9
The Australian Economic Review, vol. 33, no. 3, pp. 272–80 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research 2000 Published by Blackwell Publishers Ltd, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA 1. The Primary Importance of Age Structure For the field of demography, the central issue for public policy since the 1980s has been the ageing of the population. Prior to this in Aus- tralia, again from the demographic perspective, policy had focused almost exclusively on the size or growth of the population. Ageing is about the composition of the population, in par- ticular, the shape of its age distribution. In the past two years, Rebecca Kippen and I have written a series of papers relating to the shape of future age distributions in the context of very low fertility rates (McDonald and Kippen 1999a, 1999b, 1999c, 2000). Low fertility means that never again shall we see the stan- dard pyramid-shaped age structure where the numbers at each successive age are lower than at the previous ages. Our choice for the future is between what we have called the ‘beehive’- shaped age structure and the ‘coffin’-shaped age structure (Figure 1). The beehive shape re- sults from combinations of migration and low fertility that lead to at least zero population growth; the coffin shape results from combina- tions of migration and fertility that lead to neg- ative population growth. We argue that there are very good reasons to aim for the beehive shape and to avoid the cof- fin shape. The coffin-shaped age structure pro- vides a considerable risk to future economic sustainability through its impact on the labour supply. Japan and many European countries are well on the way to a coffin-shaped age struc- ture. They are facing immediate, substantial and sustained falls in the absolute size of their labour forces. Over the next 50 years, continu- ation of present birth and labour force partici- pation rates with no migration would lead to a fall in the labour supply in Japan from 65 mil- lion to 45 million, in Germany from 41 million to 21 million and in Italy from 23.2 million to 11.3 million. At the same time, the world’s eco- nomic engine, the United States, will continue to experience sizeable growth in its labour force over the next half century. The growth orienta- tion of international economic thought is very likely to continue as the US engine steams on. Capital will follow growth. Hence, countries now facing major falls in labour supply will feel the pressure (McDonald and Kippen 2000). A coffin-shaped age structure also creates a downward spiral in the size of the population that is difficult to reverse. That is, as the small younger cohorts replace the larger older co- horts in the reproductive ages, the numbers of births continue to fall leading to even smaller cohorts in the future. This is known as the mo- mentum for population decline (McDonald and Kippen 1999c). In sum, the choice between the beehive and the coffin is a choice about demo- graphic sustainability; the beehive is sustain- able, the coffin is not. Hence, the shape of an Australian population policy is a beehive. 2. Immigration, Fertility and Age Structure Recently I watched an excellent BBC televi- sion program on population ageing. As part of the introduction, the Australian presenter, with Policy Forum: Population Policy The Shape of an Australian Population Policy Peter McDonald Australian Centre for Population Research and Demography Program, The Australian National University

The Shape of an Australian Population Policy

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Page 1: The Shape of an Australian Population Policy

The Australian Economic Review, vol. 33, no. 3, pp. 272–80

The University of Melbourne, Melbourne Institute of Applied Economic and Social Research 2000Published by Blackwell Publishers Ltd, 108 Cowley Road, Oxford OX4 1JF, UK and

350 Main Street, Malden, MA 02148, USA

1. The Primary Importance of Age Structure

For the field of demography, the central issuefor public policy since the 1980s has been theageing of the population. Prior to this in Aus-tralia, again from the demographic perspective,policy had focused almost exclusively on thesize or growth of the population. Ageing isabout the composition of the population, in par-ticular, the shape of its age distribution. In thepast two years, Rebecca Kippen and I havewritten a series of papers relating to the shapeof future age distributions in the context of verylow fertility rates (McDonald and Kippen1999a, 1999b, 1999c, 2000). Low fertilitymeans that never again shall we see the stan-dard pyramid-shaped age structure where thenumbers at each successive age are lower thanat the previous ages. Our choice for the futureis between what we have called the ‘beehive’-shaped age structure and the ‘coffin’-shapedage structure (Figure 1). The beehive shape re-sults from combinations of migration and lowfertility that lead to at least zero populationgrowth; the coffin shape results from combina-tions of migration and fertility that lead to neg-ative population growth.

