May your tribe flourish!

Winds of change are blowing in China. A one-child policy was implemented in the eighties. A family had to pay a hefty fine if it produced a second child. The pregnant woman was forced to undergo an abortion if the family was not able to pay the fine.

The rate of population growth declined steeply, as a result, from 3.6 births per woman to 1.8 births per woman presently. Less than two births per woman means that two living persons are giving birth to lesser numbers.

The population will therefore decline. This may, however, not happen immediately because life expectancy is increasing, and people are living longer. In a few years, however, the lower birth rate will catch up and the total population is expected to start declining.

China has got immense economic benefits from the one-child policy in the last two decades. Mao Zedong has encouraged the Chinese people to produce more children. Large number of births took place in the three decades of fifties, sixties and seventies.

These large numbers of persons joined the workforce beginning the eighties. The availability of labour increased and production shot up. Simultaneously, a one-child policy was implemented in the eighties.

That led to reduced burden of childbearing and childrearing on the families and enabled them to undertake yet more productive work in farms and factories. This was a major factor that begot high economic growth rates of 10 percent-plus after the nineties.

The situation changed dramatically around 2010. The large numbers of baby-boomers born till 1980 started becoming old. As a result, many working persons had two parents and four grandparents to support. On the other hand, lesser numbers of births after 1980s led to fewer persons joining the workforce. The ratio of elderly dependents and working persons got highly skewed in favour of dependents.

On the other hand, lesser numbers of births after 1980s led to fewer persons joining the workforce. Energies of people were directed more towards taking care of the elderly; and less toward increasing production. According to many analysts, this has been a major factor contributing to the decline in the growth rate after 2010.

It is clear from the above sequence of events that population control has only a short-term benefit. This is called ‘demographic dividend.’ There are benefits if larger number of persons join the workforce. But this is cancelled by the larger number of dependents later. Similar conclusions are obtained from a review of experiences of other countries.

Professor at University of Maryland Julian Simon notes that densely populated countries like Holland, Hong Kong, Japan and Singapore have had high rates of growth while sparsely populated Africa has had low rates of growth.

A study by the Population Research Institute tells us that between 1900 and 2000 the population of the United States increased from 76 million to 270 million. The average life expectancy increased in this same period from 47 years to 77 years; and Standard and Poor’s Share Index rose from 6.2 to 1430. These, he says, indicate the positive impact of population growth on economy.

A report by Bloomberg says: “Singapore Prime Minister Lee Hsien Loong last November told that encouraging citizens to have more children is the city-state’s biggest challenge. The government announced in January a plan to spend 25 percent more for fertility-treatment funding, paternity leave, housing assistance, and other measures to encourage families to have more children.

South Korea has one of the world’s fastest-aging populations, too, with a birth rate of just 1.24 children per woman in 2011, well below the minimum replacement rate of 2.1 children. South Korea’s government is trying to address a shrinking workforce by opening to immigration from such places as Nepal; the number of immigrants has increased sevenfold since 2000 and immigrants as a percentage of the population could top 6 percent by 2030, compared with 2.8 percent now.

It is clear that the population has a positive impact on economic growth. The matter is really quite simple. Economic growth comes from increased production which requires a bigger workforce and higher population.

Contrary to above finding, United Nation’s agency UNFPA, as most of our mainstream economists, says that higher population deprives children of education, their productive capacities are not developed and they are not able to add to production. I am not convinced.

Education can be provided to the people by cutting other consumption and expenditures. The King’s Palace can be used for running a school, for example. Or surplus government employees in other departments can be deployed in schools.

We should also remember that the requirement of educated workers depends upon the technological makeup of the economy. A tractor driver holding an MA degree does not add more to the economy than one who has gone to high school only.

The presence of large numbers of educated unemployed points to the same direction. The correct situation is that population is an asset of it is engaged in production; and a liability if unemployed. Therefore, policies to create employment along with an increase in population will beget higher economic growth.

Second argument extended by UNFPA is that standard of living declines with increasing population because it becomes difficult for the government to provide necessary infrastructure such as education and roads. Again, I am not convinced.

The ability of the government to provide infrastructure depends upon revenues which, in turn, depends upon whether workers are productively employed. An employed person produces more than the cost of services provided to him by the government. Thus, the strategy should be to increase population, provide them with jobs, collect more taxes and provide more facilities.

My assessment is that the hype about population being a ‘problem’ has been created by the businesses to encourage women to enter the workforce and thereby reduce the cost of labour and an increase in profits. Women are preoccupied with homemaking if they have more children.

Indeed, it is true that less numbers of births begets higher rates of economic growth as has happened in China till the first decade of this century. But this is a shortsighted policy because soon the number of workers reduces and the growth rate suffers as is happening in China now. The Chinese government has learnt this hard truth and has now made the one-child policy a bit lenient.

Only couples who were both single child of their parents were allowed to have a second child. Now couples where one of the two persons is a single child will be allowed to bear another child. This step is in the right direction. The lesson for India is that we must focus on making economic policies that provide employment instead of trying to curtail population. Author was formerly Professor of Economics at IIM Bengaluru