November/December2010

ESSAY

TheDemographicFuture
WhatPopulationGrowthandDeclineMeansfortheGlobalEconomy
NicholasEberstadt
NICHOLASEBERSTADTisHenryWendtChairinPoliticalEconomyattheAmericanEnterpriseInstitute
andSeniorAdvisertotheNationalBureauofAsianResearch.
Itisalreadypossibletodrawareasonablyreliableprofileoftheworld'spopulationin2030.Thisis,of
course,becausetheoverwhelmingmajorityofthosewhowillinhabittheworld20yearsfromnoware
alreadyalive.Asaresult,onecanmakesomefairlyconfidentestimatesofimportantdemographictrends,
includingmanpoweravailability,thegrowthinthenumberofseniorcitizens,andtheresultingsupport
burdenonworkers.
Overall,itisapparentthatthefutureglobaleconomywillnotbeabletorelyonthekindofdemographic
inputsthathelpedfuelgrowthintheerabeforethecurrentglobalrecession.Fortoday'saffluentWestern
economies,thecomingdemographicchallengeofstagnantandagingpopulationscombinedwithmounting
healthandpensionclaimsonashrinkingpoolofprospectiveworkersisalreadygeneratingconcern,
especiallyinEuropeandJapan.Butatthesametime,demographicconstraintsintherisingeconomiesthat
areexpectedtofuelfutureglobalgrowtharemoreseriousandintractablethangenerallyrecognized.
Whenthecurrentpainfulandprotractedeconomiccrisisiseventuallyresolved,theglobaleconomywill
likelyembarkagainonapathofsustainedlongtermgrowthbutataslowerpace,becauseofnew
demographicrealities.Thesedemographicpressurescanbesubstantiallyoffsetonlyifbothrichandpoor
countriesundertakeprofoundandfarreachingchangesinworkingarrangements,lifestyles,business
practices,andgovernmentpolicies.
MOREHEALTH,FEWERBABIES
Thetwentiethcenturywasaneraofunprecedentedpopulationgrowth.Between1900and2000,theworld's
populationalmostquadrupled,fromabout1.6billionpeopletoaround6.1billion.Thishugeexpansiondid
notoccurbecausepeoplesuddenlybeganreproducingathigherrates;instead,populationsurgedbecause
humansfinallystoppeddyinglikeflies.Overthecourseofthetwentiethcentury,globallifeexpectancyat
birthmorethandoubled,soaringfromabout30yearsin1900toabout65yearsin2000.Thisglobal
populationexplosionwas,inreality,ahealthexplosion:theentiretyoftheenormousincreaseinhuman
populationoverthepastseveralgenerationswasduetodramaticdeclinesinmortalityandimprovementsin
generalhealthconditions.

Ifthetwentiethcentury'srevolutionarydemographictrendwasahealthexplosion,thetwentyfirstcentury's
hallmarktrendappearstobeafertilityimplosion.Adramatic,farreaching,and,asyet,unremittingglobal
reductioninchildbearingandbirthratesisnowunderway.Sustainedanddeliberatereductionsinfamily
sizethroughbirthcontrolbegantolowernationalfertilitylevelsincertainEuropeancountrieslongago.
ButsustainedfertilitydeclineonlybecameaworldwidephenomenonaftertheendofWorldWarII.Over
thepasthalfcentury,accordingtotheUnitedNationsPopulationDivision(UNDP)andtheU.S.Census
Bureau,thenumberofbirthsperwomandroppedbyalmosthalf,from4.9intheearly1960stoan
estimated2.5today,withthesteepestdeclineoccurringinlessdevelopedcountries.
Closetohalfoftheworld'spopulationnowlivesincountrieswithfertilityratesbelowthereplacement
level,which,asaroughruleofthumb,is2.1birthsperwoman.Inthesestatesabsentsteady
compensatoryimmigrationcurrentchildbearingpatternswillleadtoaneventualandindefinite
depopulation.Almostalloftheworld'sdevelopedcountrieshavesubreplacementfertility,withoverall
birthratesmorethan20percentbelowthelevelrequiredforlongtermpopulationstability.Butdeveloped
countriesaccountforlessthanafifthoftheworld'spopulation;thegreatmajorityoftheworld's
populationswithsubreplacementfertilityinfactresideinlowincomesocieties.