We argue that there are very good reasons toaim for the beehive shape and to avoid the cof-fin shape. The coffin-shaped age structure pro-vides a considerable risk to future economicsustainability through its impact on the laboursupply. Japan and many European countries arewell on the way to a coffin-shaped age struc-ture. They are facing immediate, substantial

and sustained falls in the absolute size of theirlabour forces. Over the next 50 years, continu-ation of present birth and labour force partici-pation rates with no migration would lead to afall in the labour supply in Japan from 65 mil-lion to 45 million, in Germany from 41 millionto 21 million and in Italy from 23.2 million to11.3 million. At the same time, the world’s eco-nomic engine, the United States, will continueto experience sizeable growth in its labour forceover the next half century. The growth orienta-tion of international economic thought is verylikely to continue as the US engine steams on.Capital will follow growth. Hence, countriesnow facing major falls in labour supply will feelthe pressure (McDonald and Kippen 2000).

A coffin-shaped age structure also creates adownward spiral in the size of the populationthat is difficult to reverse. That is, as the smallyounger cohorts replace the larger older co-horts in the reproductive ages, the numbers ofbirths continue to fall leading to even smallercohorts in the future. This is known as the mo-mentum for population decline (McDonald andKippen 1999c). In sum, the choice between thebeehive and the coffin is a choice about demo-graphic sustainability; the beehive is sustain-able, the coffin is not. Hence, the shape of anAustralian population policy is a beehive.

2. Immigration, Fertility and Age Structure

Recently I watched an excellent BBC televi-sion program on population ageing. As part ofthe introduction, the Australian presenter, with

Policy Forum: Population Policy

The Shape of an Australian Population Policy

Peter McDonaldAustralian Centre for Population Research and Demography Program, The Australian National University

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Figure 1 Beehive (Total Fertility Rate = 1.65, Annual Net Migration = 80 000) and Coffin (Total Fertility Rate = 1.40, Annual Net Migration = 40 000) Projection Scenarios, Australia 1999–2099

0–4

10–14

20–24

30–34

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100+1999

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100+2024 beehive

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100+2099 beehive

1000 500 Population (’000) 500 1000

1000 500 Population (’000) 500 1000

1000 500 Population (’000) 500 1000

1000 500 Population (’000) 500 1000

1000 500

0–4

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20–24

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100+2024 coffin

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Population (’000) 500 1000

1000 500 Population (’000) 500 1000

1000 500 Population (’000) 500 1000

1000 500 Population (’000) 500 1000

1000 500 Population (’000) 500 1000

Age

Age

Age Age

Age

Age Age

AgeAge

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apparent certainty, said that Australia was in amore fortunate position than most other coun-tries in regard to ageing because of its post-warimmigration program. The implication, as weoften hear, is that post-war immigration haskept our population young. This is a matter thatRebecca Kippen and I have been investigating.We have reproduced Australia’s post-war pop-ulation history, from 1945 to 2000, with andwithout the impact of immigration. We havefound that, with zero immigration since 1945,Australia’s population in 2000 would havebeen 12.2 million or about seven million lessthan it is, however, its age structure would havebeen almost exactly the same as it is now. Thatis, contrary to popular wisdom, immigrationhas had virtually no impact on our present agestructure. Instead, our present age structure hasbeen determined almost entirely by the fluctu-ations in the annual number of births over thepast 80 years. Falls in mortality have had asmall and recent impact at the oldest ages (Kip-pen and McDonald 2000).

