The Baby Bust and the Global Economy

have big implications for the economy, society, and everything. Later in the program, I'll be talking to a Canadian academic, Darryl Bricker, who thinks that all the big problems the world will be facing in fifty years time will relate in some way to a falling population. I'll also chat to Bloomberg columnist Justin Fox about why people who work

from home are now the best paid US workers. But first, Bloomberg's economy reporter in Madrid, Jeanette Newman, has been to the epicenter of Europe's baby bust to get a glimpse of what might be your head. Nine women sit around a table at a health clinic in northern Spain. They're talking about why their home region of a Studius has the lowest fertility rate in the European Union. Those that don't have work blame the bad labor market. Those that do have a job, blame long working hours. All the

women have one or two children. If it weren't for their own parents stepping into babysit, most days, the women say they wouldn't make it. Those problems might sound familiar to many women, but in a studius they have them in spades. Most of the local coal mines have closed and the steel industry is in decline. The economy is shrinking. The unemployment rate is four. Alba Scobio Sanchez is pregnant with her first child at thirty one years old. She's the only one among her group of friends in a

studio US who will have a kid. I always knew that I wanted to have kids, even three, but I kept putting it off because of all day and certainty with jobs. Work life balance is a problem in Spain in general, not just a studios. But here we have the more serious problem that there's no work. In a studious, women are likely to have an average of one point zero three children, among the lowest fertility rates in the world. The figure measures the average number of children a woman

is expected to have based on current fertility trends. The number in his studius is well below the European Union average of one point six children per woman, and that EU average is under the two point one children per woman that's necessary to maintain a stable population in a studius. There have been more deaths than births since At the same time, people in a Studios, like the rest of Spain, live longer than almost everyone else. The average life expectancy

here is nearly eighty three years. Put those two demographic trends together and you get a shrinking, aging population. Just over a million people lived in the region in n Since then, the population has fallen by about fifty over the next decade. Economists expect the region to lose another fifty thousand people. Sixty five year old on Hiles Montero Garcia tells the women that those shifts have transformed her own family in town. It's all of us older people

who remain here. There are no children, which are Detroit or any town. The plunging fertility rate and rapidly aging population in Asturias are an extreme example of a demographic trend that's reshaping economies around the world. Remember studying Thomas Malthus and economics during the past couple of centuries. Malthus and other demographers were mainly concerned with over population. They thought more people posed a threat to the supply of

food and water and to the environment. Mouthess it only war, famine and disease would slow population growth. In fact, all it took was an industrial revolution and letting women into the workplace. Birth rates began to drop during the Industrial Revolution as countries became more prosperous and mortality rates fell across much of the world. Those declines accelerated in recent

decades as more women joined the labor market. Changing attitudes about having and rearing children have also played a role. Women are having fewer children and later in life. In two thousand eighteen, countries such as the United States and South Korea reported their lowest fertility rates ever. In nineteen seventy, a woman in the US could be expected to have an average of two point five children. Now she is expected to have, on average, just over one point seven.

The concern in many countries then has become population de client. Alejandro Macarone, a demographic expert and consultant, tells me that a smaller number of kids will have a big impact on businesses. We've spoken the children's clothing department at Spain's largest department store a Quarte in Glaze. He has to remind executives that demographic changes can sometimes explain weaker sales.

For instance, maybe they wonder why they're selling less than ten years ago, but there are thirty percent less babies last year into That might be one of the resents an aging population consumes differently. Older people tend to consume less so called durable goods, think fewer dishwashers and cars. That also means they spend less on fuel. Those items tend to bring in a lot of taxes, so more

sluggish sales can mean less in government coffers. Ignacio de la Torre is chief economist that investment bank Arcano Group. At his office in Madrid, he tells me that low birth rates mean policymakers should focus on increasing productivity. Economic growth just depends on two variables the number of hours worked and productivity over worked and the number of hours work and normany is pretty much linked to the growth

of your active population. Active population has started to decline in the O city countries three years ago as well as in China, which means that in the past we had two engines of growth. Today we only have one engine of growth, which is which is a productivity. During the past twenty years in a Studios, the size of the economy has shrunk. As a share of the broader Spanish economy, Pensions and other government benefits make up around fort of income for households. Here. That's a much greater

portion than in the rest of Spain. A Storius has attracted some immigration to counter the ebbing population, but nothing significant. Potential workers aren't drawn to the less dynamic economy. Those who do immigrate are mainly from outside Spain. The head of the statistics agency tells me they come to work in one of the few industries that is booming, elderly care.