Chinaisonesuchlowincomesocietywithsubreplacementfertility.Itmayseemexceptional,given
Beijing'sonechildpolicy.Yetsubreplacementfertilityisalsothenormtodayinmanylowincome
countrieswithoutcoercivepopulationcontrols.Strikingly,someofthesearecountrieswithpredominantly
ruralpopulationswhereeducationalopportunitiesforwomenremainlimitedandhealthconditionsarestill
poor.OnesuchcasemaybeMyanmar(alsocalledBurma),animpoverishedandisolatedcountrywhere,
accordingtotheUNDP,birthlevelshavefallenbelowthereplacementrate.
TheU.S.CensusBureauandtheUNDPbothestimatethatsubreplacementfertilityisthenorminevery
EastAsiancountryandinmuchofSoutheastAsia,includingVietnamandThailand;inmostofthe
Caribbeanislands;and,increasingly,throughoutLatinAmerica.Whatisnolessstriking,subreplacement
fertilityhasalsocometopartsofthegreatIslamicexpansethatstretchesfromnorthernAfricathroughthe
MiddleEastandintoAsia.
Muchremainsunexplainedaboutthecontinuingmarchtowardeverlowerlevelsoffertility.Forexample,
therearefewsocioeconomicpreconditionsforrapidandpronouncedfertilitydeclineorevenforslidesinto
subreplacementfertility,asthecaseofMyanmarunderscores.Furthermore,itisnotknownhowlonga
societythathasenteredintosubreplacementfertilitymodewillstaythere:Japan,forexample,began
reportingsubreplacementfertilityinthe1950sandhashaduninterruptedsubreplacementfertilitysince
theearly1970s.Demographers,itshouldbeemphasized,stillhavenoreliabletechniquesformaking
accuratelongtermfertilityforecasts.Nevertheless,somespecialistsarguethatultralowfertilityratesmay
bebutaharbingeroffutureandcurrentlyunimaginablefertilitydeclines.
Althoughlittleisconclusivelyknownabouttheunderlyingcausesofthefertilityrevolution,someofits
consequencesarediscernable.First,pronouncedfertilitydeclinestodayimplyaslowdowninthegrowthof
theworkingagepopulationtomorrow.Second,lowfertilitytodayleadstopopulationagingtomorrowa
processthatbecomesturbochargedifsubreplacementbirthratesaresustainedovertime.
MENATWORK
Onagloballevel,returningtoprecrisiseconomicgrowthrateswillbecomplicatedbytheimpending
andinalterabletrendsinworldwidemanpoweravailability.Betweennowand2030,theglobalsupplyof
potentialworkersissettogrowmuchmoreslowlythanintheprevioustwodecades.AccordingtoU.S.
CensusBureauprojections,theabsoluteincreaseintheworld'sworkingage(between15and64)
populationbetween2010and2030willbearound900millionpeople,400millionfewerthanoverthepast

twodecades.Theprojectedaveragerateofglobalmanpowergrowthforthecomingdecadesis0.9percent
peryear,onlyhalftheratefortheperiodbetween1990and2010.
Complicatingmattersstillfurtheristheprospectiveregionaldistributionofthecominggrowthinglobal
manpower.Overthepast20years,thetwogreatestcentersofmanpowergrowthhavebeenChinaand
India,whichalsohappenedtobetwooftheworld'smostrapidlygrowingeconomies.Overthenext20
years,however,thelargestshareofgrowthintheworld'sworkingagepopulationwelloverathirdofthe
totalwilltakeplaceinsubSaharanAfrica,theregionwiththeworstrecordoflongtermeconomic
performance.BangladeshandPakistanwillaccountfornearlyanothereighthoftheworld'smanpower
growth.Inotherwords,overthenexttwodecades,subSaharanAfrica,Bangladesh,andPakistanwill
generatenearlyhalfthegrowthintheworld'sworkingagepopulation.
Atthesametime,mostofthecurrentadvancedeconomiesoftheOrganizationforEconomicCooperation
andDevelopment(OECD)andmanypromisingemergingeconomiesaresettoexperienceshrinkagein
theirworkingagepopulations.ThisgroupincludesChina,Japan,thecountriesofeasternandwestern
Europe,andtheformerSovietstates.