While we have found that immigration hashad virtually no impact on age structure overthe past 50 years, immigration can have someimpact in the next 50 years. The change in theimportance of immigration in the determina-tion of age structure relates to the shift in fertil-ity from rates that are above an average of two

children per woman to rates that are below twochildren per woman. Two children per woman(more exactly, 2.06) is the number that wouldlead to the exact replacement of one generationby the next. In the longer term, a populationwith exact replacement level fertility has zeropopulation growth in the absence of migrationand it has a beehive-shaped age structure.When fertility is below the replacement level,in the absence of immigration, the coffin-shaped age structure emerges over time. Thecoffin shape also emerges when the level of im-migration is insufficient to offset the effects ongrowth of low fertility (Figure 1, right side).We have shown that immigration is an effec-tive way to offset this effect (McDonald andKippen 1999b). That is, the beehive shape canbe produced from appropriate combinations ofbelow replacement fertility with immigration.For example, if fertility in Australia fell duringthe next decade to an average of 1.65 childrenper woman and then remained constant, net mi-gration around the post-war annual average of80 000 persons per annum would ensure abeehive-shaped age structure (Figure 1, leftside). Other combinations of fertility and netmigration that produce zero population growth(stationarity) and, hence, the beehive-shapedage structure, are shown in the first two col-umns of Table 1.

Table 1 Combinations of Fertility and Migration Leading to Population Near-Stationarity within 50 Years, with Selected Population Outcomes for the Year 2099

a

TFRANM (’000)

Population (million)

Average age ofpopulation aged 20–64

Proportion of total population aged 20–64

(per cent)

1.0 285 35 44 53

1.1 235 32 44 53

1.2 200 30 44 53

1.3 165 28 44 52

1.4 135 27 43 52

1.5 105 25 43 52

1.6 85 25 43 52

1.7 60 24 43 51

1.8 40 23 43 51

1.9 20 22 43 51

2.0 0 21 43 50

Note

: (a) TFR is the total fertility rate, the average number of children per woman across a lifetime. ANM is annual netpermanent and long-term migration.

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The final two columns of Table 1 show indi-cators of the age structure of the stationary pop-ulations that would be obtained by the differentcombinations of fertility and migration. The es-sential point to be made here is that the resultantage structures are very similar irrespective ofwhether the stationary population is obtainedwith high fertility and low migration or the re-verse. To repeat, all of these combinations offertility and net migration would produce abeehive-shaped age structure. On the otherhand, the middle column of the table showsthat, although all these combinations eventuallylead to zero population growth, before thatpoint is reached, the different combinationsproduce different total population sizes. Thecombination of low fertility with high migra-tion leads to a much higher population size be-fore it becomes stationary than does thecombination of high fertility and low migration.However, we should not conclude from this thatthe best way to get a beehive-shaped age struc-ture and a large population size is to have verylow fertility and very high migration. A muchmore efficient way to achieve the beehive-shaped age structure and to have a large popu-lation is to have combinations of fertility andmigration that produce an eventual populationgrowth rate that is above zero. Slowing downthe rate of decline in fertility, indeed, bringingthe decline to a halt, is a necessary componentof such a strategy. We have also demonstratedthat when a positive, long-term rate of popula-tion growth is produced as a net result of highmigration combined with fertility below an av-erage of two children per woman, the resultingage structure remains beehive-shaped. It is justa bigger beehive (McDonald and Kippen1999b). To produce a younger age structurethan the beehive age structure, fertility must beabove two children per woman on average.

On the other hand, for those who argue thatAustralia should be aiming for a sustainablepopulation with a low population size (for en-vironmental reasons, for example), Table 1 im-plies that the best way to achieve this result isby aiming for low migration in combinationwith a fertility rate that approaches two chil-dren per woman. The present continued fall inAustralian fertility, however, does not bode

well for this ‘low population’ strategy. It mayseem incongruous to argue that the best way toachieve a low population size is to ensure thatfertility does not fall any further than it has, butthat is the message from Table 1. The key to theargument is that demographic sustainability re-quires a beehive-shaped age structure. Lowerfertility would stimulate higher and higher mi-gration in order to achieve the beehive shapeand that would mean a much larger populationthan if fertility had not fallen.

