Population change and impacts on the economy

You’ll often hear it said that Britain, or the world, is ‘overpopulated’, but that’s a very hard concept to pin down. Hostility to migrants into the UK is high, yet economists often argue we need more immigrants. One Labour MP, Stella Creasy, has stirred controversy by saying “talk to Nigel Farage not just about the immigrants who come here and create jobs, but the immigrants who come here and create skills and create opportunities for people and create new ideas for people. There are now more people over the age of 65 than under the age of 16 in Britain. So unless women like me have a lot of children very quickly our ability to sustain our economy (and) to sustain our public services will come under threat”.So do extra people add to the economy or subtract from it? I’ve put together a few links and ideas.

Firstly, it’s worth watching Hans Rosling for 3 minutes explaining how it's wrong to think that saving poor children will lead to ‘overpopulation’. Secondly, it’s just not true to say the world’s population is growing faster than ever. Growth is the human population is slowing, fast. The number of people in the world might start falling towards the end of this century.

This issue is perhaps best approached in Economics by referring to the dependency ratio. That’s the balance between people of working age, vrs those who aren’t because they are very young, or very old. Stella Creasy is referring to the problems faced by rich countries (and increasingly middle income ones like China) who have very few children and are referred to on this graphic as having fertility rates below ‘replacement level’. That means a shrinking workforce has to support a growing proportion of retired folk.

The population worry of the 1960s were huge birth rates that meant lots of children relative to the working population, which presents another set of economic challenges – and a will lead to a big increase in the total number of people in society. These challenges still exist in some poor countries (refer back to graphic).

Then there are the countries in the middle, said by demographers to be enjoying a ‘demographic dividend’. That means that their birth rates have plunged, but they don’t (yet) have many old people in their populations. Such frisky nations should be able to chalk up rapid economic growth rates, something that I blogged about, giving it as a reason why parts of Africa are ripe for industrialisation.

The Economist has more recently argued that hopes that Africa’s dramatic population bulge may create prosperity seem to have been overdone.

Don’t expect debates about the impact of population and immigration to fade away in the coming years – these issues are likely to grow in importance through the century.