for [less developed] nations may come in this generation”. Not only will they continue to lose migrants to wealthier countries, he wrote, but they will also suffer from some of the same demographic problems, such as an ageing population. In the short-term, advancements in artificial intelligence may make it difficult for poorer countries to compete in services like call centres and customer service.

Warrington takes a broader view. “If we continue to insist on creating conditions that are not conducive to our thriving and flourishing, we will go extinct. That’s the deep fear underlying a lot of the scaremongering around population collapse.”

Despite these economic risks, many believe the planet would be better off with a smaller population. Even if the gloomiest prophecies of Thomas Malthus and Paul Ehrlich did not come to pass, a vocal minority argue the whole concept of growth is outdated.

Childless by choice

There remain many good reasons not to have lots of children, as families – especially women – around the world have been realising for a century. Warrington is not the only writer examining this. Emma Palmer, a Bristol-based writer and the author of books on the growing phenomenon of “elective childlessness”, is another.

“Growing up as a teenager in the 1980s, I believed in those kinds of myths of women having it all,” she says. “But as a young adult I saw how the people who suffered were women who were trying to have careers and be creative and have families and friends. There was a lot of struggle around managing all that. I had a realisation, which sounds obvious now, that it is not mandatory to have children. The decision came from weaving many threads, from my feminism and my belief in the environment, too.”

Women who are not choosing to be child-free are choosing to stop at one or two rather than four. This is despite incentives around the world to reverse these trends. Few are as extreme as the

Mother Heroine medal, an honorary title in the Soviet Union for women who had raised 10 or more children, which Vladimir Putin revived in 2022. But many countries have offered tax breaks or improved childcare arrangements to encourage women to have more children.

While there have been some policy successes – Japan has mitigated its decline – no developed nation has managed to get its birth rate back up above replacement sustainably once it has fallen below it. Twenty years ago Finland was held up as a model of progressive natalist policies, with a rising birth rate, but despite generous support the rate has been falling since 2010 and is now below the UK’s. Fertility remains an enigma.

As Hess argues, policies are rarely as effective as culture. The few developed nations that buck the trend on fertility – Israel, for instance, where it is still at 2.9 – have strong cultural forces to encourage reproduction. France was one of the first European nations where the birth rate began falling, some argue because of its early secularisation. In Spain, Ireland and Italy, largely Catholic countries, the rate fell later. The US has had a higher birth rate than Europe, despite worse family support.

“The current generation no longer have what we used to call the obligation to reproduce,” says Prof Harper. “They’re more concerned they have one or two high-quality children in terms of education and healthcare. And many women feel their work prospects would suffer if they had more children.” Another factor is the age at which women have their first child. Until 2010, in developed countries, most women had their first child between 25-29. Today it is 30-34, which leaves less time to have a large family, even with modern fertility treatments.

One interpretation of this might be that the work women did before they entered the traditionally male workforce was far more valuable than official statistics have acknowledged. The appropriate incentive for a professional woman to have more children might not be £5,000 but £50,000, or some other figure that would be politically untenable.

Most of the possible solutions to the demographic crisis make for tricky politics. Mass immigration can bring cultural challenges, too. Most leaders choose to kick the demographic can down the road rather than attempt drastic reform. Despite its economic benefits, immigration remains a thorny subject, especially if it comes without the requisite investment in housebuilding, social services and infrastructure, as it has in the UK in recent years. There can be short-term social costs, even if they are outweighed by the long-term benefits.

In Britain, the Tories are in knots over their plan to deport illegal immigrants to Rwanda. Some have argued that the Brexit vote proved that a population will vote in what it perceives to be cultural rather than economic self-interest. Across the Atlantic, Donald Trump is building his re-election campaign on battle cries against illegal immigration. Rightwing populist parties are on the rise across Europe. Yet it is also true that London, with the highest immigration levels in the country, is also the most prosperous area in the country. Without immigration the NHS would fall apart, cultural life would be infinitely less interesting and restaurants would be a disaster.

