Europe's demographic bombshell
DOUG SAUNDERS
Globe and Mail Update
September 5, 2008 at 12:23 PM EDT
LONDON — In France, they call it la rentrée, the day in early September when the entire population of Europe coagulates the continent's highways and asphyxiates its airports by returning from four- and six-week vacations all at once. It's considered a sombre and melancholy day, a moment to contemplate your depleted finances and advancing age.
Never more so than this week. Aside from a slumping euro and a collapsing real-estate market, residents of most European countries returned from the beaches to discover that their grey hairs and their improved lives have led their countries to a looming demographic and fiscal catastrophe.
Eurostat, the European Union's statistics body, created a continent-wide frisson of alarm over the Aug. 31 weekend with a study bearing the innocuous title “Population and social conditions.”
The statisticians discovered that it will be only seven years – not 20 or more years as previously thought – until a population milestone is reached, the point at which deaths will outnumber births across the continent, something that has not occurred since the disease-ridden years of the 18th century.
In other words, as of 2015, Europe's population will no longer increase naturally. And, even with immigration at its current levels, that means that within the next generation, the European population will begin shrinking.
Europeans are freaking out
“Those of you who have a chance of living to see the year 2060 should start getting worried,” wrote the conservative Madrid newspaper ABC. “All conceivable catastrophes are possible.”
The year 2060, as we shall see, is something of a demographic black hole. At the moment, 1 in 5 people on the continent is over 65. This means that the pension costs, public-health and transportation needs (and sometimes the housing and social-welfare requirements) of each senior citizen must be supported by taxes and other deductions from the incomes of just four working-age people (aged 15 to 64), presuming they have incomes.
As birth rates stay low and longevity increases, this gap will widen. By 2060, there will be 50 million fewer workers and 67 million more seniors, so the ratio will have changed to 1 in 3 – in other words, there will be only two working-age people to support each senior.
The costs of supporting the over-65 population are already the largest government expenses in many European states. This doubling of the ratio means that taxes will either have to increase dramatically – some speculate they may have to double – or the quality and level of public services will have to be slashed harshly without any commensurate tax cut. Either choice would badly wound the economy.
The Swedes got down to nuts and bolts: “To cope with this decline, the aging population must work longer; that means both men and women,” the newspaper Dagens Nyheter wrote, joining many voices now calling for a retirement age of 70 and longer work hours to boost productivity.
“But that will not be enough. Immigration must increase, with everything that entails in terms of integration measures. And finally, the obstacles hindering people from having children must be set aside. That includes facilitating artificial insemination, for example. But the key thing is to create an equitable labour market, so that women do not feel forced to choose between children and their professional life.”
That doesn't quite add up: If you're going to encourage women to have more than 2.1 babies each – such as by paying them $1,500 a month for each additional child, as the French are now doing – then how can you also encourage them to get more active in the work force? If I were a 30-year-old woman or a 64-year-old factory worker in Europe now, I'd be getting worried. The boom is about to come down on you.
Of course, this should be a happy story: Because living conditions have improved in so much of the world, people are finally having an appropriate number of children. Overpopulation is a big worry – and in places like the countryside of India, it remains a crisis. We can't keep multiplying forever, and human populations are never stable: They either grow or shrink. Europeans have long complained about what they believe are crowded conditions, which is why they continue to come to Canada and Australia.
So now they might be able to get those open spaces at home. But the price, it turns out, might be unbearably high.
The fiscal cost, mentioned above, is only the beginning. In a shrinking population, and therefore a shrinking market, it is extremely hard to avoid poverty, inequality and unemployment – why would anyone invest in your business or buy your house, knowing there will be fewer buyers in the future?
Productivity gains, as the Swedes suggest, can buy you some time, but in the long run a minus sign is bad for everyone.
There are now 51 countries whose populations will shrink in the next 50 years, plus 28 that are able to maintain their populations only through immigration. That includes Canada, whose population will start shrinking in about 20 years, even with 300,000 new immigrants a year.
It also includes Qatar, Singapore and the United Arab Emirates. Iran is on the verge of joining this group – after plummeting from seven children per family in the 1980s to barely more than two now – and Turkey is not far behind.
When people become prosperous, they stop having large families. That includes immigrants, who don't reproduce more, after a generation, than the rest of us. Either we take in a lot more than we do now, or we get ready to change our way of life – this will be the big debate of the near future.
Twenty years ago, Canadian-born historian William H. McNeill became the first scholar (to my knowledge) to look seriously at the problem of shrinking population, which was then strictly a speculative matter.
“Politically speaking,” he concluded, looking at places such as Quebec, where it had already happened, “one must expect considerable volatility in public responses to what is still a new and perhaps unstable demographic regime in the rich, urbanized countries of the earth.”
He warned that every nation would soon have to be an immigrant nation and spoke of “the tendency toward aggressive self-assertion in the face of diminishing numbers.”
I fear that may have been a good prediction.
