Demographic & social challenges

A slowdown in global population growth 

Published on 07 June 2024

cpram

Bastien Drut,
Head of Studies and Strategy - CPRAM

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A historic increase in the 20th century 

The global population experienced a historic increase in the 20th century. Whereas the earth was populated by just 1.6 billion people in 1900, by 1950 this had risen to 2.5 billion, by 2000 to a little more than 6 billion, and by 2023 to 8 billion. This increase was driven by the “demographic transition” phase that humanity went through, which the French National Institute of Demographic Studies defines as “the switch from a traditional regime of high natality and mortality, which more or less balanced each other out, to a regime of low natality and mortality, which also balanced each other out”. The decline in mortality preceded the decline in natality, which naturally led to a spike in the global population. 

It was in the 1950s and 1960s that the global population rose the fastest, by about 2% on annual average. Beginning in the early 1970s, global population growth weakened gradually over the decades, returning to about 1% annually by the end of the 2010s. 

What was behind this steep acceleration in the global population in the 1950s and 1960s, followed by a trend deceleration? 

One reason is the spike in births after the second world war, just as infant mortality had declined sharply. Meanwhile, medical advances lengthened lifespans. The number of children per woman, which averaged about 5 in the 1950s and 1960s globally, began to trend downward, to about 2.5 in the 2010s, with a wide discrepancy between continents (more than 4 in Africa but only about 1.5 to 1.6 in Europe and North America). For about a decade, mortality in rich countries and also in China rose significantly, as people born in the 1950s became older than 60 years. France provides a good example of the various episodes of the “demographic transition”1

Uncertainty on future global population trends 

    In its population forecasts for each county, the United Nations laid out several scenarios on fertility, mortality and international migrations. Under its baseline scenario (i.e., the median trajectory among hundreds of simulations), the UN forecasts that the global population should continue to expand, but at a far slower pace than in the 20th century. Under this baseline scenario, global population would expand by just 0.5% per year around 2050 and would be close to levelling off around 2100, at about 10.4 billion (peaking in 2086). Under the UN’s “low fertility” scenario, the global population would approach 9 billion around 2050 without going any further, before receding to 7 billion in 2100.  

      However, population forecasts are fraught with uncertainty. Even small mistakes in forecasting the fertility rate can lead to huge errors in forecasting long-term population trends. Indeed, fertility rates have been surprisingly low on a regular basis in many countries in recent years (the term “baby bust” is often mentioned). To show just how uncertain projections can be, in the set of forecasts it released in 2019 the UN predicted a global population of almost 11 billion in 2100. However, a study2 published in The Lancet in July 2020 estimated that the fertility rate would decline more sharply and that the global population would peak in 2064 at 9.7 billion, before declining thereafter. 

        Epidemics, which by nature are unpredictable, or wars can skew forecasts, but so can other factors, such as the consequences of climate change or declining biodiversity. 

          Be that as it may, global population growth is very likely in the coming decades to be far weaker than in the second half of the 20th century. In the UN baseline scenario, global population growth by 2050 would be similar to what was seen in the late 19th century and early 20th century. 

            A close correlation between global GDP growth and the global population

              Economic theories generally assume that the economic growth that is achievable over the long term (the famous “potential growth”) depends on the availability of the labour factor (i.e., the number of persons available for work), on the availability of the capital factor (plant and equipment) and on the productivity of these factors. Empirically, over the very long term, there appears to be a very close correlation between global population growth and growth in economic activity. 

                During the centuries prior to the industrial revolution – generally speaking, prior to the 19th century – growth in the global population and in global GDP were very slow. These two variables peaked in the  1950s and 1960s at about 2% annual growth in global population and 5% annual growth in global GDP. Growth then receded gradually. 

                  With the slowdown in global population growth, which could peak and begin receding within a few decades, global growth is likely to be weaker in the 2020s, 2030s and 2040s than during the second half of the 20th century. This will have very great repercussions, given that many economic, social and financial systems are based on the assumption of significant economic growth. 