The mismatch of resources for young and old is on display and the small town in Asturias where I spoke with the women about the low fertility rate in the town and the surrounding area, there are eight social centers for elderly people and just one youth center. I visited one of the centers for the elderly. Retirees take exercise classes and play card games, which seemed to get pretty heated.

Manuel Tourado Garcia runs one of the centers. A former minor, he has the build of someone who spent years breaking coal with a sledgehammer. Well finished the year with eight ninety seven members in a town of three thousand people. That's a lot, but it's to be expected. We're in a town that's growing old, the very old. You barely see any kids around across town. I visit the only youth center in the area. It's quiet. Manuel and Hillquista is the manager. He says, the local government has long

dedicated greater resources toward older residents. They're more politically active and organized than young voters. There is high use and employment, which means they leave. It's a visious cycle because if the young people live, then there are people here to have kids, and therefore the birth rates go down. Look at it, it's very difficult to down things around. Most demographers agree with Manuel and Health the notable jump in fertility rates is unlikely in a studious or elsewhere in

developed countries. But can anything be done to slightly boost the fertility rate so that women can have the children they want? An economist can rest somewhat assured about pensions and productivity. South Korea has tried in an effort to boost the world's lowest fertility rate Seoul has spent billions on subsidized childcare, free nurseries and stipends to no avail. That's in part because the measures have an addressed broader issues,

says Olivier Tavan, an O E c d economist. There are a few top slots at the universities or in the labor market that makes things very competitive, and many women are still expected to stop working if they have a child. Other countries, such as Russia and Hungary have recently increased financial incentives for women to have children. Such measures can sometimes encourage a woman to have a child sooner than she was planning, but the measures aren't usually

successful at boosting the fertility rate over time. France in the Nordic countries, on the other hand, have typically had a slightly higher fertility rate than peers. That's in part because they have more favorable labor mark conditions for women who want to have children. That includes subsidized child care for instance, parental leave, and a work culture that allows

more family time. But a recent and striking decline in the fertility rate in the Nordic countries in particular seem to dethrone their status as the gold standard for work life balance. Researchers are still investigating why, but Magaila Kraenfeld, a professor of sociology at the Hrdye School in Berlin, points out that there could be an entirely benign explanation. Women in these countries may simply be choosing to have their children later. That could change what we might call

the headline fertility rate for a few years. But in her view, the Nordics are still the outstanding examples of countries that are committed to letting women combine a career

with as many children as they want. When you encourage compatibility of work and family life and also the parent leave benefit, that actually encouraged people actually to combine a working family life, and that it's good for gender equality and also for the sustainable of the household because then both couples can work, and that is actually for the economic foundation of the family actually more important on the

long run. A studious as an example, writ large of the economic perils of having too many hurdles for women who want to work and also be a mom. There could be a big economic payoff awaiting any region or country that's able to make it easier for Bloomberg News I'm Jeanette Newman. So I'm joined now by Darryl Bricker, the Canadian author and pollster who was the co author with John Ibbotson of the book Empty Planet earlier this year. Darryl,

thanks very much for chatting to Stephanomics. Well, I'm looking forward to having a chat with you about this Today's Stephanie, So to tell us about the book, because it's it's was squarely on the themes that we talked about in

Jeannette's piece. You know that the implications of this potential for the global population to fall, and I guess you you think that what we're seeing in places like Spain is just the beginning, and that the population globally is going to fall even more than the kind of official u N forecast suggest well, and so does so does the u N even since we wrote the book, because they've adjusted down their estimates by three million, did it just a couple of months ago, And that that's about

the size of the population of the United States. So it gives you some sense of how big the potential for a decline is. So the Empty Planet is really all about what I call vertical knowledge. It's that thing that everybody knows that everybody repeats that nobody understands or is actually checked. So what John Evertson and I did was check and lo and behold, went to go in and and look at the way that the population estimates

