The world's population continues to grow at an alarming rate, and many countries are facing declining birth rates. This has far-reaching consequences for economies as the aging population shrinks the workforce, leading to a shortage of low-wage labor. Additionally, the demographic pyramid is becoming inverted as the elderly population grows relative to the working-age population, creating sustainability issues for social contracts that rely on the young to support the elderly. These challenges are particularly pronounced in developed countries, while developing countries face the opposite problem of a growing youth population with insufficient job opportunities. With the future of the global population at stake, it's crucial to address these issues and find sustainable solutions that benefit all.
Japan's Prime Minister, Fumio Kishida, has warned that Japan is on the brink of being unable to sustain itself as a functional society due to its declining birth rate. The country's population, which is 125 million, is estimated to have had fewer than 800,000 births last year, a significant decrease from the over two million births recorded in the 1970s. The declining birth rate is not only a problem in Japan, as other countries are also facing the same issue. However, Japan's situation is more difficult due to the rising life expectancy, which now results in an increasing number of older adults and a declining number of workers to support them. Japan now has the second-highest proportion of people aged 65 and over, 28%, after Monaco.
To address this issue, the Prime Minister has announced that he wants the government to double its spending on child-related programs. Japan's Prime Minister hopes to implement a new government agency established in April to focus solely on this problem. Despite previous attempts by the government to promote similar strategies, this issue still needs to be solved. In 2020, there were projections that Japan's population would decrease from its peak of 128 million in 2017 to less than 53 million by the end of the century. The falling birth rate is due to various factors, such as rising living costs, more women in education and the workforce, and greater access to contraception. Although Japan has strict immigration laws, some experts suggest they should be loosened further to help tackle its aging society. Japan's story is similar to many other developed countries.
According to the National Bureau of Statistics, China also reported its first drop in population in 60 years last week, a shift that could impact the global economy. The population dropped by 850k to 1.41175 billion in 2022, with a birthrate of 6.77/1000, down from 7.52/1000 in 2021. This could lead to higher labor costs and difficulties funding public health and welfare, slowing China's economy. Factors behind the lower birth rate include rising living costs and COVID-19. China's economy grew only 3% in 2022, far below its target, partly due to the zero-COVID policy. Concerns about China's economic performance are discussed at the World Economic Forum in Davos, Switzerland.
Lant Pritchett, a developmental economist, warns of a potential global demographic crisis that is often overlooked. Slowing birth rates in developed countries are causing aging populations and smaller workforces, while some developing countries need more jobs to expand working-age people. The solution, according to economists, is migration, but political implications could be a challenge. The UN reports that two-thirds of the world's population lives in countries with birth rates below the replacement rate. As populations age, low-wage jobs are in high demand, but fewer young workers fill them. In contrast, Sub-Saharan Africa has a growing youth population but job shortages. Migration could be the solution, but there are fears of exploitation.
The US fertility rate reached a new low for the second consecutive year, continuing the decrease in American births that started in 2008. The rate dropped to 60.2 births per 1,000 women of childbearing age in 2017, down by 3% from 2016, as per the Centers for Disease Control and Prevention's National Center for Health Statistics. Companies producing baby products face challenges due to this trend, as parents delay parenthood. For example, Kimberly-Clark, the maker of Huggies diapers, has been affected and had to reduce its workforce by 13%, or 5000 jobs, due to declining birth rates and sales. Other companies such as Procter & Gamble and Edgewell Personal Care, the makers of Pampers and Playtex baby bottles, respectively, have also reported declines in their baby businesses. Baby care giant Johnson & Johnson has seen a 20% decrease in sales in its Baby Care unit since 2011 and is revamping its product line to appeal to modern-day mothers. This declining birth rate trend will significantly impact various businesses in the coming years. Generational changes, with women choosing to focus on their careers before having children later in life, may also play a role in this trend. The impact on businesses will depend on how Generation Z, now up to age 22, reaches traditional milestones like having children.
The global population is on the rise, and while this presents a plethora of opportunities, it also brings about its own set of challenges. One of the biggest dangers is the low birth rate observed in many countries. The combination of a declining birth rate and a rapidly aging society puts a tremendous strain on the country's ability to function and work as a society. The future of our communities rests on how effectively we tackle these challenges and ensure sustainable growth for all.