Theprospectofshrinkingmanpowerdoesnotlookanybetterwhenbrokendownintosubsidiaryagegroup
components.Youngerworkersareimportantforgrowth,becausetheytypicallyhavehigherlevelsof
educationandbetterknowledgeofthelatesttechnology.Butoverthenext20years,growthinthe
worldwidepoolofyoungmanpowerwillundergoaseveredeceleration.AccordingtoU.S.CensusBureau
projections,totalyoungmanpowerdefinedhereasmenandwomenbetweentheagesof15and29will
increasebyjustfourpercent,or70millionpeople,betweentodayand2030,representingbarelyafifthof
theincreaseoverthepasttwodecades.OnlythecountriesofsubSaharanAfricawillseeappreciable
growthinyoungmanpower.JapanandthestatesofwesternEuropeareoncourseforsignificant
prospectivedropsinthiskeymanpowerpooloverthenext20years(inthecaseofJapan,byalmost25
percent).ButbyfarthemostmassivefalloffinyoungmanpowerissettotakeplaceinChina:overthenext
20years,thisworkingagegroupwillfallinChinabyaround100millionpeople,orabout30percent.
Yetasyoungmanpowergrowsrelativelyscarcer,oldermanpowerisbecomingincreasinglyabundant.
Overthenext20years,theoldestsegmentoftheconventionallydefinedworkingagepopulationmen
andwomenbetween50and64yearsofageisprojectedtoaccountfornearlyhalfofallglobal
manpowergrowth,nearlytwicethesharefortheperiodbetween1990and2010.Chinawillfacea
particularlyhugeincreaseinoldermanpower;theworkingagepopulationwillalsoageinmanyother
emergingmarkets,aswellasinallthedevelopedWesterneconomies.Olderworkersdobringsome
particularskills,basedonexperience,buttheyalsotendtobelesseducatedandlesshealthythanyounger
workers.Furthermore,laborforceparticipationratesforolderworkerstendtobelower,andinsome
affluentsocieties,muchlower.
Theprospectiveglobalworkforceof2030isontracktobeingmoreeducatedandhealthierthanprevious
generationsofworkers,whichshouldincreaseoveralllaborproductivity.Buttheeconomicpotentialof
suchprospectivebenefitsshouldnotbeexaggerated.ProjectionsbytheInternationalInstituteforApplied
SystemsAnalysis,inAustria,andtheViennaInstituteofDemographysuggestthatimprovementsin
educationallevelsfortheworld'sworkingagepopulationstandtobesloweroverthenext20yearsthan
theywereoverthepast20years.Forexample,theproportionofglobalmanpowerwithnoeducationatall
isprojectedtodropbylessthanfivepercentagepoints,comparedtoaneightpointdropinthepast20
years.Andtheshareoftheworkingagepopulationwithsecondaryschoolingorbetterisestimatedto
increasebytenpoints,threepointsfewerthanintheprevioustwodecades.
Takenasawhole,thesemanpowertrendspointtomountingdemographicpressuresand,quitepossibly,a
slowdownintherateoflongtermeconomicgrowth.Allotherfactorsbeingequal,thesetrendsalsosuggest
aslowdowninconsumerspending,whichcouldperhapsleadtoaslowdowninbusinessprofits,aswell.

AGINGUNGRACEFULLY?
Theeconomicperformanceoftheworld'ssixmajoreconomieswilllargelydeterminegrowthpatternsfor
theworldasawholeoverthenext20years.China,India,Japan,Russia,westernEurope,andtheUnited
Statesaccountforoverhalfoftheworld'scurrentpopulationandover70percentoftheworld'sGDP,
adjustedforpurchasingpowerparity.Andoverthedecadebeforethecurrentfinancialcrisis,they
accountedforabout70percentofglobaleconomicgrowth.
NomajoreconomyhasmoreradiantprospectsforthecomingdecadesthanChina.Itseconomic
transformationhasbeennothinglessthandazzlingaccordingtoWorldBankestimates,inthethree
decadesfollowingDengXiaoping's1978movestowardsystemicreform,China'sGDPgrewbyalmostten
percentayear.(Othersourcessuggestaslightlyslowerrateofgrowthbutstillonethatishistorically
unprecedented.)Beijingofficiallyforecastsannualgrowthratesofroughlysevenpercentperyearbetween
nowand2030.ButthisrosyprognosisdoesnottakeintoaccountChina'sloomingdemographictempests.
