Lower fertility rates that once paid big economic dividends now threaten to choke economy

For decades China has pursued policies intended to slow population growth by reducing childbearing. Slowly, attention is shifting to the dangers of super-low fertility, population decline, and rapid aging. Recent changes in the family planning policy do not match the new demographic reality, however. Low fertility threatens to undermine China's economic success, while population policy continues to discourage childbearing. A new approach is needed and without delay.

The response to the new policy allowing some couples to have two births has been modest. But even if the change were universally applied, a two-child policy is guaranteed to produce fertility well below replacement fertility. Some couples are unable to have children, some will experience the death of a child, and some will choose to have only one or none. Achieving an average of two births per woman is impossible unless some women have more than two children, balancing those who have fewer.

This important point is illustrated by the experience of the United States, where fertility is close to replacement level. Women who were 40 years old in 2010 had essentially completed their childbearing with 2.07 births on average. Only one-third had two births, however, while one-third had one or none and one-third had three or more. Capping fertility at two births per woman would have reduced average births per woman to only 1.5, pushing the US from replacement fertility to super-low fertility.

Is low fertility really a problem? Fertility decline from the high levels of the past led to a demographic dividend in China. The boost to economic growth occurred as fertility decline pushed the share of the working-age population higher, increased investment in the health and education of children, raised female labor force participation, and raised saving and investment rates. At some point, lower fertility becomes a problem. The critical issue is at what point fertility is too low. This is exactly the issue recently addressed by a team of over 50 researchers from 39 countries organized by Ron Lee and myself. China's team was led by Li Ling from Peking University and Chen Qiulin from the Chinese Academy of Social Sciences. The results, published in Science, show that super-low fertility, a total fertility rate of 1.5 births or less, creates problems.

The number of workers, the engine of the Chinese economy, has begun to decline and economic growth will surely slow. Rapid population aging will make it much more difficult to support public programs that provide for the social welfare of the elderly. Deteriorating public finances could affect the resources available for children, as well. This is bad for three reasons. The first is that high levels of investment in the health and education of children will be increasingly important to sustain economic growth in China. The second is that lower levels of public support for children will likely lead young couples to have even fewer births. A third danger is that low fertility may lead to rising inequality.

China's leadership should recognize that high fertility is no longer a problem and that continuing an outdated family planning policy fails to respond to China's new demographic realities. Programs that limit childbearing in any way should end without delay. Next attention should be redirected to providing a supportive environment for young couples who are bearing and raising China's next generation.

As Ronald Rindfuss and Minja Kim Choe point out in their forthcoming book, Low and Lower Fertility, seven important societal features affect rates of childbearing: the flexibility of the labor market, the link between marriage and childbearing, factors that help or hinder parents in balancing work and family obligations, gender equity, education systems, the housing market, and governmental subsidies for the cost of childrearing. Urgent attention is needed to develop policies in these areas that help the newest member of the super-low fertility club increase its fertility.

The author is a professor of economics at the University of Hawaii, senior fellow at the East-West Center, and co-author of Population Aging and the Generational Economy. The views do not necessarily reflect those of China Daily.

(China Daily European Weekly 07/24/2015 page13)