Do We Need More People? – OpEd

This is a line endlessly repeated in the media. Somehow, we face a terrible risk if people decide to have fewer kids. While this is the accepted wisdom in elite circles, there is remarkably little basis in reality for this view.

The latest piece pressing this line was a column in the Washington Post by Catherine Rampell headlined “Americans are having too few kids. The GOP made the problem worse.” The piece then points out that Republicans have opposed policies, like paid parental leave, subsidized childcare, and expanded child tax credits that make it easier for families to raise kids.

To be clear, these are good policies, which reasonable people should support both to help parents and improve the lives of children. At this point there is plenty of research showing the benefits to children, especially those from low- and moderate-income families, from these sorts of programs.

However, the question is whether we should support these policies because we need more people. Rampell tells us:

“As other countries have discovered, a population that fails to replace itself can face serious challenges. For instance, all else being equal, a shrinking workforce can lead to stagnant or declining living standards, because workers power the economy.

“Likewise, a shrinking contingent of young people means fewer workers are available to care for the growing elderly population and pay for its retirement benefits. Already, the typical American senior receives more Social Security and Medicare payments than they paid into the system. As the ratio of retirees to working-age Americans grows, this problem will worsen.”

This story is not well supported by the evidence. Countries that have declining populations can manage to do just fine in terms of improving living standards.

This point is well demonstrated by Japan, everyone’s favorite story of a country with a declining population. Japan’s population has been declining since 2005. Its population is roughly 2.5 percent lower now than it was 19 years ago.

That’s a fairly rapid decline, but the Japanese probably have not noticed they are suffering as a result. Per capita income in 2023 was 11.9 percent higher than in 2005. That’s not as good as the 23.7 percent growth in the United States, but better than many countries with stable or even increasing populations.

And this income figure is not giving us the full picture. Japanese workers have chosen to take a large share of the gains from productivity growth in the form of more leisure. Workweeks have gotten shorter and vacations have gotten longer over this period. According to the OECD, the length of the average work year for a Japanese worker has been reduced by 9.6 percent over this period. By contrast, it has fallen just 1.6 percent for workers in the United States.

There is no economic reason why people should value higher income more than increased leisure. Since its population began to decline, Japan has managed to have a substantial rise in per capita income and also a substantial increase in leisure for an average worker. This does not look like an economic disaster.

It’s also worth noting that these data do not pick up benefits of a smaller population like less crowding and less pollution. Other things equal, a smaller population means less time wasted in traffic jams and fewer people packed in at beaches or museums. If you face a years-long wait to get admitted to one of the more popular national parks, because they have limited places, think of what the situation is would be if the U.S. had twice as many people.

Similarly, other things equal, a smaller population means less pollution. Sure, we can adopt cleaner technologies that offset the impact of a larger population, but does anyone think that we will have cleaner technologies simply because we have more people?

Tokyo used to be a city where the cost of housing was ridiculous. Now it is touted as one of the most affordable major cities in the world. There is much more to this story than just population. Toyko has been very good in pushing policies that facilitate housing construction. But for any given housing stock, more people will mean higher prices.

On the point about fewer workers to support retirees, it’s worth noting that even modest gains in productivity growth swamp the demographic impact of a smaller ratio of workers to retirees. There can be problems associated with shifting resources, but that was also true when the baby boom generation was growing up and governments had to massively expand the school system to accommodate millions of new students.

Expanding the school system was certainly a problem back in the 1950s and 1960s. Similarly, there will be problems associated with the growth of Medicare and Social Security, but on the economic side, they will be manageable. As far as the politics, who can say? But that is a political problem, not an economic one.

Why Our Elites Worry About a Shrinking Population

Even if there is little basis for most people to be worried about the consequences of a declining population, there is a different story from the standpoint of our elites. The leader of a country has standing in the world based in large part on the size of their country’s economy.

This is one where it is not per capita that matters, but the absolute size. The world listens much more to the president of the United States than the prime minister of Norway because the U.S. economy is fifty times the size of the Norwegian economy, even though Norway has a larger per capita income. From the standpoint of politicians seeking to maximize their power, more people is definitely better.

This also applies to a much larger group of people who have the job of working for or advising government officials. Working in a high-level position for the president of the United States is a big deal. The same is not true for a minister in Latvia’s government.

It goes further. You can become a very prominent writer or academic by dealing with political battles in the United States, that is not the case with political analysts in Estonia. These people also have an interest in seeing a growing population. It makes the subject of their work more important.

In short, there is a clear divide in how people are impacted by a shrinking population. For most ordinary people, it is not a big deal and could well turn out to be a positive development. But for the elite types that get their views published in major media outlets, a declining population is definitely bad news.

Look for lots more stories about the horrors of a shrinking population.

This first appeared on Dean Baker’s Beat the Press blog.