PopulationspecialistsbelievethatChinabecameasubreplacementfertilitysocietyabouttwodecadesago
andthatsincethen,birthrateshavefallenfarbelowthereplacementlevel.Forexample,theU.S.Census
BureauputsChina'stotalfertilityrateatabout1.5childrenperwoman,or30percentbelowthelevel
requiredforlongtermpopulationstability.
Persistent,andnowextreme,subreplacementfertilityisthedemographicdrivershapingtheChinaof
tomorrow.Givencurrenttrends,U.S.CensusBureauprojectionsanticipatefewerpeopleundertheageof
50inChinain2030thantodayandmanyfewerChineseintheir20sandearly30s.Thesesameprojections
foreseemanymoreelderlyChineseintheir60s,70s,and80s.China'solderworkersaremuchlesseducated
thantheiryouthfulsuccessorsnearlyhalfoftoday'sworkingagepopulationbetweentheagesof50and
64hasnotcompletedprimaryschool.Educationallevelsforolderworkerswillimproveinthedecades
aheadbutwillstilllagbehindChinesenationalaverages.AndChinawillbeexperiencingapopulation
explosionofseniorcitizensoverthenext20years;theyaretheprogenyoftheprepopulationcontrolera.
In2010,about115millionpeopleinChinawere65orolder.By2030,thisnumberisprojectedtoapproach
240millionpeoplemeaningthatChina'scohortofseniorcitizenswouldbesoaringatanaveragerateof
3.7percentperyear.
HowBeijingwillsupportthiscomingtsunamiofseniorcitizensremainsanunansweredquestion.Asyet,
Chinahasnonationalpublicpensionsystemandonlythemostrudimentaryprovisionsforruralhealth
care.Meetingtheneedsofitsrapidlygrowingelderlypopulationwillplaceeconomicandsocialpressures
onChinathatnocountryofacomparableincomelevelhaseverhadtoconfront.
Moreover,inthedecadesahead,Chinawillfaceagrowingnumberofyoungmenwhowillnevermarry
duetothecountry'sonechildpolicy,whichhasresultedinareportedbirthratioofalmost120boysfor
every100girls(mostsocietiesreportthebirthsof103to105boysforevery100girls).Thisimbalanceis
settingthestagefora"marriagesqueeze"ofmonumentalproportions.By2030,projectionssuggestthat
morethan25percentofChinesemenintheirlate30swillneverhavemarried.Thecomingmarriage
squeezewilllikelybeevenmoreacuteintheChinesecountryside,sincethepoor,uneducated,andrural
populationwillbemorelikelytoloseoutinthecompetitionforbrides.Beijingwillhavetodeterminehow
itwillcopewithagrowingdemographicofunmarried,underprivileged,and,quitepossibly,deeply
discontentedyoungmen.
Chinastillhaspotentialsourcesforenhancingproductivity,includingthemigrationofruralworkersto
moreproductiveurbanjobs,thewiderapplicationofcurrentlyunderutilizedtechnicalknowhow,improved
financialintermediationforthecountry'shighsavingsrates,andbroaderinstitutionalandpolicyreformsto
enhanceefficiency.Suchuntappedpotentialcanfuelfuturegrowth,butnevertheless,China'sserious
demographicchallengescouldsloweconomicgrowthmorethaniscurrentlyexpected.

Russiaisanotheremergingmarketcountrywidelyregardedasholdingimmenseeconomicpromise,not
leastbytheleadersintheKremlin.Despitethecurrenteconomicdownturn,officialRussianplansenvision
economicgrowthofsixpercentayearthrough2020andcontinuingrapidgrowththereafter.Butthese
ambitiousvisionsseemtoignorethefactthatthecountryhasbeeninthegripofaprotracteddemographic
crisissincetheendofcommunistrule.Since1992,Russia'sdeathshaveoutnumberedbirthsbyroughly50
percent,orabout13million,andofficialfiguressuggestthatthecountry'spopulationhasshrunkbyabout
fivepercentnearlysevenmillionpeoplefrom148.6millionin1993to141.9milliontoday.
