Toward A Sustainable Population
Can humanity head off population decline? Should we?
Population growth is seen as an anathema to environmental “sustainability.” However, a shrinking population may offer no net environmental benefits relative to a growing one and instead may endanger civilization itself. With populations set to begin shrinking mid-Century, humanity is sleepwalking into a population crisis, with little time to change course. It would behoove policymakers to begin taking demographic sustainability seriously.
Demographics is Destiny
When it comes to growth and progress, scale matters. Economic growth models, the steady expansion of human capability, are underpinned by an assumption that the population will continue to grow in perpetuity. On the other hand, research suggests that population decline could lead to a dystopian world of stagnation, see our work on this topic here.
A larger population enables greater specialization of skills and knowledge. A shrinking population engenders a reduced ability to specialize and a reduced number of new ideas generated. Ideas that are the source of innovation, growth, and progress.
Additionally, a growing consumer and industrial base makes investments into new technology, which often require an initially high R&D outlay, possible. On the contrary, shrinking populations with declining demand for goods and services may not generate sufficient incentive necessary to justify those R&D expenses.
Some counter that a falling population will bring environmental benefits. However, the literature suggests that the population declines necessary to significantly mitigate human environmental impact would far exceed those forecasted by demographers. Faster innovation, the ability to do more with less energy and materials, would more meaningfully benefit the environment in this century.
On the contrary, population decline could, to the detriment of the environment, stunt the innovation required to reduce human environmental impact. Thus, modest population growth may ultimately benefit the environment more than negative growth.
Burden Sharing and Opportunity Cost
Recent research, including a study published in The Lancet, forecasts that the world population will peak at about 9.7 billion in 2064, before falling to 8.8 billion by the end of 2100. Fertility rates in 183 nations will fall below the 2.1 threshold needed to maintain a stable population. In more than 23 countries, populations will shrink by more than 50 percent. These include Japan, South Korea, Thailand, Spain, Italy, and Portugal.
This begs the question: what is the cause of this global decline in fertility? In a 2008 study, Bruce Sacerdote and James Feyrer postulated that, at least to some degree, fertility is tied to the status of women. That is, when women have few opportunities in the workforce, they tend to have more children. As their status and labor participation climbs, they have fewer children.
In large part, this comes down to burden and opportunity cost. As a woman’s income increases, the opportunity cost of leaving the workforce and taking on the expense of raising a child is simply too high. Burden, in terms of time and housework, is also a factor, as working women have less time to devote to housework and child-rearing.
In addition, it appears cultural shifts may also explain some of the fertility changes we are observing. Indeed, surveys indicate that younger respondents are less likely to want children, some arguably due to misplaced environmental concerns. Admittedly though, it is difficult to disentangle cultural preferences from generational economic realities, as they feed into and rationalize one another.
Globally, the rising status of women and growing female labor participation is unquestionably a positive trend. The question becomes, how must policy adjust to ensure that the human population is sustainable going forward? Can policy meaningfully influence fertility?
Can Policy Influence Fertility?
Bruce Sacerdote and James Feyrer’s research reveals that fertility increases when the burden, the cost of raising children in terms of time and money, is shared. Policies like publically provided daycare services are positively correlated with higher fertility. For example, a significant increase in social spending in Sweden from the 1960s through the 1980s led to an increase in fertility relative to other Scandanavian countries.
Child allowances, that is, direct or near-direct cash transfers, also appear to be an effective policy tool. In another study, Kevin Milligan evaluated the pro-natalist Allowance for Newborn Children (ANC) that ran in Quebec from 1988 to 1997. In this scheme, families were provided direct cash benefits for every child they had. The payment size was determined by the birth rank of the child, with payments made quarterly up to a total of $8000.00.
The introduction of the ANC saw the fertility rate of Quebec increase relative to the rest of Canada. His findings conclude that the fertility rate of eligible recipients increased by 12 percent on average, but up to 25 percent for those receiving the maximum award.
Notably, the benefits of cash child allowances appear broader than merely raising fertility. In a separate study by Irwin Garfinkel et. al., researchers performed a systemic review of cash and near-cash income transfer programs. The literature was nearly consistent: the long-term effects of cash transfers are overwhelmingly positive. Their research found that children provided these benefits had better health, longer lifespans, increased future earnings, and a reduced probability of being incarcerated.
In sum, they estimated that a permanent $1000/year expansion of the child tax credit in the US, similar to the one passed in the American Rescue Plan, would cost $97 billion per year but lead to $982 billion in net social benefits annually. Therefore, cash transfers appear to not only be a viable means of raising fertility but offer a net benefit to society over the long term.
A Potential Solution
To preserve the right of women to work on an equal footing with their male counterparts, while also ensuring a sustainable population, policymakers should seek to mitigate the burden of having children. We have already proposed reforms that would ensure stronger economic growth, reduce the cost of higher education/healthcare, and policies to lower housing costs.
Such measures likely will not go far enough because child-rearing will still remain “uncompensated labor.” This incentive structure needs adjustment not only from the “cost” side but also from the benefits side. To do this, it’s time to consider properly compensating child-rearing through direct cash transfers. One potential option is a Negative Income Tax (NIT) that includes minor children.
A negative income tax would function much like a child tax credit, except that it would be fully refundable and paid in installments throughout the year. Payments would be made to parents for each child they are raising. The goal is to assist with child-rearing while preserving the freedom of choice.
Unlike “free” daycare schemes, with cash transfers, parents can best determine how to use funds for the benefit of their family. They could use it to save for education, to pay for daycare so they can continue to work, or to supplement their income while one caregiver stays at home.
The payment amount would be determined by available funds. And while such a measure would certainly not come cheap, remember that direct cash transfers offer long-term benefits in terms of reduced crime, better health, higher incomes…etc. Ultimately, an NIT for children may pay for itself.
To fund the NIT, we would best turn to Land Value Taxes (LVT). To learn more about LVT, please see our work on this topic here. LVT is ideal because unlike income taxes or corporate taxes, LVT does not impose any deadweight loss on the economy, and only taxes “unearned income.” Therefore, LVT does not force anyone to hand over their hard-earned income to someone else.
A Sustainable Civilization
Sustainability is not limited to mitigating human environmental impact. True sustainability requires that humanity consider all variables that might lead to civilization’s fall. Population decline likely offers no net benefits to civilization or the planet it depends on.
Caring for the Earth requires caring for humanity as well. That begins with ensuring we have future generations ready, able, and willing to carry the light of civilization forward.