BABY BOOM: God's Gift for Economy

Which is optimum: One, Two, or Three CHILD POLICY?

Despite being the country with the second-largest population, there is no policy in India regarding control of the growing population? What can be the reasons behind it? (Maybe we want to see India on Top of the list. XD). Many other things are going on backstage, about which we are going to learn in a while.

First of all, we need to understand the connection between Fertility rate, Replacement rate, Dependency ratio and growth of GDP. Let's simplify these terms:

Fertility rate: It is the average number of new born babies to the average population of women during a fixed period.

Replacement Rate: It is the number of children that a couple is expected to have during their reproductive period of life to replace themselves and keep the economy running.

Dependency ratio: It is the ratio of the non-working age group (Above 65years or below 14years) to the working-age group.

There is a direct relationship between the replacement rate and fertility rate. Both go hand-in-hand. The Idle replacement rate is 2.1 whenever the fertility rate increases or decreases it impacts the whole economy in the following way:

CASE 1: WHEN THE FERTILITY RATE FALLS CONSISTENTLY

This means there will be a smaller number of new born babies. This will lead to shrinking of the population of the nation in the coming years. This means in the coming years there will be a greater number of people who will go out from the group of working-age population than those who will enter. This will slowly and gradually decrease the working population of the country. Thus, this will eventually lead to less productivity in the economy which gradually leads to a fall in the GDP of the country. There is a minor assumption here that there is no immigration.

CASE 2: WHEN THE FERTILITY RATE RISES CONSISTENTLY

This clearly defines there will be consistent growth in the number of new born babies. This will lead to consistent growth of the population of the nation in the coming years. This states that in the coming years there will be a greater number of people who will come into the group of working-age population than those who will exit due to retirement. This will slowly or gradually increase the working population of the county. Thus, this will eventually lead to high productivity in the economy which gradually increases the GDP of the country. Assuming the country can absorb all the new labours entering into the market.

Till now, I hope you understood how the population and GDP are connected and how replacement rate and fertility rate play a crucial role in the economy. This is the reason why nearly all the nations love growing population.The impact of the growing population is quite evident on the economy. The more people entering the labour force, the greater will be the potential of the economy to grow.

“Never in history has there been economic growth without population growth.”

~ European Commission warned in 2005

As per the records of 1,000 years of history of the world economy, the world economy has never been able to see growth without complimentary population growth. Throughout the history of the world economy, the population growth rate always accounted for half of the growth rate of the world economy. In simple words, to attain a growth rate of 4% the economy needs the population to grow at 2%. Even the records witness the same.

In the late nineteenth century before the introduction of the Industrial Revolution, the world economy had a population growth of less than half percent and complementing it the global economic growth rate never exceeded 1%.

With falling mortality rates in the twentieth century, the population adopted the growth rate of 1% which led the global economy to grow with a 2% growth rate.

The baby boom (A period which is marked by significant growth in birth rates) last observed in the mid and late twentieth century took population growth towards 2 percent, and economic growth rose to an annual pace of nearly 4 percent for the first and only time in the history of the global economy.

The 2 Percent Population Pace Test

This test states that when the working-age population grows at an average rate of at least 2 percent a year then the nation is most likely to witness an economic boom for a long period.

The major problem begins here. All the major nations are witnessing a continuous decline in their population growth rate which leads to negative rates in the working-age population in most cases. The graph shows the magnificent decline in the birth rates in some of the major nations of the world economy.

Shocking right!?

Even the world average has been transformed to half of what it was in 1950. This is where the nations are more focused on and they are not ready to compromise with their economic rate of growth. This puts a lot of pressure on the nation to look over this issue and come out with ways to avoid this massive disastrous situation which is quite predictable as of now. Now let me show you the headlines of some of the most prestigious media houses.

To overcome this problem, All the nations are trying to pull out all their cards and do everything to increase fertility rates. The major reason behind such level of decrease in birth rate is that educated women have started delaying or avoiding childbirth to pursue career which is a good thing obviously. Moreover, the fear of overpopulation and huge inflation has increased the cost of raising a kid in the modern world.

Nearly 70 percent of developed countries today have implemented policies to boost their fertility rate. Some have come up offering to women like "baby bonuses," which is a form of incentive to encourage women to have more babies though it's controversial and rarely effective.

According to the United Nations

Some of the ineffective policies by the developed nations for increasing their fertility rate are as follows:

China

Due to the one-child policy which was a smart move by china to control their rising population, the working-age population growth rate started flickering around 2 % in 2003, then continuously fell until it turned negative for the first time in 2015. This explains why in 2015 China replaced its one-child policy with a two-child policy. Recently, China announced three child policy and encouraging couples to have three babies to revive the shrinking population of the country.

Singapore

Singapore started campaigns with the slogans like “Have three, or more if you can afford it." Along with other incentives which include subsidized hospital stays, etc. but it had a minute effect on the fertility rate. The government started by providing some more incentives that include new child-care subsidies, better maternity leave policies, and cash grants which amount to $7,330 per newly born baby.

Canada

Canada came up with a baby bonus in 1988 but soon had to pull out, the reason being that the cash benefits were received majorly by poor women and their children which put more burden on welfare expenses.

Russia

Putin has announced tax breaks for large families, and health insurance by the government to covers the cost of in vitro. "Maternity capital" a kind of cash grant of $6,200 is provided.

And the list goes on till infinity. But the shocking part is that all the incentives are ineffective and able to bring a minute change only. The reason for the same is that the cost of raising a child is far more than these incentives.

But now the question comes, how can we overcome this problem of a shrinking workforce?

1. Encouragement to women workforce

As per data, the women's participation rate in the workforce is less than 50% that all the nation can look upon to improve. This will drastically improve the productivity of the economy. A beautiful example for the same is presented by Japan where Prime Minister Abe has initiated the concept of "womenomics" in his plan to revive the economy. And the female labour force participation has drastically increased from 65 to 72 percent during his tenure.

2. Inclusion of AI

Machines can replace humans at various places as a potential workforce. In this way, the working population will increase as the machines will fulfil the gap of the declining workforce. Workplaces are evolving to adopt machines. An example of the same is Automatic Ticket Vending Machines at Metro stations.

3. Better Utilization of available resources

With an unemployment rate of more than 7% in India, the government should look for better utilization of the available labour force. Providing more employment opportunities will facilitate higher productivity.

I hope from now onwards whenever you will read any headline or news regarding child policy or fertility rate you will have a better picture in your mind for the same.

Until then…

Happy reading!!

THANK YOU!! :)