Immigrationhashelpedslowthecountry'spopulationdeclinebuthasnotbeenabletopreventit.The
outlookisforfurtherdepopulation:mediumvariantprojectionsbytheKremlin'sofficialstatisticalservice
envisiontenmillionmoredeathsthanbirthsoverthenexttwodecades.
EvenmoretroublingforRussiaisthecountry'sdisastrouspublichealthsituation.In2009,ashardasitmay
betobelieve,Russia'soveralllifeexpectancywasabitlowerthanithadbeenin1961,almosthalfa
centuryearlier.Tomakemattersworse,atleastfromaneconomicstandpoint,Russia'shealthcrisisis
concentratedinitsworkingagepopulation.Overthe40yearsbetween1965and2005,forexample,the
deathratesformenbetweentheirlate20sandtheirmid50svirtuallydoubled.Deathratesforwomenin
thatsameagegroupgenerallyrosebyabout50percent.Publichealthexpertsdonotentirelyunderstandthe
reasonsforthisdeathspiralalthoughpoordiet,smoking,sedentarylifestyles,and,aboveall,Russia's
deadlyromancewithvodkacanexplainmuchofthedeterioration,theactualdeclineisworsethanwhat
theseriskfactorsalonewouldsuggest.Insomerespects,contemporaryhealthlevelsforRussianadultsare
akintothoseforadultsintheworld'smostimpoverishedstates.AccordingtoestimatesbytheWorld
HealthOrganization,lifeexpectancyfora15yearoldmanin2008wouldhavebeenlowerinRussiathan
inCambodia,Eritrea,orHaiti.Betweennowand2030,theU.S.CensusBureauprojectsthatRussia's
workingagepopulationwillfallbynearly20percent,andRussia'sworkforcewillalmostsurelysuffer
moreillhealththanitscounterpartsintheOECDandthantheworkforcesoftheotherBRICcountries
(Brazil,India,andChina).In2008,accordingtoWorldHealthOrganizationestimates,mortalitylevelsfor
Russia'sworkingagepopulationwere25percenthigherthanthoseforIndia's.
Urbancentersaretypicallythehubsofeconomicgrowth,butRussia'surbanpopulationissmallertoday
thanitwasattheendofthecommunistera,andtheUNprojectsthattherewillbeevenfewerinhabitantsin
Russia'scities20yearsfromnow.Inaddition,Russia'soldageburdenwillbesteadilyincreasing
whereas13percentoftheRussianpopulationtodayis65orolder,theprojectedproportionfor2030is21
percent.Takingalltheaboveintoaccount,itisdifficulttoseehowRussiacanhopetogeneratesustained
andrapideconomicgrowthonthebasisofitshumanresources.Naturalresourcesmayofferthecountry
economicopportunitiesintheyearsahead,buttheseopportunitiesshouldnotbeexaggerated.Despiteallof
Russia'senergyandmineralwealth,itsannualexportearningshaveneverexceededthoseofBelgium,not
evenattheheightoftheprecrisisoilboom.
India'sGDPgrowthhasaveragedanimpressive6.5percentayearsincetheeconomicreformsthatbegan
in1991.Recently,theeconomyhasbeenhummingalongateightpercentgrowthperyear.Notafew
observersthinkthebestmaybeyettocome.Injustoneexample,amemberofIndia'sPlanning
Commissionsuggestedin2008thatIndia'seconomywouldbegrowingateighttoninepercentayearfor
thenextquartercentury.Inthesametimeframe,India'stotalpopulationissettogrowbyjustoverone
percentperyear,andaboutfivesixthsofthatgrowthwillbeinitsworkingagepopulation.Thankstothe
disproportionategrowthofIndia'smanpowerpool,thecountry'sdependencyratio(theratioofchildren
under15andpersonsover65totheworkingagepopulation)willbefalling,andthesocietywillremain
relativelyyouthful.Suchchangesinpopulationstructurecouldfacilitatehigherlevelsofnationalsavings
andinvestmentand,thus,economicgrowth.Inshort,Indiaappearstobeaposterchildforapotential
demographicdividend.
