Developed world: We are running out of people

France’s radical attempts to reform the pension system.

On 1st May, trade unions in Paris protested the notorious pensions reforms and as a result, protesters clashed with police violently. Tear gas, Molotov cocktails, and barricades could be sighted across Paris.  Last March, French President Emmanuel Macron invoked Article 49.3 of the Constitution of France to push his pension reforms by bypassing the censures from the National Assembly (and the Constitution Council deemed his actions accordingly). As a result, it sparked a series of widespread protests across the country that are still ongoing in certain areas. According to the Ifop and le Journal de Dimanche, 70% of French people are dissatisfied and only 28% of them are satisfied with Macron’s pension reforms last March. It would naturally raise a question about pushing agenda that is not well-received by the public:

Why would President Macron push these controversial reforms? Macron’s cabinet argues that it is meant to protect social security and eradicate the deficit.

Others, especially from the trade union perceive his actions might only harm low-paying employees and people who hold hazardous and physically demanding occupations such as nurses, garbage collectors, and construction workers.  However, Protestors chanting a slogan that they could guillotine Macron’s head as they previously did to Louis XVI during the French Revolution illustrate developed countries’ dilemma: Running the economies smoothly without running out of people. Even though France has a higher fertility rate of 1.8 children per woman compared to its counterparts in Europe, it still does not meet the requirement to keep the population growth sustainable (to keep up the population, the ideal fertility rate would be 2.1 children per woman). France is also one of the countries where employees pay higher taxes in Europe by confiscating nearly 55% of their income. In 2022, people aged over 65 was composing 21% of the population in France according to INSEE’s report. As more and more people from the generation of so-called “Baby Boomers” are retiring, it would heavily weigh down on young people’s backs. Not to mention, fewer and fewer babies are born in comparison to the death toll. Plus, a shortage of workers in certain industries such as hospitality and service sectors across France can be still seen around. If France deals with demographic crises through radical methods, what about other countries?

Consequences of population decline

Before we jump to other countries, there is a need to explain the consequences of the population decline. The negative effects caused by population decline can be damaging to the economy. Firstly, if there are fewer working-age adults than retirees, the consumption rate and tax revenue will decrease gradually.  As a result, with the few tax-paying citizens, it would be harder for the government to fund social security programs let alone fund the pension system. Secondly, the competence of the economy declines. As aging workers retire from the labor market, the retirees would take their working experience honed by years of practice with them to their retired homes. It creates a challenge for employers to maintain the productivity and quality of goods and services. Thirdly, it could be challenging for sectors that are physically demanding such as construction, military, and farming to recruit people. If a major conflict breaks out, it will be fundamentally hard for military-oriented countries such as France and Russia to find recruits.  

Germany faces a severe labor shortage

As France is engulfed in chaotic political turmoil, Germany is facing severe labor shortages. Germany, the economic powerhouse of the EU, struggles to maintain its population as it witnessed its first population decline for the first time in 2020. The country itself is experiencing a low fertility rate with only 1.6 children per woman. To fill in the labor shortage, the country is easing its visa procedure for immigrants. Experts estimate that 20 million people will retire within the next decade.  To keep the economy running, Germany requires 400’000 workers per year as more and more aged people are phasing out from the labor market. Despite the efforts, Germany is barely attracting a small number of immigrants with only 60’000 people applying for working visas last year.  If Germany’s GDP lowers gradually due to the population decline, it is not only the worst news for Germany but the whole of Europe. Because Germany is the top export destination for the majority of the Eurozone countries to export their products. For example, 28% of Poland’s and 33% of the Czech Republic’s exports were entirely composed by Germany with a margin of 95 billion dollars and 78 billion dollars in 2022 respectively.  As the population declines in Germany, the demand will automatically plummet. This leads to gaining less profit for these countries reliant on Germany as an export destination.

