In the roughly 250 years since the Industrial Revolution the world’s population, like its wealth, has exploded. Before the end of this century, however, the number of people on the planet could shrink for the first time since the Black Death. The root cause is not a surge in deaths, but a slump in births. Across much of the world the fertility rate, the average number of births per woman, is collapsing. Although the trend may be familiar, its extent and its consequences are not. Even as artificial intelligence (ai) leads to surging optimism in some quarters, the baby bust hangs over the future of the world economy.
In 2000 the world’s fertility rate was 2.7 births per woman, comfortably above the “replacement rate” of 2.1, at which a population is stable. Today it is 2.3 and falling. The largest 15 countries by GDP all have a fertility rate below the replacement rate. That includes America and much of the rich world, but also China and India, neither of which is rich but which together account for more than a third of the global population.
The result is that in much of the world the patter of tiny feet is being drowned out by the clatter of walking sticks. The prime examples of ageing countries are no longer just Japan and Italy but also include Brazil, Mexico and Thailand. By 2030 more than half the inhabitants of East and South-East Asia will be over 40. As the old die and are not fully replaced, populations are likely to shrink. Outside Africa, the world’s population is forecast to peak in the 2050s and end the century smaller than it is today. Even in Africa, the fertility rate is falling fast.
Whatever some environmentalists say, a shrinking population creates problems. The world is not close to full and the economic difficulties resulting from fewer young people are many. The obvious one is that it is getting harder to support the world’s pensioners. Retired folk draw on the output of the working-aged, either through the state, which levies taxes on workers to pay public pensions, or by cashing in savings to buy goods and services or because relatives provide care unpaid. But whereas the rich world currently has around three people between 20 and 64 years old for everyone over 65, by 2050 it will have less than two. The implications are higher taxes, later retirements, lower real returns for savers and, possibly, government budget crises.
Low ratios of workers to pensioners are only one problem stemming from collapsing fertility. As we explain this week, younger people have more of what psychologists call “fluid intelligence”, the ability to think creatively so as to solve problems in entirely new ways .
This youthful dynamism complements the accumulated knowledge of older workers. It also brings change. Patents filed by the youngest inventors are much more likely to cover breakthrough innovations. Older countries—and, it turns out, their young people—are less enterprising and less comfortable taking risks. Elderly electorates ossify politics, too. Because the old benefit less than the young when economies grow, they have proved less keen on pro-growth policies, especially housebuilding. Creative destruction is likely to be rarer in ageing societies, suppressing productivity growth in ways that compound into an enormous missed opportunity.
All things considered, it is tempting to cast low fertility rates as a crisis to be solved. Many of its underlying causes, though, are in themselves welcome. As people have become richer they have tended to have fewer children. Today they face different trade-offs between work and family, and these are mostly better ones. The populist conservatives who claim low fertility is a sign of society’s failure and call for a return to traditional family values are wrong. More choice is a good thing, and no one owes it to others to bring up children.
Liberals’ impulse to encourage more immigration is more noble. But it, too, is a misdiagnosis. Immigration in the rich world today is at a record high, helping individual countries tackle worker shortages. But the global nature of the fertility slump means that, by the middle of the century, the world is likely to face a dearth of young educated workers unless something changes.
What might that be? People often tell pollsters they want more children than they have. This gap between aspiration and reality could be in part because would-be parents—who, in effect, subsidise future childless pensioners—cannot afford to have more children, or because of other policy failures, such as housing shortages or inadequate fertility treatment. Yet even if these are fixed, economic development is still likely to lead to a fall in fertility below the replacement rate. Pro-family policies have a disappointing record. Singapore offers lavish grants, tax rebates and child-care subsidies—but has a fertility rate of 1.0.
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Unleashing the potential of the world’s poor would ease the shortage of educated young workers without more births. Two-thirds of Chinese children live in the countryside and attend mostly dreadful schools; the same fraction of 25- to 34-year-olds in India have not completed upper secondary education. Africa’s pool of young people will continue to grow for decades. Boosting their skills is desirable in itself, and might also cast more young migrants as innovators in otherwise-stagnant economies. Yet encouraging development is hard—and the sooner places get rich, the sooner they get old.
Eventually, therefore, the world will have to make do with fewer youngsters—and perhaps with a shrinking population. With that in mind, recent advances in ai could not have come at a better time. An über-productive AI-infused economy might find it easy to support a greater number of retired people. Eventually ai may be able to generate ideas by itself, reducing the need for human intelligence. Combined with robotics, ai may also make caring for the elderly less labour-intensive. Such innovations will certainly be in high demand.
If technology does allow humanity to overcome the baby bust, it will fit the historical pattern. Unexpected productivity advances meant that demographic time-bombs, such as the mass starvation predicted by Thomas Malthus in the 18th century, failed to detonate. Fewer babies means less human genius. But that might be a problem human genius can fix. ■
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OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
