Declining birthrates are officially manifesting in shrinking populations, leaving many to wonder what lies ahead.-BY Jill Motley
When China released its latest demographic figures, newspapers around the world screamed the facts out in the largest print-type they could find. It was official. China’s population had declined. The country, long one of the most populous in the world, was now joining the rest of East Asian in seeing years of declining birthrates manifest in a shrinking population.
To be fair, it’s not a new problem, nor is it wholly unexpected. Population analysts from the UN and elsewhere have been warning Asian leaders for some time that without drastic action, smaller families and lower marriage rates would lead to declining populations. Many estimated that it would be happening by 2050, or at the latest by 2100. However, for a number of reasons, many Asian nations are finding that their moment of generational inflection has arrived earlier than anticipated. This requires an honest look at the implications of generational change, from family formation policies to working habits and the social safety net.
One of the most popular moves across Asia in response to persistently low birthrates has been a rush to support family formation and childbirth. These have included cash payments to new parents, like the ~$1,600 USD parents in Seoul were granted for each new 2022 baby. Monthly support payments for young children are also a popular move, as are extended leave periods for parents, childcare vouchers, and free baby items. In Japan, provided both partners are under age 40, the government will even award newlyweds up to 600,000 yen (~$5,000 USD) to help them start their new life together.
Admirable, to be sure. Effective? Unfortunately, the evidence is mixed.
While individual families already planning to have children welcome the payments, increased flexibility in work hours, and free childcare items, national birth statistics remain stubbornly flat. In China, for example, eliminating the one-child policy in favor of a two-child policy created a one-year bump in birthrates. Then, fertility levels continued their decades-long downward trends even following the announcement of a three-child policy and extra birth incentives.
When asked, parents and single women point to high costs of living, stresses of daily life, and shortages of suitable housing as major impediments to starting a family. These are larger systemic problems that can’t be fixed by one-time baby vouchers or gifts of diapers and toys. Indeed, making women and young families feel more confident in their finances, housing situation, and possibility of a bright future for their next child will require many additional steps on top of “fast cash” incentives for new births.
Changes to working habits and expectations of retirement
As birthrates decline below replacement rates across Asia – and even in India, it has now slipped below the 2.1 line – incentives for new babies must also be combined with changes to work/life expectations. After all, knowing that a smaller generation is coming along behind them, how can the present generation still plan to retire as soon as possible? Who will do the necessary work?
Employers are well aware of the shortages. A history of mandatory retirement ages put many workers on pension rolls… but firms are hiring older workers back on part time contracts to help keep things going. In Japan, Korea, and Hong Kong, firms are also modifying offices to be friendlier to older workers with things like adaptive bathrooms, swapping stairways for ramps or elevators, and clearing away cords and clutter. This can help older workers feel comfortable staying on longer and prevent firms from becoming short-staffed.
Of course, not all workers want to keep working after retirement milestones are met. There’s a social contract understanding that is under strain in many countries, with a stable labor force needed to continue to hit productivity metrics, but a long-time promise to workers that after so many years of hard work, it would be okay to stop. Countries that have tried to adjust working ages and retirement rules have seen fierce protests, and it’s not clear that any one country has uncovered a good path forward that gives fair and equitable options to both employers and workers.
Planning for strain on social safety nets
Along with the strain around the productivity vs. retirement-ready elements of workforce planning, the shift in population demographics means that frank discussions about social safety net strain need to happen. In some Asian nations, the ratio of retired workers to active workers supporting pension payments and healthcare is as low as any European nation. Further, soaring costs of living mean that even stable pensions from past eras are too small to support comfortable retirement, leaving millions of older Asians mired in poverty.
Governments will need to spend more to support their older populations. Infrastructure, defense, and political projects will need to be sacrificed to shore up pension payments. Otherwise, the alternative is higher taxes on younger, active workers. Unfortunately, this is the exact thing that raises costs and reduces the likelihood that these younger workers will form families or have multiple children. That cycle – higher costs for the young meaning smaller families and then an even large burden on the next generation – is one that only government spending shifts have the power to stop.
Will they have the will and fortitude to make the shift? It’s not clear. What is clear is that time is of the essence on these decisions. Demographic changes are slow-moving but serious. No country in Asia is immune to what’s happening, and there’s no perfect answer in sight. However, by shoring up pensions, increasing flexibility of work and retirement for those who want to stay on the job, and addressing systemic challenges to prosperous family life, Asian nations have the chance to offset the impact of the coming generational turn even as it alters the society around them.