Thus, attainment of the beehive-shaped agestructure, or demographic sustainability, im-plies that, as fertility falls, we should adjust netmigration upwards in compensation. However,there are limits to the extent to which this ap-proach is possible. If fertility in Australia wereto fall from its present level of just over 1.7children per woman to 1.2, the level now pre-vailing in a number of southern and easternEuropean countries, net migration of 200 000persons per annum (starting now) would be re-quired to ensure the beehive shape. To providesome perspective to this number, the highestannual net migration we have experienced inAustralia in the past 50 years is around 150 000per annum, a number reached in just two of thepast 50 years. In the latter years of the 1980s,when net migration approached 150 000 fortwo successive years, there were questionsabout the skill level of the intake. The onset ofa recession led to many of these people remain-ing unemployed for a long period of time. Netmigration at 200 000 per annum every year intothe indefinite future is well outside the range ofour experience. Furthermore, with very lowfertility and high net migration, the rate of pop-ulation turnover becomes very high indeed.This can create issues of social or political sus-tainability. Finally, because of the falling la-bour supply in many European countries, theinternational competition for skilled immi-grants is about to hot up considerably.

The clear conclusion is that demographicsustainability through a balancing of fertilityand migration becomes increasingly more dif-ficult to achieve as fertility falls below about1.6 births per woman. Whether we are aimingfor a low-sized sustainable population or alarge-sized sustainable population, cessation of

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fertility decline is a requirement. The differ-ence between the two aims is then a matter ofimmigration levels. On present trends, the fer-tility rate in Australia will fall below 1.6 chil-dren per woman in about five or six years time.There is no present sign of any slowing downin the rate of decline of the fertility rate. To addto this, a recent draft paper from the FederalDepartment of the Treasury has projected thatAustralia’s low fertility trajectory will lead to afall in gross domestic product (Bacon 2000).Hence, in the interests of both demographicand economic sustainability, there is a policyinterest in bringing the present fall in fertility inAustralia to a halt.

3. Shifting Opinion on Fertility Policy

Cessation of the fall in fertility as a policy aimis achieving growing recognition. For example,the Business Council of Australia (in a letterfrom its President dated 1 October 1999 to par-ticipants in a BCA Forum) has recently ex-pressed the need for ‘a family policy thatencourages natural increase in the populationby making the successful combination of workand family life a practical choice’. Martin Fer-guson, elsewhere in this issue of the

AustralianEconomic Review

(p. 263), says:

Labor sees fertility as a crucial factor affectingour population … We will not arrest the decline inbirth rates without taking positive steps to im-prove the quality of life of those seeking to com-bine family with work.

Earlier this year, the Australian Institute ofFamily Studies, with strong backing from theFederal Department of Family and CommunityServices, convened a meeting on DecliningFertility in Australia: Policy and Research Is-sues. A recent editorial in the

Australian

news-paper (8 June 2000, p. 15) said:

Governments rightly profess concern about thetrend of falling birth rates yet it is unquestionablethat public policy has a core role to play in advo-cating change.

The President of the Australian PopulationInstitute Inc., Albert Dennis, predicted a sub-

stantial drop in the standard of living of Austra-lians unless, among other things, we ‘increaseour fertility rate to the replacement level of 2.1births to one female’ (quoted in

APop Vision21

, July 2000, p. 1). While this may be a some-what ambitious target, the need to deal withfertility as a policy issue is clearly evident.

