European Population Crisis?

Dennis Hogan

Stages of the Demographic Transition

Aging of the Population

• Mostly due to decline in FERTILITY • Declines in death rates only important at very

advanced ages (80+)• In fact populations would not grow old even if

immortality, unless fertility rates are below replacement

• The age/sex pyramid reflects what has already happened

• Only future fertility is a question

Age Structure Depends on Fertility

Aging of All Populations:Developed Nations First in Transition

Age Pyramids Reflect History

Decline in Fertility-Germany

Proximate Causes of Low Fertility

• Decline in desired family size • Delays in age at marriage/partnership reduces

period of exposure• Improvement in contraception– Unwanted births avoided– Mistimed births delayed– Longer birth intervals– Decline in higher order births at ages 40+

Social Factors in Low Fertility-1

• Delayed transition to adulthood– prolonged years in school– Problems in work/income independence– Prolonged residence with parents

• Need for both husband/wife to work– Declines in real earnings last 30 years– Dual Income needed for household to avoid

poverty– No longer can husband alone support family

Social Factors in Low Fertility-2• Women’s work– Initially need to pay off human capital investment– Better returns on higher education=better paying

jobs– Women begin to have careers not just jobs– Increased opportunity costs of discontinuing work

• Women’s need for autonomy– Independent decision making?– Fertility outside of marriage– Unmarried births very young ages (social exclusion

and dependency)

Fertility Higher-1• If unplanned births happen (young premarital

births)==social support to escape bad life• If support for women’s work– Hourly earnings adequate for part-time work– Childcare access, quality, affordability (could be

family based)– Generous maternity leave– Flexible work schedules

TFR & Non-marital births

TFR and Women’s Employment

Fertility Higher-2

• Father Involvement– Household jobs– Childrearing shared

• Affordable housing• Social investments in children (reduce cost of

children to parents)– Income supplements per child– Child care– Free education & health care

Aging Population a Problem?

• Less innovation• Slow response to social transformations (need

cohort replacement)• Less vibrant, healthy, intensive workforce• Lack of opportunity for new workers (old stay on

jobs-little cohort turnover)• High old age dependency burden• High medical costs of very old (last year of life?)• Decline in national power (vis Israel)

Aging Population an Advantage?

• Reduced child dependency costs• Invest better skills for mid-life workers• Experienced labor force (key element of

human capital)• Social stability• War less likely?• Lower crime rate

Labor Shortage and High Consumptionin Aging Population

• Improvement in Human Capital• Technological Innovation• Full employment – young (not most of Europe)– Women (not in Japan)– Minorities (excluded populations)

Solutions to Old Age Dependency

• Increase in age at retirement (62 to 65, 65 to 67)

• Encourage individual savings for retirement• Smart retirement consumption (internet)• Contact with family, friends thru internet

(more social support?)• Better health among better educated• Less use of extreme health measures

The Demographic Myth• Uses period rates to predict the future• Fails to recognize social adjustments to

demographic change (social system to support mothers working and child subsidies)

• Fails to recognize increasing value of children and young adults when small cohorts– Easterlin—increased fertility as consumer durable

• Assumes no increase in fertility desires (from 0,1 to 2)– Great depression 1930s proves wrong

• Hogan Prediction – Fertility increase in Europe by 2025