Friday 10 October 2014 9:25 am

Lower birth rates could help stimulate the economy, says report

The declining birth rates in most developing countries across the world are giving rise to an ageing population.
There are concerns that this could cause an economic slowdown as healthcare costs and retirement costs rise, leading many governments to encourage higher birth rates to maintain the workforce and tax base needed to fund pensions, healthcare and benefits for the elderly.
A group of scientists at the University of California, Berkeley, conducted a study into how birth rates influenced standard of living in 40 different countries spanning all the continents.
Using government and private spending data for all age groups in each country, they looked at how population changes impact economies across generations.
Their calculations were based on finding the birth rate and age distribution that would best balance the costs of raising children and of caring for the elderly. 
The results of their study, published in the journal Science, suggest that in many parts of the world it actually pays off to have fewer children. In fact, the optimal birth rate in most places was found to be a little under two children per woman.
"A more complete accounting of the costs of children shows only a few countries in East Asia and Europe where the governments should encourage people to have more children," said Andrew Mason, an economics professor at the University of Hawaii-Manoa and one of the lead researchers in the study. 
"In the United States and many other high- and middle-income countries, people are having about the number of kids that are best for overall standards of living."
The cost of having lots of young people introduced to a population, they explain, comes from the need for new infrastructure to support them. 
“A growing labour force has to be provided with costly capital such as factories, office buildings, transportation and housing," said Ronald Lee, a demographer and one of the lead researchers in the study.
"Instead of trying to get people to have more children, governments should adjust their policies to accommodate inevitable population ageing," he added.
Ageing population
Data released earlier this year by the US Census Bureau showed that the proportion of the UK's population aged 50 or over is expected to go up from 35 per cent to 42 per cent by 2050. In the US, it is expected to go up from 32 per cent to 37 per cent. 
The projected increases are even steeper in Japan and China, where they are set to rise from 44 per cent to 57 per cent, and from 25 per cent to 49 per cent, respectively.