ButIndiahasstrikingregionaldisparitiesinpopulationprofiles.Indiaisbisectedbyagreatnorthsouth
fertilitydivide:inmuchofthenorth,includingpartsoftheGangesriverbeltandsomeofthecountry's
westernmostdistricts,fertilitylevelsremainquitehigh,atfour,five,ormorechildrenperwoman;inmuch

oftheIndiansouth,however,fertilitylevelsareat,oralreadybelow,thereplacementlevel.Ineffect,this
meansthattwoverydifferentIndiasarebeingborntodayayouthful,rapidlygrowingnorthernIndia
whosefuturepopulationstructurewillbeakintothatofatraditionalThirdWorldsocietyandasouthern
Indiawhosepopulationgrowthwillbeslowingorceasing,wheremanpowergrowthwillbecomingtoan
end,andwherepronouncedpopulationagingwillbetakinghold.
Thisdemographicdivergencecouldmakesustainingrapideconomicgrowthatrickierpropositionthanit
mightseematfirst.India'senginesofeconomicgrowtharemainlyitssubreplacementfertilityareas,
whichincludemuchofthesouthandpracticallyallitsmajorurbancenters:Bangalore,Chennai,Kolkata,
andMumbai.Butitsdemographicsmeanthatthecountry'sfutureworkerswillincreasinglycomefromthe
highfertilityareasofthenorth.Thisrevealsafundamentalmismatch:India'scontinuedeconomicgrowth
requiresworkerswhoarerelativelywelleducated,butIndia'smostlyruralhighfertilityareasareproducing
arisinggenerationwithwoefullylowlevelsofschooling.
India,itistrue,canboastofacadreofmillionsofhighlytrainedengineers,scientists,researchers,and
professionals.Butinacountryofwelloverabillionpeople,thesespecialistscomposeonlyatinyfraction
ofitsoverallmanpower.Inthecountryasawhole,educationallevelsarestillremarkablylimited,and
remedialeffortswilltakegenerationstoachievesubstantialimprovement.Currently,aboutathirdof
India'sworkingagepopulationhasnoeducationatall;20yearsfromnow,asixthofthecountry'swork
forcemaystillbetotallyunschooled.Theseeducationalshortfallsplacematerialconstraintsonthe
prospectsforsustainingrapidratesofeconomicgrowth.
Broadlyspeaking,allthedevelopedeconomieswillfacedemographicslowdownsandpopulationagingin
thecomingdecades,butJapanstandstobethemostheavilyburdenedbytheloomingtrends.Ithashadthe
steepestandlongestfertilityfalloffinmodernhistory.In2008,thecountryrecordedaround40percentas
manybirthsasithad60yearsearlier.Japanesechildbearingiscurrentlyestimatedtobenearly35percent
belowthereplacementlevel.ButJapanhasalsoenjoyedrapidandcontinuingimprovementsinpublic
healthsincetheendofWorldWarII.TheJapanesehaveanaveragelifeexpectancyof83years,higher
thananyothercountryintheworld.Takentogether,thecountry'sfertility,migration,andmortalitytrends
arepropellingJapanintodemographicdecline,andintoadegreeofagingthusfarcontemplatedonlyin
sciencefiction.
Overthenexttwodecades,accordingtoU.S.CensusBureauestimates,thesurfeitofdeathsascomparedto
birthsisexpectedtodriveJapan'stotalpopulationdownfrom127millionto114million,atenpercent
decrease.Therelativedeclineintheworkingagepopulationisprojectedtobeevensteeper,from81
millionto67million,ora17percentdecrease.Allthewhile,thenumberofJapaneseseniorcitizenswould
berisingandby2030,thecountry'smedianagewillbeabove52years,with30percentofthetotal
population65orolder.Theeconomicimplicationsoftheseimpendingchangesarefarfrompositive.Even
withhealthyagingandlaterretirement,thesetrendssuggestamarkedcontractioninthecountry'slabor
supply.Moreover,thesocialandeconomicstrainsfromJapan'sloomingoldageboomcouldfurther
complicateeffortstomaintaineventhecountry'scurrentsluggishratesofeconomicgrowth.