                    As far back as 1937, the economist John Maynard Keynes wondered about the economic repercussions of population decline. To him, one of its obvious implications would be a contraction in investment in reaction to weaker projected demand for goods services: “In an era of declining population […] demand tends to be below what was expected, and a state of over-supply is less easily corrected. Thus a pessimistic atmosphere may issue”3. This idea is reflected in the concept of “secular stagnation” introduced in 1938 by the economist Alvin Hansen4. This theory suggests that few investment decisions are made due to low projected demand, which can push down growth and give rise to a vicious circle. One of the consequences of secular stagnation is that investment is too low to absorb savings and that interest rates will remain low.

                      It is conceivable that an acceleration in labour productivity will make up for slower population growth, thus helping to maintain growth potential. However, research by Robert Gordon, a growth specialist, found that almost half of the slower economic growth in the US from 2006 to 2016 compared to 1970-2006 was due to a slowdown in productivity5. Productivity has also slowed in Europe and Asia. Paradoxically, this has occurred even as there have never been so many patents filed worldwide. Recent innovations seem to have had less of an impact on productivity than they used to. In a study published in 2019 , the OECD concluded that “productivity growth fell short of compensating for the negative impact of ageing on per capita GDP growth in almost half […] of OECD regions” and that one of the reasons is that “ageing of the population can itself have a negative impact on growth in productivity”, as older employees may have less incentive to acquire new skills and to adapt to new technologies. Older employees may also have a harder time moving to a different region or changing jobs. This would undermine the quality of the employer-employee match and make productivity gains less likely.

                        After historic gains in the 20th century, the global population is now expanding less and less rapidly. Moreover, there is likely to be greater awareness of a coming peak, and perhaps even a receding, in global population. This would result in a trend weakening in global growth, which would have very great economic, social and financial repercussions. 

                          Total population trends at the country level

                            At the level of a country, population change depends on two phenomena: the rate of natural increase, which is the difference between births and deaths, and net migration, which is the difference between the number of people entering the country and the number leaving. In rich countries and in China, the natural population change is now very negative. A number of countries have avoided a decline in their total population through positive net migration. In the future, migration will very likely be a far more pressing issue. 

                              Population has even shrunk already in some countries in the 2010s. In 2023, total population shrank in Japan for the 13th consecutive year and in Italy for the ninth consecutive year. But it is in eastern Europe that population has shrunk the most (since the mid-1990s). In 2022, the United Nations forecasted that population would decline by at least 1% by 2050 in 61 countries.

                                For governments, population declines exacerbate budget shortfalls. There are fewer workers to provide resources for public spending, while pension and healthcare costs are likely to rise as the population ages. A declining population can also cause land-use planning issues, most often in rural areas. This can result in phenomena such as school closings, falling real-estate prices, shutdowns of healthcare infrastructure and sports and cultural venues, shrinking retail sales, fewer new businesses, and longer trips to access infrastructures. 

                                  1. High fertility and high mortality that offset each other  high fertility and low mortality  relatively low fertility & mortality that offset each other.
                                  2. United Nations
                                  3. Vollset et al. (2020), Fertility, mortality, migration, and population scenarios for 195 countries and territories from 2017 to 2100: a forecasting analysis for the Global Burden of Disease Study, The Lancet.
                                  4. Keynes J.M., 1937, “Some Economic Consequences of a Declining Population”.
                                  5. Hansen A., 1939, « Economic progress and declining population growth”, American Economic Review.
                                  6. Gordon R., 2018, “Why has Economic Growth Slowed when Innovation appears to be acceleration?”, NBER working paper N°24554.
                                  7. OCDE, 2019, “Ageing and productivity growth in OECD regions: Combatting the economic impact of ageing through productivity growth?”, OECD Regional Development Working Papers 2019/08.

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