have been put together. They really are biased to suggest a much larger population than we're likely to have in the world. So um, the premise of the book is that the u N says we're going to be at about eleven billion people by the turn of the century. The premise of the book is we will never get there, will probably peek out somewhere between eight and nine billion and then start to decline. And the only question is

how rapidly it struck me. I think your story. One of the big pieces of that is what you think is going to happen in Africa? Is that right? Because that's obviously one of the areas where we had expected population growth to continue to be quite rapid relative to other parts of the world. So we traveled to Africa, We went to uh we went to Kenya, and we looked around. We asked people who were demographers, We interviewed people who were living with these types of family issues

in those in that country. In Arabian. You know, what we found was that some of the many of the things that we're having an effect in other places are having an effect in Kenya too, And the reason for that is because it's about urbanization, and Kenya is going through rapid urbanization, as is most of Africa, along with the effect of that on women's lives. And when women

move into cities, their lives change. They get access to education, they get access to jobs and careers, They live a different life than their mother or their grandmother lived, and part of that different life is having a smaller family. So it's already started in Kenya, where it's gone from the nineteen six birth rate of about eight down to about five about ten years ago, it's now down below four.

It's happening very, very rapidly. And if we step back and think what does this mean for the global economy, what kind of implications are we going to be grippling with over the next ten twenty you go look ahead even further than that to the second half of the twenty one century. But you know, we tend to think in Europe, Jeanette was talking about the efforts of governments to sort of effectively bribe people to have more more kids. You know, we tend to think it's a bad thing

to have this potential decline in the population. Is that Is that the right way to think about No, it's not. As we say in the book, it's not a good thing. It's not a bad thing. It's just a big thing, and we have to understand it. And the thing about all of those attempts to bribe people, as you said, to have larger families, well, for the most part, they haven't paid off. For example, France, which you mentioned, the birthrate is below replacement, and all the Nordic countries the

birthrate is below replacement. They can have some impact on the speed at which this happens, but the direction of it pretty much not. And the reason for that is what they're up against is not a financial decision that people are making. It's not an economically rationally driven decision. It's really a decision about the culture of the country.

You know what, what what do they support? Larger families or smaller families and the lives that the parents want to live, and part of that life that they want to live today, the model for the life they want to live today is a smaller family. Should we worry about the growth implications. I mean a lot of people would say, you look at the spending habits of old people and you tend to think, um that you know,

consumption will be lower, growth will be lower. Um. There's also people it's an older population is associated with less innovation. But I don't know, do you think maybe that would change as what do you think do you think we're necessarily going to see less economic growth even per head than we have in the in the future, in the future that we have in the past. Well you hit

on a really key point stuff. And it's not just that the size of the population is going to change, but the structure of the population is going to change. So we have this uh and there's a huge youth bias when it comes to thinking about the economy. You know, we'll have a population maybe smaller that we'll be going

through uh. Time and space as as as structured as it is today, it won't be the biggest growth in the population today is not as a result of people coming into the population, as a as a result of people not leaving. We're we're getting so much better at keeping people alive and it's had a huge impact on the structure of our population. We're really bad at make new people are getting worse out of In fact, we're

really really good at keeping people alive. And as a result of this huge growth of elderly people, the idea that you know, early life consumption is going to drive our economy is going to have to change. But the large proportion of the consumption you do when you're older, at least in the current model that certainly the very old people is healthcare is only particular sectors. I guess that's what people are sort of nervous about how that

might skew our economy going forward. Oh yeah, there's there's no doubt it's going to have a huge impact. There's very little study that's been done on this. Most of the conversations we have about about the economy are still

stuck in that old the the old population model. By that I don't mean older population, but the way we used to think about UH population leading up to this period, which was very heavily youth driven UH And very few people are talking about exactly what we're talking about today, and who especially not talking about it are marketers and producers of products and services who still think that their market is going to be driven by young people, and

that's going to be a decreasing case. It's been one of these great tropes that one here is particularly kind of fund managers who are investing in Japan. They're sort of top fact that they like to repeat is that the market in Japan for for adult diapers is now