WesternEurope,foritspart,canexpectpopulationstagnation,accordingtotheU.S.CensusBureauits
populationmaygrowbyjustthreepercentoverthenexttwodecades,withnearzerogrowthprojectedby
2030.GermanyandItalyareexpectedtoexperiencepopulationdecline.AstagnatingEuropewillalsobea
grayingEurope.TheU.S.CensusBureauestimatesthatwesternEurope'smedianagewouldrisefrom42
yearstodaytonearly46yearsby2030.Despiteoverallpopulationstagnation,westernEurope's65and
olderpopulationissettorisebynearly40percent,whileitsmanpowerpoolisslatedtoshrinkby12
millionpeople.Andtheseprojectionsarepremisedonanetinflowofapproximately20million
immigrants,mainlyofworkingage.

TwounanswereddemographicquestionsloomoverthefutureofthewesternEuropeaneconomy.First,can
thecountriesintheregionsucceedinattractingandincorporatingtheforeignworkerstheireconomieswill
needinthecomingdecades?Thusfar,westernEurope'srecordonthesocialinclusionofimmigrantsmay
havebeensomewhatbetterthanmanyappreciate;however,therehavebeenincreasingassimilation
problems,which,ifleftunattended,couldimpingeoneconomicgrowth,aswellassocialcohesion.Second,
canthecountriesofwesternEuropetranslatepublichealthimprovementsintolongerworkinglivesfor
progressivelyagingpopulations?Atthemoment,overalllifeexpectancyatbirthinwesternEuropeisabout
twoyearshigherthanintheUnitedStates(80yearscomparedto78years).Buttheaverageretirementage
inwesternEuropeislowerthanitisintheUnitedStates,evendespiterecentincreasesinthelaborforce
participationofolderworkersinnorthernEurope.Thissummer'spublicprotestsinFranceagainsta
proposedincreaseintheFrenchretirementagefrom60to62showshowtoughitmaybetoachieve
politicalconsensus.
THEDEMOGRAPHICEXCEPTION
TheUnitedStateswillavoidthedemographicstagnationanddeclinethatfacesmostotherOECD
countries.TheU.S.population,accordingtoU.S.CensusBureauprojections,issettogrowby20percent,
orover60millionpeople(from310millionto374million),between2010and2030.Bysuchprojections,
theUnitedStates'populationgrowthratewillnearlymatchIndia's.Accordingtothesecalculations,the
UnitedStates'rateofpopulationgrowthapproximatesthatoftheworld'saverage,meaningthattheU.S.
shareofglobalpopulationisnotsettoshrink.VirtuallyeveryagegroupintheUnitedStatesissetto
increaseinsizeoverthenext20years.Unlikeallotheraffluentcountries,theUnitedStatescanexpecta
growingpoolofworkingagepeople(amoderatebutsteadyriseaveraging0.5percentperyearoverthe
next20years),anditcanexpectaslowerpaceofpopulationagingthanvirtuallyanyotherstateinthe
OECD.
TheUnitedStates'demographicexceptionalismisexplainedbythecountry'srelativelyhighfertilityrate
anditscontinuinginfluxofimmigrants.Overthepastgenerationandahalf,whilefertilityratesinmost
otherWesterncountrieswereplunging,thefertilityrateintheUnitedStateswasactuallyincreasing,and
unlikethatofanyotherlargerichcountry,itsratehasbeenhoveringjustaroundthereplacementlevelfor
thepastgeneration.IffertilityandimmigrationintheUnitedStatesremainmoreorlessattheircurrent
rates,asU.S.CensusBureauprojectionsassumetheywill,theUnitedStateswillenjoyasurplusofbirths
overdeathsofnearly35millionandwilltallyanetinflowofalmost30millionimmigrantsoverthenext
20years.Bothfactorswouldkeepthenationgrowingandrelativelyyoung,shapingadistinctlymore
auspiciousoutlookforeconomicgrowthintheUnitedStatesthanexistsforJapanorwesternEurope.
Nevertheless,therearealsocloudsontheU.S.demographichorizon,allofthemregardingthequalityof
futureU.S.humanresources.TheUnitedStateshasarelativelygoodrecordwhenitcomestoassimilating
immigrantsasproductivenewcomers,butresistancetocontinuedimmigration,orunexpectednew
problemsinabsorbingimmigrantinflows,couldlimitfuturesuccess.Furthermore,theUnitedStates'
primaryandsecondarypubliceducationsystemproducesunevenresultsthataremediocreincomparisonto
otheraffluentsocieties.ThepercentageofAmericansgraduatingfromhighschoolhasbeenslowingand
couldpossiblyplateauintheyearsahead.AndadvancesinhealthintheUnitedStatesdonotcomparewell
withthoseunderwayinotheraffluentstates.Educationandhealthwillbekeytoenhancingthe
productivityandwealthoftheU.S.populationinthedecadesahead,whichmeanstherearefewgrounds
forcomplacencywhencontemplatingthesechallenges.