Italy, the extreme case of declining population in Europe

As time passes, Italy is running out of the people. With a fertility rate of barely 1.2 children per woman, Italy is in a rough position of maintaining its social security system. In 2022, the ratio of birth-to-death is 7:12 per thousand people according to the ISTAT. According to the UN population division’s 2015 report, the work-life imbalance, youth unemployment, and gender division of labor could be factors that contribute to population decline. Some experts are warning that Italy could find itself in an irreversible situation to increase the population. Even though Italy is facing a severe population decline, Italy is taking a harder stance against immigration. As a result, the Italian government scrapped its 2020 modifications that could naturalize migrants that have familial ties in Italy.

Russia: A country that is facing negative digits of population.

Russia is in the free fall of the population. Even though Russia is blessed with an abundance of lands and natural resources, Russia is struggling to reverse its population decline with a fertility rate of 1.5 in 2020. Dr. Morland argued that the invading neighbors like Ukraine could be based on the desperation to overcome the population crisis. In 2022, the population of Russia was shrunken to 145 million from 146 million due to various factors such as the armed conflict in Ukraine, poor living standards, emigration, alcoholism, etc… Throughout periods of history, the utilization of its numerous manpower enabled Russia to maintain its influence across Eurasia.  Russia is heavily dependent on military power to maintain its status in international politics, the manpower issue is getting trickier as the population decreases. Experts point out this trend could persist for a longer time.  To maintain the current status quo of the population, Russia needs to have at least 1 million migrants per year until the end of the century according to the Moscow Times. It would be also increasingly difficult for Russia to maintain its population presence in its Far Eastern territories (Compared to western parts of Russia, Far Eastern Regions are sparsely populated. These regions are strategically vital to Russia’s interests.) as more and more Russians are heading into westward in hopes of higher living standards and economic opportunities.

Japan, South Korea, and China:  Worst scenarios of population decline.

The demise of population declines hits harder for the East Asian countries as they get the title “aged societies”. Despite the prosperity and high-living standards, Japan and South Korea are in a pinch to increase their population. South Korea with its low fertility rate could be extinct by 2750 according to one study. Meanwhile, Japan is also sweating to increase its births to maintain its economic capability.  Previously, former prime minister Shinzo Abe initiated a policy called “Womenomics” (encouraging women to participate labor market) and opted for immigration to tackle the lack of labor shortage. Yet, Japan faced its direst population decline recently. Prime Minister Fumio Kishida issued an alarming statement that Japan is in a critical moment to reverse the declining population and promised that he would double up its budgets designated to boost births and set up a new agency for population growth.   According to the UN, the population of China could fall from 1.113 billion to 800 million by 2100. And India is posing to overtake China’s position as the most populated country. Thus, it could negatively affect China’s “world factory” as it heavily reliant on its enormous human resources. China experienced its first birth decline even though it relaxed its restrictions of having one child by extending to two children and lately to three children.

What now?

The population decline is a dilemma for developed countries. Various countries are solving this issue in their best capacities. South Korea is offering financial subsistence for families with newborn babies with an amount of 740$. Plus, there was a discussion that increasing working time from 52 hours (including overtime hours) to 69 hours per week in South Korea. Despite its talking about increasing working hours, a phenomenon named “gwarosa” (“karoshi” in Japanese), which literally means “working to death”, is ongoing in South Korea. Gwarosa could impact young people to have no babies. In Italy, some villages are paying people to stay in their villages and distributing empty houses through the infamous “one euro” scheme. Japan is also distributing its abandoned houses for free in order to tackle the depopulation across rural areas since 2021. Others such as France are opting for the increase of retirement age through coercive ways. Most of the developed countries are considering immigration as the best option to tackle the labor shortage.  For example, Germany is instituting new reforms to its immigration laws to facilitate foreigners from non-European countries easily. However, it is still doubtful that increasing allowance, changing working hours, encouraging immigration, and lifting the retirement age could systemically solve the demographic crisis. The demographic crisis will be a silent, steady yet impactful disaster for most of the developed countries. Even though people are living in the safest and most prosperous era, the number of babies are dwindling.