bigger than the the one for for baby diapers. I mean, I guess, if if you think about I guess the upside of a declining population could be that some of the other things we've worried about recently, I mean, particularly the burden on the world, on the environment of a rising population, you might think that this would be good news for the environment. And the other thing that we talked about a lot is the loss of power for labor relative to capital, the way that wages have been

squeezed in many countries over the last few decades. You know, if we end up with a sort of chronic labor short age globally, is that also something that might turn around in the next twenty or thirty years. Well, we've got, you know, three little things there that are really important, not three, three major things. One in terms of the environment, just about every aspect of of what's happening in the environment can't help but be improved. But with a smaller population,

there's there's no doubt about that. So there's good news on the environmental front going forward, everything from the sustainability of fish stocks through to potentially global warming, whatever you want to take a look at. Having fewer people on the face of the earth is good for that if you've lost all the fish by the time you get to that point, and I guess it's academic, but anyway, well, it is a bit of a race. There's no there's

no doubt about that. But the fact is that if there's fewer, if you change the denominator in many of these equations, the new moderator starts to change too. And the second point about that, which is the place of labor in in the marketplace. The idea of unemployment is going to change, The idea of employment is going to change, in the idea of retire elements is going to change. A lot of these concepts are going to have to be rethought as the population structure goes through the transition

that it's going to go through. The biggest equation in all of this economically is what is the future of economic growth going to be. I think we're probably going to have to rethink that based on the changing structure of the population. Finally, I am not the first to mention to notice that in your book you basically predict that, you know, some of the world's great nations will not fare very well in this new new world, but Canada will get a new lease on life and might even

turn into a global superpower. Um. But you've been teased for that a bit, given that your two Canadian authors. But what's what's the case for for Canada owning the future? Well, I know we've got some criticism about two Canadians writing a book that has something positive to say about Canada, mainly because I think we have just had more experience and exposure to it than than anything else. I mean, we certainly have our troubles here in Canada as well.

But the one thing that Canada has seems to have gotten right, at least in the short term, as uh, the approach towards immigration. Now it might be unique to Canada. And the reason that it's unique to Canada is because of this that the um the construction of our culture. So the idea that you've got something to protect with the exception of the province of Quebec is not as strong here as it is in the in many other countries.

So immigration is a short to medium term solution. But it is only a short to medium term solution, and the reason is because the places that normally spin off immigrants are also going through the same population change that that the developed countries are going through. And quite frankly, immigration is a young person's game, and they're not going to be as many young people immigrating. Well, you're looking

around the world. I'm not sure that one would conclude that the world was becoming more like Canada, but I think I would definitely say it wouldn't be such a bad thing if it were. Thank you very much, Thank you, Stephanie. So I'm joined out by Bloomberg columnist and author Justin Fox.

Justin thank you for coming on Stephanomics. Great to be here, and there are a lot of things I like about your columns, But I think the thing that you do more than other people is you spot new facts, interesting things in new data, and then you write about what that data might mean for our economy but also for the for the way our lives are organized, and often I guess the way our towns and cities are organized.

And I wanted to ask you about a top fact that you found buried in some recent US Census data on the earnings of different types of households in the US. It was very striking. Tell us more um. In the American Community Survey, this annual survey that the Census Bureau did, they ask people, um, how they got to work last week.

And I actually got surveyed in the American Community Survey a few years ago, and I had actually ridden my bike to work three days the previous week, so I could put down could be part of that bold group of bike commuters. But anyway, the week that year that one of the only I was living up in Cambridge, Massachusetts, where most of the time it was either too cold or too human to ride my bike to work, but it was beautiful weeks. I feel like undermined the day

exactly well. But you figure, you know that that one person happened to do it that week, there will be other people who would do it other weeks. I think it all works out. So they ask this, and they also then they you know, cross tabulated with stuff like

your media and earnings data. And one I've been watching this for a few years and one of the things that kind of funny that came out is that people who take public transportation um now have higher meeting, media and earnings in the US than people who drive to work. And the reason for that is pretty simple. It's that public trans most public transportation units users in the US aren't about five big rich metropolitan areas, and so they're richer.

