Does The Economy Need More People?

Business Standard     1st September 2021     Save    

Context: In the light of the recent move by some states incentivising smaller families, there are good reasons to curtail the population growth since, in the age of technological disruptions and climate change, the case for a young and fast-growing population driving India’s economy is growing weaker.

Reasons to curtail population growth:  In some parts of the world, especially Africa, West Asia and the Indian sub-continent.

  • Resisting damage to earth: Malthus was wrong to claim that population growth will outstrip resources. We have the opposite problem: That resources will be found by doing greater damage to the earth’s future.
    • Young people need more resources than older people, and the planet cannot afford a rapidly-rising rate of consumption in its poorest countries.
  • Growth no longer requires large labour resources: Higher youth populations are not always needed to drive growth. This has happened for  two main reasons: 
    • One is the increasing contribution of capital and technology to grow.
    • The other is the rapid “dematerialisation” of most things produced. 
      • The term dematerialisation means that most physical products made today (not to speak of virtual and digital products) use less and fewer materials and energy than they did before. 
      • For e.g. Cars use less steel and aluminium than they did a few decades ago. 
      • Issues like dependency ratios — the proportion of dependents to the working population — may not be that relevant when jobs are anyway going to be automated.
  • Market polarisation for skills: As the world has become more and more dependent on sophisticated technologies, the market for skills has polarised. 
    • There is a huge need for highly skilled people and also for low-skilled people, but demand for middle-skilled, middle-class, middle-income professions is shrinking. 
    • At the bottom end, technology reduces the level of skill needed to hold a basic job. Consider how easily new Uber drivers, with practically no knowledge of city topography, navigate roads using Google maps and apps.
    • While low-skill jobs, which may not be what one aspires for, will be aplenty, the formal and comfortable mid-skill jobs will reduce steadily.
    • Upskilling ???? a double-edged sword: The more you upskill, the lower the relative wages of those upskilled.
  • International precedents: While some parts of northern Europe are facing population declines in future, technology is stepping into the breach to maintain lifestyles. Even with a rapidly ageing population, most countries are able to get what they want done without excess immigration or higher birth rates.

Conclusion: The case for a young and fast-growing population is growing weaker in the age of technology-driven growth and climate change. We do need some babies to be born, but the old TFR goal of 2.1 live births per woman no longer holds. We need to bring down population rates faster, and the best way to do it is by focusing on women.