These very recent statements stand in sharpcontrast to statements made earlier in the 1990swhen the sustained fall in fertility was less ev-ident than it is now. In 1992, the Population Is-sues Committee of the National PopulationCouncil concluded that immigration alone isthe core of active population policy. In regardto fertility, the Committee concluded:

The role of government in the area of fertility isonly that of ensuring that couples are providedwith the maximum extent of informed choice indeciding whether or not they have children and, ifso, how many.[National Population Council 1992, p. x]

In 1996, Doug Cock’s book based on sub-missions to the House of Representatives LongTerm Strategies Committee inquiry into Aus-tralia’s population carrying capacity concludedthat immigration policy is the keystone of pop-ulation policy and that the extent of fertilitypolicy was eliminating ‘unwanted’ births.Most of the fertility-related submissions to theCommittee called for the elimination of gov-ernment family supports so that fertility wouldfall. The logic of these submissions was that, inorder to protect the environment, Australia’spopulation size needs to be as small as possiblein as short a time as possible (Cocks 1996). In1997, Harry Recher, Professor of Environmen-tal Management at Edith Cowan University,said:

I would stop immigration—adding more peoplefrom any source is an ecological error. Australiaalso needs a one-child policy.[Quoted in McDonald and Kippen 1999c, p. 10]

McDonald and Kippen (1999c, pp. 10–11)have demonstrated that the combination of zeromigration and a one-child policy is a fast-trackroute to the coffin-shaped age structure.

Opinion on the significance of public policyto fertility has shifted as fertility has fallen to

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new record-low levels and shows every indica-tion of continuing to fall.

4. Social Reproduction and Market Production

In a recent paper, I have discussed four theoriesto explain low fertility and have considered therange of policy responses associated with eachtheory (McDonald 2000). Upon further reflec-tion, I would argue that all of these theories oflow fertility are associated at a more generallevel with an emphasis upon market productionat the expense of social reproduction.

Since the 1980s, the industrialised countriesof the world have restructured their economiesin line with a philosophy that the free operationof the market is the most efficient and effectiveform of economic organisation. Regulationsand restrictions have been reduced so that cap-ital can flow easily in the direction that maxi-mises business efficiency and profit. Thetheory is that profitable businesses mean im-provements in employment and wages and,hence, in economic wellbeing. The characteris-tics of this new economic regime are smallgovernment and low taxation, free flow of cap-ital across international boundaries, free trade,freedom for employers and workers to deter-mine wages and working conditions, and cur-tailment of government-funded social welfare.In distributional terms, the system rewards in-novation and hard work and, hence, providesincentives for both. The individual worker hasthe freedom to sell his or her skills to the high-est bidder. Government, both national and in-ternational, takes on a new role as facilitatorand regulator of this system.

In the 1990s, this system produced lowerlevels of unemployment in most industrialisedcountries and, on average, greater prosperity.However, there are questions about its distribu-tional outcomes. The system is unforgiving ofits casualties whether they be individuals, com-panies or nations. Companies and nations arepenalised for failure through outflow of capitalat short notice. Individuals are penalised forfailure by loss of their income source. The re-wards may be greater under this system thanunder the former system of protection, but the

risks are also greater. Most countries deal withthe casualties of the market through their wel-fare systems, but these are increasingly seen asbeing under threat. The principal role of wel-fare states has been to provide a safety net sothat the risks of falling off the market’s highwire are greatly reduced. In the prospect thatthe safety net may be removed, people adoptrisk-averse behaviours.

The market approach deals with individualsas inputs to the system of production. Conse-quently, in order to protect themselves fromrisk, individuals must maximise their utility tothe market. This means that they need to focusupon the acquisition of saleable skills, work ex-perience and a marketable reputation. At thesame time, they need to accumulate savings orwealth as a personal safety net. They also needto maintain flexibility of time and place so thatthey can react to opportunities as they arise.The risk-averse individual in a world that re-wards market production is unwise to devotetime or money to social reproduction. Socialreproduction involves altruism, that is, timeand money devoted to others or to the societyat large. For the risk-averse in a free marketeconomy, altruism is equivalent to foolhardi-ness.