The other thing that stood out is that people who worked at home had the highest media and earnings of any of the main categories that the census tracks. And I looked back over the years and it turned out that, you know, in two thousand ten, that was not the case at all, and I think it was about two

years ago. Um, they passed those who drive. And that just seemed one more I've been writing about this growing number of people who work at least part of the time from home, and this just seemed like one more interesting, um, a bit of evidence that this was happening and it was something that people were doing because it was a good deal for them. Now, I mean, economists always say

connection is not causality. Also, you know the fact that these things go together, is not necessarily the reason for them. So if you've got if you're making more is obviously not just from working from home. It's fact. The fact that you're working from fro from home probably tells us something about the job you're you're doing, right, and it's it's white collar work, UM and professional work that people

are increasingly doing this. There's there's another UM Bureau of Labor Statistics survey that I actually didn't realize was out there until after I'd done this column. But it just asked people, you know, it's the American Time You survey. They ask people how they spend their day, and basically the percentage of people who worked at home at least a little bit on an average day is close to a quarter, and for those with advanced degrees it's more.

And that's partly just because people with advanced degrees all work way too many hours in the US, and so a lot of those people are both working in an office all day and working at home. But there's still the percentage of those people who are working in an office at all is much lower than for people in

of of lower education levels. I guess I mean the darker interpretation of this is that, you know, it's just one more way in which lower skilled workers in the US and other places are being locked out of the the advantages of being in a twenty one century economy. You know, you can't work at home if you're an Amazon warehouse worker, right, you work in a supermarket. I think you also point out that it's a do you say in your column it seems to be a white

people thing. I mean there's a lot smaller proportion of African American and Hispanic people from Yeah. I mean, it's a privilege extended to people who already have some privileges. And there are lots of ways that it's great. It It sort of allows people to live in different places. It might take a little bit of the pressure off real estate markets and places like San Francisco and New York.

And it's it's interesting that I looked at the metropolitan areas in the US that have the highest percentages of at home workers, and number one is Boulder, Colorado, which is a totally lovely place. Also right outside of a really big metropolitan area, Denver Kingston, New York, which is the cat Skills here outside of New York City is

another one of the top ones. Portland, Oregon is another big one, and there are tons of people who have still have work connections to Silicon Valley but live in Portland or Bend or again or elsewhere and maybe go down once every two weeks or something like that. You often do right about about cities. It's one another reason

I write your columns. And I guess there's always been a debate about whether or not telecommuting and sort of the internet digitalization generally was going to be good for cities or whether it was actually going to mean more even distribution of wealth and jobs around the economy. I mean, so far, we have seen still what you'd call the

agglomeration effects. You've still seen cities get more and more pop successful, cities get more and more successful, despite the fact that you you know, you think people will be able to work from anywhere. Do you think there's any sign, I mean you see in these numbers. Do you think there's any sign of that shifting. I feel like there's some, and they're definitely signs in US population data of places like the Bay Area in the New York Area, starting

in New York City proper starting to lose people. Although when you dig a little deeper, it's mostly UM people who earn less money, have lower education levels who are the ones bailing out. So it's a little hard so at this point, not yet, but it definitely is. One thing that this just made me think of is, you know, the rise of computers was supposed to mean the end of lots of paper in offices, and I think for the first UM decade or so it was the exact opposite.

People had these printers and they printed out twice as much. I know, reached a point where I don't print out a lot. And I would guess that shows up in UM paper statistics. I mean, I think the paperless office has, bit by bit finally come and I you know, they're they're counter forces in this whole agglomeration thing that Yes, it's really useful to be in a in a in a dense place where you interact with lots of other people.

But I think it's also possible to find ways to keep taking advantage of that occasionally while saving on living cars, commuting cars, communing time, and everything else. Justin Fox, thank you very much, Thank you, thanks for listening to Stephanomics. We'll be back next week with more on the ground insights into the global economy. In the meantime. You can find us on the Bloomberg Terminal, website, app, or wherever

you get your podcasts. We'd love it if you took the time to rate and review our show so it can reach more listeners. And for more news and analysis during the week from Bloomberg Economics, follow as Economics on Twitter. You can also find me on at my Stephonomics. The story in this episode was reported and written by Jeanette Newman. It was produced by Magnus Hendrickson and edited by Bruce Douglas.

Special thanks to Darryl Bricker and Justin Fox. Our executive producer is Scott Laman and Francesco Levy is the head of Bloomberg podcast. The un