By Leney Ang, Senior Editor
With the inception of any newly formed nation, big families were considered a threat to prosperity. [1] In attempts to grow the wealth of a nation, through consolidating scarce resources governments would introduce coercive birth control policies that guarantee family planning. From China's infamous one-child policy [2] to Singapore's 'Stop at Two' campaign in the 1970s, these policies worked well. Perhaps too well. [3]
With the inception of any newly formed nation, big families were considered a threat to prosperity. [1] In attempts to grow the wealth of a nation, through consolidating scarce resources governments would introduce coercive birth control policies that guarantee family planning. From China's infamous one-child policy [2] to Singapore's 'Stop at Two' campaign in the 1970s, these policies worked well. Perhaps too well. [3]
The Tables Have Turned
With time, developing nations have become increasingly wealthy and birth rates are now on a decline. [5] Despite the relaxation of these rigid childbirth policies, its prolonged effects are still evident to date as seen in the easing of China’s one-child policy, where they only began allowing couples to have two children in 2015 and eventually raising the number to three in 2021. [6]
Even with incentives to sweeten the pot, the impact remains dismal. Similarly in Singapore, there are various initiatives by the Singaporean government such as the baby bonus scheme and grant to incentivise childbirth. [7] Yet, the population replacement rate continues to decline well below the required replacement rate of 2.1 children per woman.
In 1965, the average mother in Singapore had at least four children. Based on the latest census report today, this number has dropped to 1.25 with the country experiencing a population growth of only 1.1% each year, which remains the slowest decade of growth since independence. With a culmination of different factors - an increasing median age, more Singaporeans deciding to stay single, and even those who are married choosing to have fewer babies, our nation's population is starting to turn a darker shade of grey. [8]
An Aging Asia
Fortunately (or not), Singapore is not an outlier. Many Asian countries around the economic bracket of Singapore face similar challenges albeit to varying degrees. South Korea, a highly industrialized nation, has the world's lowest birth rate of 0.92 as of 2019, far below the replacement rate. [9] Similarly, Japan experienced a record low birth rate during the pandemic, with an expected decline to 1.34, among the lowest in the world. [10] Even China -- the country with the biggest population in the world -- continues to see a steady decline in newborn babies, with a relatively low fertility rate of 1.3. [11]
In wealthier nations, the low fertility rate can be attributed to many factors: from the parental desire to properly invest in each child, to balancing the high cost of living and normalisation of smaller-sized families. In contrast, developing countries boost a replacement rate of nearly four times as much as wealthier countries. [12] A lot of this can be attributed to perspective, where children in developing nations are seen as investments and insurance for the older generations. However, they also suffer from higher mortality rates. Additionally, social norms may dictate the idea of bigger families, and link a woman's value to the number of children she can produce (the more kids they have, the higher the woman's value). Remaining childless or having small families is therefore often frowned upon in such societies. [13]
The Economic Impacts of a Declining Population
One of the earliest individuals that foreshadowed this as a potential problem was John Maynard Keynes himself. In 1937, Keynes's lecture on "Some Economic Consequences of a Declining Population" theorised that a falling population would result in high unemployment. Keynes explains that there would be slower economic growth and expected falls in outputs with fewer people to make things. At the same time, with fewer people to act as consumers, this would translate to weak demand for investment from companies because firms will expect a falling population of customers, and ultimately resulting in lower demand and higher unemployment. [14]
Alvin Hanse, a prominent economist, had additionally put forth the theory of secular stagnation in the late 1930s, where he argued that a low population could cause persistent spending weaknesses, resulting in entrenched low growth and interest rates, as well as secular stagnation.
Another theoretical consequence of a low birth rate is the "Low-Fertility Trap Hypothesis," as Demographer Wolfgang Lutz and colleagues stated. This theory postulated that low birth rates in developed nations might never recover because potential mothers in the future will have an even lower birth rate than the cohort before them, thus perpetuating a vicious cycle of lowering replacement rates. [15]
Though these predictions and theories were postulated many decades ago in the 1930s, these warnings read like a prophecy in our current era. Low fertility rates do not exist in a vacuum; their impact has a resultant domino effect and they run in tandem with an aging population.
An aging population is characterised by higher life expectancy, and unless the older population continues to remain economically productive, there will be a rising tax burden from pensions and healthcare schemes. This will eventually come at the heels of a shrinking workforce that would increase the tax burden for the working class.
In places with limited housing supply, the falling interest rates would also lead to high house prices, further placing financial strain and pressure on the young. A prime example is Japan, where an increase in taxes and social insurance premiums have soaked up almost all recent income growth for working-age people. [16]
As we approach this downwards spiral, what might be a solution to this demographic dilemma?
Solutions to the age old question
A relatively quick but controversial solution would be to increase immigration flows, specifically for young people. This could reduce population decline, combat a shrinking workforce and improve the age dependency ratios. [17] However, this remains a profoundly unpopular solution. Globally, we have witnessed the use of immigration and immigrants by various political groups as a political tool to perpetuate an 'us vs them' mentality in a bid to re-establish the respective nation's sovereignty, as we can clearly see in cases of Brexit and Trump's MAGA. [18]
Singapore, despite having been established as a globalised hub for innovation, immigration remains a sensitive topic for many locals. The release of the Population White Paper that stated the Singapore government's intention to increase the population by 30% by 2030, with foreigners comprising 45% of that number, was met with fervent resistance by citizens in the form of rare mass rallies. [19]
The consequences of a low birth rate coupled with an aversion to accepting immigrants would result in limited market size, talent pool, all of which would hinder economic development.