In his speech urging citizens to go forth and multiply, Macron announced other conservative measures aimed at keeping France culturally cohesive and neutralising political attacks from the right: national service, compulsory school uniforms and lessons in art history and drama. Thomas Gassilloud, the head of the defence and armed forces committee in the French National Assembly, said the SNU, the national service, which to date has been voluntary, had cultural rather than military aims. “A military service is set up to teach a generation how to handle arms and be prepared for war,” he said. “This is not the case here. The SNU’s purpose is to bring together young people from all social and geographical backgrounds.”

The most extreme example in contemporary European politics is Hungary, where Orbán has dramatically reformed schools, media and cultural institutions in the name of preserving a nationalistic, Christian vision of Hungary. Many parts of Asia have weaker and more recent histories of multiculturalism than Europe. Korea, and Japan, for example, are much more ethnically homogenous than the UK or the US, which has contributed to their falling population rates. In December, the Korean justice minister, Han Dong-hoon, said the country had “passed the stage of deliberating whether to implement [pro-immigration policies]”. He added that “if we don’t, we cannot escape the fate of extinction due to the demographic catastrophe”.

Another possible solution is to extend the working age. Most pension systems date from a time when life expectancy was much lower and more workers did physically demanding work. Most jobs today involve using a computer, something older people can do.

“There are potential societal benefits to a shrinking or smaller growing population, but if you still have to service the pension, the debt and the healthcare provision to a rapidly growing older population, it becomes a problem,” says Pomeroy. There is a risk of a vicious circle: with more voters past retirement age, it is less likely they will vote for parties promising to reduce their benefits, especially after they have spent their career contributing to the pot. In turn this makes the economy less appealing for working age people, which in turn makes it harder for them to have children.

“It might be that governments have to think seriously about the level of provision they’re providing to those generations in the future. That could be one way out of this. It will be hugely unpopular, but raising the retirement age, making pensions less generous so people keep working, or [lowering] the levels of healthcare we’re providing: these are ways we might get around it. But I don’t see any government in the world willing to make those decisions publicly.”

Rise of the robots

Not everyone takes such a gloomy view of the prospects of a shrinking workforce, globally or locally. “There is a presumption, which is that we need constant growth of a population to drive [the economy],” says Prof Harper. “We did in the 20th century; it’s not clear in the 21st century that we do.” Maybe AI will enable a smaller workforce to achieve greater productivity per capita, just as a farmer with a combine harvester, fertiliser and pesticide could do the work of many hundreds of labourers.

Daniel Susskind, a research professor in economics at King’s College London and the author of an upcoming book, Growth: A Reckoning, believes we need to overhaul our vision of what growth means. “Growth in the 20th century was driven, in part, through getting more and more people through more and more education,” he says. “But in the 21st century, there are reasons to think this might be harder. It is not only that there might be fewer people, but our ability to get people into further education is plateauing, especially in developed countries.” As he argues in a previous book, A

World without Work, the best universities are increasingly unable to help people compete with machines. He writes: “Even the best existing education systems cannot provide the literacy, numeracy and problemsolving skills that are required to help the majority of workers compete with today’s machines – never mind the capabilities of machines in the future.”

Susskind believes that we need to replace our vision of an economy that relies on more people. “We need more robots, not fewer,” he says. “Not only to tackle productivity, but to respond to these demographic and educational limits as well.” Put bluntly, some people may no longer offer much economic value, but that is not the same as having no value as people.

The UN predicts that the world population will top out at around 10.4 billion in the 2080s. The figure is lower than some of its historic predictions. If birth rates continue to fall, the estimate may be revised downwards again in the future. It is still a lot of people. If they are all to lead happy, healthy, fulfilled and lengthy lives, and enjoy a decent retirement, they will need some help from the machines.

Economics has always been about doing more with less resources. In the future it may be about doing more with fewer people, too.