The Macroeconomics of Demographic Change
oNE oF ThE JoYS oF bEING AN ACTuARY is the breadth of
what we have to learn to attain that lofty designation: mathematics,
law, the social security systems of two dozen countries, theories
of aging, the curve of human mortality, medicine, accounting,
investments, economics, and demography. As a consequence, one of
our responsibilities as citizens is to stretch that knowledge into an
understanding of the complex world in which we live. our grasp of
the amazing demographic changes occurring in the modern world can
shape our views on the problems our nation faces and how these may
be handled effectively—particularly as our population ages.
Demographic change always is hard
to manage. The current reality is that
people in almost every land are having
fewer children per woman than at any
other time in the past 100 years. Many
Americans see the population of the
world climbing, and still believe in the
Malthusian view that population growth
will be exponential forever. This belief
helps shape their attitudes toward many
of the important issues of the day.
But the demographers of the United
Nations project just the opposite. They
believe that far from growing forever,
world population will stabilize sometime in the latter half of this century at
approximately 9 ½ billion people. The
New York Times recently published a
chart from the Pew Research Center
showing that the number of children per
woman has fallen in the past 20 years in
Muslim-majority countries from about
4. 3 children to below 3 children. It is
projected to drop to just above 2 children by 2030—a fact that would come
as a big surprise to most Americans.
At the same time, the population of
Russia is imploding, the population of
Japan is shrinking, and Italy isn’t far
behind. China instituted its one-child
policy 30 years ago. According to Toshi-ko Kaneda of the Population Reference
Bureau, “The dramatic fertility decline
and improved longevity over the past
two decades are causing China’s population to age at one of the fastest rates ever
recorded, accompanied by an increase
in the prevalence of chronic disease and
disability in the population.”
Demographic Dividend
There is a marked economic advantage,
at least initially, to lower fertility. Sev-
eral papers presented at the Society of
Actuaries Living to 100 and Beyond In-
ternational Symposium, which was held
Jan. 5-7 in Orlando, Fla., refer to a demo-
graphic dividend and suggest that there
is a window when working-age adults
with fewer children can save rather than
consume income.