Optimists have instead suggested the use of automation and technology to make up for these gaps. As labour shortages worsen and the pool of labour shrinks, technology will be expected to make up for these shortfalls. [21]
In fact, the Singapore Armed Forces (SAF) expects the lower birth rate and ageing population to limit the number of eligible national servicemen. Thus, they have taken concerted efforts to invest in technology to drive the overall capability and productivity of the SAF, with a focus on improving the quality of these servicemen to compensate for the falling quantity. [22]
The Japan Way
In Japan, automation is preferred over immigration. As world leaders in robotic technology, the Japanese have leveraged robotics technology to combat an aging population and shrinking workforce. It has been estimated that by 2025, Japan will face a shortage of over the 350,000 caregivers necessary to take care of their aging population. [23]
As a way to combat this pressing issue, the Japanese government spent nearly US$100 million in the development of nursing care robots to combat the gap in eldercare. At the same time, the domestic market for these eldercare bots can be expected to grow to ¥400 billion (US$3.8 billion) by 2035, thus demonstrating the market potential and the business opportunity present. [24]
However, is technological advancement and raising productivity enough?
Some economists such as Simeon Alder have argued that economic growth requires population growth in the long run. Drawing on the analogy of 'fishing out the pond', Alder argues that it would be increasingly difficult to find new ideas with only the existing pond. Instead, it would be necessary to expand the pond with more fishes to find bright minds that can develop new ideas that can aid in economic growth in the long run. [25]
What Now
However, does it mean that we will shrink, age, and lose vitality in our current state that we are in? Fast-ageing Japan remains a critical case study for Singapore and many other developed countries with low growth rates. Despite a Japanese population that is a "super-aged" nation, Japan continues to be a world leader in robotics, remaining at the forefront of robotics technology as they continue to astound the world with their innovative technology. [26] Though not a perfect solution, continuous innovation and an increasingly capable workforce remain their best bet.
But will it work for Singapore? Can Singapore be as innovative as the Japanese? How do we drive continued economic growth in the midst of dwindling population growth rates? This also remains a critical policy question, and one that the Singapore government continues to struggle to find the balance for. As we, along with our economic counterparts, continue to grey, the need for a solution to this demographic dilemma will only grow increasingly pressing.
Bibliography
[1] https://www.economist.com/leaders/2009/10/29/falling-fertility
[2] https://www.theguardian.com/world/2019/mar/02/china-population-control-two-child-policy
[3] https://mothership.sg/2018/05/singapore-stop-at-two-children-campaign-successful/
[4] https://mothership.sg/2018/05/singapore-stop-at-two-children-campaign-successful/
[5] https://www.bbc.com/news/health-53409521
[6] https://www.bbc.com/news/world-asia-china-57303592
[7] https://www.madeforfamilies.gov.sg/raising-families/baby-support-grant
[8] https://www.straitstimes.com/singapore/politics/more-singles-fewer-babies-slowest-population-growth-since-1965-5-highlights-of
[9] https://indianexpress.com/article/explained/explained-why-south-koreas-falling-population-has-its-govt-worried-7132507/
[10] https://edition.cnn.com/2021/06/05/asia/japan-birth-rate-2020-intl-hnk/index.html
[11] https://www.globaltimes.cn/page/202105/1223326.shtml
[12] https://worldpopulationreview.com/country-rankings/total-fertility-rate
[13]https://www.economist.com/international/2019/02/02/thanks-to-education-global-fertility-could-fall-faster-than-expected
[14] https://www.ft.com/content/c017334e-36bb-11ea-a6d3-9a26f8c3cba4
[15] http://pure.iiasa.ac.at/id/eprint/7910/
[16]https://www.isa-world.com/news/?tx_ttnews%5BbackPid%5D=1&tx_ttnews%5Btt_news%5D=485&cHash=8066cd77ac69cb1e4a967f1e527fafdd
[17]https://www.imf.org/external/pubs/ft/fandd/2020/03/can-immigration-solve-the-demographic-dilemma-peri.htm
[18] https://www.vox.com/2016/6/25/12029786/brexit-uk-eu-immigration-xenophobia
[19] https://www.bbc.com/news/world-asia-21485729
[20] https://theindependent.sg/population-white-paper-must-proceed-or-else/
[21] https://link.springer.com/article/10.1007/s13209-019-0190-z
[22]https://www.channelnewsasia.com/news/singapore/saf-uses-technology-to-counter-lower-birth-rate-amp-ageing-popul-8359432
[23] https://www.channelnewsasia.com/news/asia/robots-as-caregivers-at-japan-s-nursing-homes-video-11013758
[24] https://www.strategy-business.com/article/Robotic-seals-and-bionic-limbs-How-Japan-is-creating-opportunity-for-medtech
[25] https://www.marketplace.org/2021/04/01/will-economic-growth-always-rely-on-population-growth/
[26] https://internationalfinance.com/japans-robots-are-conquering-the-world/
Leney is a Year 3 business student who is currently a Senior Editor for The Convergence. When not drowning in submissions and group projects, she vegges out and goes down a rabbit hole of Youtube videos, from watching conspiracy theories to listening to random podcasts. When the algorithm gets too crazy, she indulges in reading books. A fanatic collector of books (hoarder), she has amassed a collection of books, half of which are still unread (yikes!).