The fewer, the merrier

From the June 2024 print edition

There was a very important and underreported story that emerged around the turn of the New Year. The most populous country in the world is no longer China. It’s India. It is still close in absolute numbers; India’s population is estimated to be 1.442 billion while China’s comes in at 1.425 billion. In and of itself, that is significant enough. But what really surprised me was that China’s population, for the second straight year, had declined. This is something I had associated with, or even expected from, a country like Japan, whose economy is both highly developed and fully mature. But China, really?

Toronto-based Michael Hlinka is a tenured professor at George Brown College. He hosts a weekly podcast about wagering on professional football. His website is www.michaelhlinka.com.

This led me to do some further exploration about this phenomenon and by that, I mean population trends. Not only in China, but around the globe. The recognized expert when it comes to this subject is the UN Population Projection.

In 1968, it looked ahead 22 years and estimated that in 1990 there would be 5.44 billion people and as it turned out, there were 5.38 billion. It seems to me that you should call this rounding error and leave it at that. Then, in 2000, it estimated that there would be eight billion in 2020 when the actual number was 7.8 billion. These folks didn’t go to school just to eat lunch!

There are two other institutions with expertise when it comes to estimating population, the International Institute of Applied Systems Analysis (IIASA), based in Vienna, and the Institute of Health Metrics and Evaluation (IHME), based in Seattle. The UN believes that global population will peak at 10.4 billion in 2085, the IIASA’s estimate is 10.1 billion in 2080, while the IHME sees population peaking at 9.7 billion in 2064. While the three bodies differ in their estimate of peak population and when it will occur, all agree that after that high water mark, the world’s population will shrink from that time forward.

Exploding population
There is a rich history in economic thought that worried about the number of people overwhelming the Earth’s ability to supply necessities. The earliest proponent of that theory was English economist Thomas Malthus. He believed that as wealth and living standards increased, population would go up with it and there would be no increase in the average person’s standard of living and quality of life. Paul Ehrlich wrote The Population Bomb in 1968, the first line of which reads, “The battle to feed all of humanity is over.” His dire prediction was that wide-spread starvation was going to be the “new normal.”

It’s been demonstrated – historically – that a growing population is consistent with higher standards of living, not lower ones. However, the question in the future could well be, is a declining population consistent with higher living standards? Japan could be the test case. Its population peaked in 2009 at 128.117 million. Since then, the number of Japanese nationals has declined each year without exception until it stood at 123.295 million in 2023. Its decline in percentage terms is accelerating and the UN estimates that by 2056 there will be fewer than 100 million Japanese.

From 2009 to 2021 GDP per capita in Japan flatlined. Then for some reason, it plunged by 15 per cent in 2022, then by another three per cent in 2023. This takes us to the “worst-case” scenario for a declining population that is simultaneously aging which is the reality for Canada, the US, and other countries in the developed world. The ratio of those who work to those who do not work is in decline and will continue to decline for the foreseeable future. The challenge is to figure out how to reverse that trend and it’s going to be easier than one thinks.

The value of education
Let’s start with post-secondary education. When I look at the protests that have recently rocked a number of North American universities, it is clear to me that there is a significant cohort of university students who are attending school, learning nothing useful, and have too much time on their hands. They will graduate with zero marketable skills and a crushing debt burden. If we were smart, there would be a very limited number of university STEM programs that would have zero tuition associated with them and otherwise all other useless “disciplines” should be shut down.

Something that I addressed in a previous column is, we must recognize that if you’re a paper-pusher, retiring at 65 is anachronistic. At the same time, there must be the flexibility for employers to replace less productive older workers with younger, more productive ones. Part of the productivity equation has to be compensation. This would have an impact on closing the generational wealth gap, which is another reason why contestable labour markets are not only good economics, but good and just public policy as well.