Europe's Impending Demographic Disaster

A new report is warning that aging populations and declining birthrates will bring a demographic disaster to most of Europe within a generation.

"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."

Full Story: Europe comes home to the shock of a demographic bombshell

Comments

Comments

Correct Link for Europe's Demographics

The planetizen link is broken. You can read the story at http://www.theglobeandmail.com/servlet/story/LAC.20080906.DOUG06/TPStory...

Charles Siegel

Is It A Demographic Disaster?

"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?"

For some reason, people love predictions of disaster. Population growth is a demographic disaster, and population decline is also a demographic disaster.

Actually, the law of diminishing returns suggests that, as population declines, real incomes should increase, because there is more land and more capital per person. It happened after the black plague ended in medieval Europe: because of shortages of labor, real wages approximately doubled. The claim that shrinking population means more poverty and inequality is probably untrue.

Yes, the price of housing will go down - bad for people who own homes but good for the younger generation that wants to buy homes. Because of lower real prices of housing and food, there should be less poverty in the younger generation than there was in the previous generation.

The age of retirement will have to increase to 70 or more. But remember that when the retirement age was set at 65 in the 1930s, average life expectancy was 61 or 62 years, so most people worked until they died and never retired at all. The higher ratio of retired to working people is a function of longer life as well as of slower population growth.

We obviously do need more economic analysis of what will happen when population begins to decrease, since Europe is leading the way and the entire world's population is projected to peak and start declining around the middle of this century. But this sort of alarmism is not the same as serious analysis.

Japan's population has already peaked and started to decline, and I have not heard that the sky is falling there.

Charles Siegel

Japan

Japan has actually been deflating since the early 1990's, with one of the primary causes being property devaluation...

Demographic vs. Economic

I don't think it's a demographic disaster either. In fact, the world would probably be better off with fewer people, although Europe is not the issue there.

Japan has experienced a near economic catastrophy because of their population decline/stagnation. Their stock market was in shambles for years (check the Nikeii 225 in the 90s and early 2000s) though it has recovered a little bit lately. Property values were hit. Real interest rates were negative once again displaying the near futile attempts of monetary policy when you're up against these types of trends.

But, demographics are what they are. Hopefully, people have the freedom to choose how they procreate and don't feel obligated nor deterred in that decision. There will be economic consequences, but I'm not sure there is anything we can do about that. The upside, as you say, is that eventually, conditions will stabilize and people can still have a good quality if life. The transition could be quite rough though.

Economic Planning for Negative Population Growth

CP, you are right that deflation could be a problem. I don't think it would be like Japan, where a bubble burst. But people would not want to buy houses, for example, if they thought that, by the time they paid off the mortgage, the house would be worth less than the purchase price.

Clearly, they would need inflationary monetary policies to counteract this potential deflation, so money prices of housing etc. remain stable as their real prices decline.

This is the sort of technical problem that economists will have to deal with in the age of negative population growth. Europe will be a test case for this sort of economic planning. In a way, it is too bad that they have gone to the Euro; they might find the right planning tools more quickly if they had many different national currencies so different countries could try different policies.

Charles Siegel

They will eventually disappear

I have been following this story for a couple of years now-not sure why it suddenly hit over there, unless they don't trust non-EU statisticians...

Anyway, they have not been having children at even the replacement rate for years. I don't see why the population would stabilize. The more "socialized" they become, the fewer children they have. I'm familiar with what happened after the Black Plague, but I would note that the population immediately began rising, once it had subsided. The only source for population gain now, is through immigration. Unfortunately, the primarily source over there is from Islamic countries. They don't appear to be "integrating" into the host countries very well. In 50 years, Europe will likely be an islamic continent.

Rate Of Population Decline

"I don't see why the population would stabilize."

The real dangers are: the speed of negative population growth, and how long it continues.

If negative population growth is too fast, it will be hard to cope. Fertility rates in Italy, South Korea, and a few other countries have already gone down to 1.3 or 1.4 - which would mean a population decline of about one-third in a generation. The world's fertility rate is declining, and no one knows how low it will go. If it goes down to 1.3 or 1.4, it would obviously be very disruptive and hard to cope with. We need policies (such as subsidies to families with children) to keep the the growth rate down to -5% or -10%, which should be easy to cope with.

If negative population growth continues indefinitely, the world will be totally depopulated. We will eventually be back to just Adam and Eve, and they will have just one child, who won't have anyone to be fruitful and multiply with. But I expect that life will get easier as the world's population declines, because of the abundant resources available per capita (law of diminishing returns again), and this should make people feel they could afford to have more children. Obviously, we have entered the realm of wild speculation when we project this far into the future.

Some people have talked about encouraging immigration from Latin America to Europe, to get immigrants who are closer to Europeans culturally. But note that fertility declines are happening in Latin America and the Islamic countries also. Most Islamic countries still have relatively high fertility rates, but Iran is already down to 2 - lower than the replacement rate.

Charles Siegel

Thank you, Charles!

I've always been suspicious about the alarmism surrounding declining birth rates. I suspect it's linked to one thing in particular: low populations mean a wage market that favors the workers. Eventually, toilet cleaners would be able to demand and receive living wages, and what would happen to the social hierarchy then?

I agree with those who have said that what's needed here is calm discussions of the various effects of population shrinkage.

Michael Lewyn's picture
Blogger

rising wages my eye

No, it won't lead to rising wages because if there are not enough people around to work at ANY wage level, Europe will have to import immigrants.

Moreover, low birth rates mean that there aren't enough taxpayers to support their social security and health care systems. (Though perhaps this could be resolved by raising the retirement age to 80 or something).

Importing Immigrants Is Temporary

Maybe Europe can keep its population growing by importing more immigrants after 2030, but what will happen when total world population stops growing around 2050 or 2060?

If there is a precipitous drop in population, say one-half or one-third each generation, then it would be very difficult to support retirees. But if population drops by 5 or 10 percent each generation, then supporting retirees would not be much more difficult than with a stable population - considering that output per worker hour tends to roughly double each generation, and considering that real prices of food and housing will decline as population drops.

Charles Siegel

Michael Lewyn's picture
Blogger

Not all European countries are equal

A lot of this discussion assumes that all European countries are suffering equal declines. In fact, some countries aren't declining at all, and the biggest losers are likely to be in Eastern, not Western Europe.

Here's a chart: http://www.os-connect.com/pop/p2ai.htm

Bulgaria is the biggest loser, losing 42% of its population by 2050. The three largest European countries (France, UK, Germany) should lose about 0-5% of population. The Netherlands and Denmark are actually growing.

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