Family is at the heart of social reproduction.It is the place where altruism abounds. Thereare people and politicians who believe that thepublic world of the market economy and theprivate world of the family can be separateworlds: that an individual can be highly com-petitive, individualistic and risk-averse in themarket but then be self-sacrificing, altruisticand risk-accepting within the family. The onlyexplanation I can give for this logic is that theseare people who still believe in the 1950s’ sepa-ration of the roles of men and women; that mar-ket production is a male responsibility andsocial reproduction is a female responsibility.A worker with a family can be flexible to thedemands of market production if he has a wifeat home taking care of social reproduction.

This is not the 1950s. In attitude and behav-iour, we have rejected the male breadwinnermodel of the family. Young women today areequipped for market production at a level atleast equivalent to young men and employers

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are very happy to employ women in the marketeconomy. Where human capital counts, thefree market will employ a skilled woman be-fore an unskilled man, even before a manslightly less skilled than the woman. The risk-averse woman of today will ensure that she isable to support herself and, given the highprobability of divorce, will be careful not to putherself at the risk of dependency upon a man.Couples recognise that dual employment pro-vides a hedge against job loss for either one andbanks reinforce this by providing mortgages onthe basis of two incomes. Parents and schoolsencourage young women to accumulate skillsthat will enable them to remain attached to thelabour force. As a result, there are very fewyoung women today who see their future livesin terms of finding a husband and never there-after being engaged in market work. Reinstitu-tion of the male breadwinner model of thefamily is not the solution to the dilemma thatwe now face in maintaining social reproductionin combination with a free market approach toeconomic production.

The foundation of social reproduction is thebirth, nurture and socialisation of the next gen-eration. The failure of the social and economicsystem that we have today is most evidenced byour failure to be able to establish this founda-tion. For the past 20 years, almost all industria-lised countries have had rates of birth that arebelow the level that reproduces the population.What kind of society cannot even reproduce it-self? The answer is our kind of society. Thisshould be an issue that exercises the minds ofgovernments and firms committed to the futureof market production because, in some coun-tries, very low birth rates are already leading tofalls in the absolute sizes of their labour forces.

The market is not interested in this issue be-cause the market is very short term in its orien-tation. Firms and governments become caughtup in this short-term vision and with good rea-son because they tend to be punished by the fi-nancial markets for any short-term lapse.Consequently, long-term investment tends tofall off the agenda for both firms and govern-ments. When I have spoken to economistsabout labour supply in 2020, their eyes glazeover. They say that they do not have the models

to estimate what labour demand will be that farout so how can they assess labour supply. Forall its virtues, neoclassical economics is the sci-ence of change at the margin. Its models showthe impact of change at the margin includingmargins of time. The neoclassical approach tofertility decision making is to devise a modelrelating to the utility of the marginal child tothe marginal couple. There is not much roomhere for attributing low fertility to the nature ofsocial organisation. Social organisation is ex-ogenous, well covered by the assumption of ce-teris paribus. The long term is in the lap of theneoclassical god, the price mechanism. We canhave faith that, in good time, it will correct forwhatever we need. As children become scarcer,their value to society will increase and we willpay more to those who produce them. This maybe so but, if the market is reacting to a shortageof workers induced by previous low birth rates,an increase in births does not feed into the la-bour force for around 20–25 years. That is, thelag time to response can be very long indeedand major demographic problems can be cre-ated in the interim.

Population policy is policy for the very longterm. As an example, we are now preparing fora large increase in the aged proportion of ourpopulation that will occur mainly between2020 and 2040. Ageing is the product of rela-tively high birth rates from 1950 to 1970 fol-lowed by low birth rates since 1970. Hence, apolicy issue in 2030 derives from births 70years and more beforehand. We can projectahead now and see that very low birth ratessuch as those that apply in Japan and most ofEurope today will lead to age structures that arecoffin-shaped. There is no sign at all that themarket price mechanism is about to correct forthis situation in Japan or Europe. Indeed, theopposite is true. The market continues to pro-duce risk-averse workers for whom childrenare a considerable risk.