Despitetheparticulardifferencesintheirdemographicoutlooks,Japan,westernEurope,andtheUnited
Statesshareacommonfiscalproblem:therelationshipbetweenpopulationagingandpublicdebt
obligations.Overthepasttwodecades,astrikingfeaturehasemergedinthemacroeconomiesoftheOECD
countries.ThegrossburdenofpublicdebtasaproportionofGDPhascometocorrespondwiththe
proportionofthepopulationthatis65orolder.Veryroughlyspeaking(asmycolleagueHansGrothandI

haveshown),costsassociatedwithpopulationagingareestimatedtoaccountforabouthalfthepublicdebt
runupoftheOECDeconomiesoverthepast20years.Inthenexttwodecades,theincreaseinthe65and
olderpopulationwillbeabouttwiceasgreatasitwasinthedecadesjustpast.Copingwiththefiscaland
publicdebtimplicationsofthepressuresthatpopulationagingplacesonmacroeconomicperformancemay
notbeanentirelynewchallengeforaffluentsocieties,butitpromisestobecomeanevermoresalientone
overthenext20years.
HUMANITY'SSECRETWEAPONS
Leftunattended,theglobaldemographictrendsoutlinedabovesuggestseriousandgraduallymounting
pressuresonglobaleconomicdevelopmentandmayleadtodownwardrevisionsofworldwidematerial
expectations.Butfeasibleoptionsdoexisttoalleviatesomeofthesepressuresandtocapitalizeonnew
demographicopportunitiesthatmayarise.Addressingthesenewdemographicchallengeswillrequire
deliberate,concerted,andsustainedefforts.Suchanapproachmustfocusonaugmentinghumancapitalby
expandingeducation,improvinghealthconditions,andcreatinganeconomicenvironmentinwhichgreater
returnscanbegeneratedbytheworld'sprecioushumanresources.
Improvingeducationalopportunityandqualityinlowincomeareas,forexample,shouldfigurecentrallyin
enhancingprospectsforlocalandglobalgrowth.Bettereducatedworkerstendtobenotonlymore
productivebutalsohealthierandbetterplacedtoleadlongerworkinglives.Simplyput,populationsin
developingcountriescannothopetogenerateFirstWorldincomelevelswithThirdWorldeducational
profiles.Improvinghealthstatusshouldalsobeacentralobjective,sincehealthadvancescouldprove
criticaltomaintainingorincreasinglongtermeconomicgrowthratesinanevergrayerworld.
Foraffluent,grayingsocieties,takingeconomicadvantageofhealthyagingwillbecomeevermorecrucial
tothequestforhighernationalincomelevels.Thissuggeststhattheexistingdisincentivesinsomanyrich
countriestocontinuingtoworkatolderagesshouldbereexaminedandultimatelyeliminated.Atthesame
time,governmentsshouldconsidercarefulincentivesforthevoluntaryextensionofworkinglife.More
generally,inbothrichandpoorcountries,governmentsshouldenactbusinessandeconomicpoliciesthat
enhancetheefficiencyofmanpowerresources,therebyelicitinghigherproductivityandfastereconomic
growth.
Humanityhasoneadditional"secretweapon"inacceleratinggrowthintheyearsahead:knowledge
productionandtechnologicalinnovation.Therevolutionsofthepastgenerationinhealthandlifesciences,
informationtechnology,andmaterialssciencepointtothesortsofopportunitiesthatmaylieaheadfor
improvingproductivity.Morethaneverbefore,researchanddevelopmentmustbeincentivizedtoreward
risktakers.
Forthesakeoftheworld'sfutureprosperity,reformsandinnovationsmustbepursuedwithurgency.
Demographicchangesunfoldslowlyfrommonthtomonth,butthecumulativeimpactcanbestaggering.It
isnotalarmisttowarnthatthereisnotimetoloseinrecognizingandadaptingtotheenormityofthe
world'sunavoidabledemographicchallenges.
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