The collapse of birth rates in most industria-lised countries is telling evidence of the failureof the market approach to allow social re-production to proceed. First reactions havebeen to lash out at young people, especiallyyoung women. Newspapers in Japan havecoined the term ‘parasite singles’ to describe

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young Japanese. Various conservative coun-tries have called upon young women to fulfiltheir national duty. These are all pointless, and,at worst, counterproductive because attentionis focused in the wrong policy direction. Theissue is much more fundamental. It is not amatter of tweaking this and fiddling with that,the standard approach of Australian govern-ments. What is required is a new social contractthat enables the market approach to proceedbut which, at the same time, provides just re-wards to social reproduction. This is indeed achallenge. As Nancy Folbre (1997, p. 10) hassaid, ‘The competitive structure of a globalcapitalist economy makes it much easier tooverturn old forms of social obligation than toestablish new ones’.

5. Concluding Remarks

I have argued that the first priority of a popula-tion policy for Australia is to ensure an agestructure that provides long-term demographicsustainability. This can be achieved through acombination of immigration and fertility thatleads to at least zero population growth in thelong term, or to the beehive-shaped age struc-ture. An important part of this policy directionis to stop Australian fertility rates from fallingbelow about 1.6 births per woman. I argue thatthis is not so much a question of pro-natalism,but of less anti-natalism. Australian fertility isdefinitely heading in the direction of ratesbelow 1.6 births per woman as social and eco-nomic institutions become more anti-natal. Thedifference between a fertility rate of 1.6 birthsper woman (a sustainable level) and 1.3 birthsper woman (an unsustainable level) is 30 percent of women having one less child. This isthe target for a less anti-natalist policy. That is,it is pointless to direct policy at women or menwho are strongly committed to not having achild or another child. Policy needs to be di-rected at the 30 per cent most likely to have oneless child than they currently intend. It wouldbe useful to conduct research that indicateswhom these people might be and what supportswould best meet their needs. From this per-spective, this policy direction has both demo-graphic and social justification.

If the fertility rate can be stabilised at a min-imum of 1.6 births per woman, then we wouldrequire net migration of the order of 80 000–90 000 persons per annum to achieve thebeehive-shaped age structure, that is, a contin-uation of immigration at its post-war averagelevel. This should be readily achievable despiteincreasing competition for international immi-grants. In the last two years, net migration hasbeen around 110 000 per annum.

1

If the first priority of a population policy hasbeen achieved, the debate shifts back to a de-bate about population size. With fertility at 1.6births per woman and immigration around80 000–100 000 per annum, no reasonablysized addition to the immigration intake willchange the age structure of the population to asignificant extent—but it will change the sizeof the population. This debate is not a demo-graphic debate but a debate about the economyand the environment. Looking back to 1945,the equivalent debate is about whether Austra-lia is a better country in 2000 because post-warimmigration has provided it with an additionalseven million people than it would otherwisehave had. Unfortunately, the economic modelsthat we have available are not very good at ad-dressing this question because economic mod-els deal at the margin and with the short term.For the future, the question is whether or notAustralia will be a better country in 50 yearstime with a population of 32 million comparedwith a projected (stationary) population ofabout 25 million. This is about the range of fea-sible options (McDonald and Kippen 1999c).There is no point embarking upon this debate,however, if we allow fertility to continue to fallto present European levels.

July 2000

Endnote

1. The standard method for population projec-tions, the cohort-component method, assumesthat net migration is net

permanent

migration.As pointed out in this issue in the paper byMinister Ruddock, much of Australia’s recentnet migration consists of temporary immi-grants. The demographic impacts of permanent

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280 The Australian Economic Review September 2000

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and temporary migration are not the same. Bydefinition, temporary immigrants leave. Thismeans that to achieve a constant annual incre-ment to the population, the intake of immi-grants has to rise continually to offset thesedepartures. Also, effectively, temporary immi-grants have zero fertility because they taketheir children with them when they leave.

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