The theme of the following four sections of the blog is that innovation, not price competition, is the basis for understanding economic growth, competition, and analysis.
Basic Concepts and Theory
Market Behavior and StructureMarket
Dynamics and Information: How Markets Work
Economic Theory and Markets
Corporate Strategies
There is beginning a historic change in future populations and their demographics. This will interact with other variables and have a serious, maybe profound, effect on future economic growth.
Demographics and Economics
China
Geopolitics and the Global Economy
American Economic History
Management
The world seems to be in the midst of radical political and social change. Where are we going? Can studying past periods and countries facing disrupting change help us navigate our times? Maybe.
History
American History
World War I: The Beginning of the 20th Century
The Roman Republic and America – Differences and Some Possible Parallels
Economic and Fiscal Policy
Financial Markets and Investment Strategies
Foreign Exchange Markets The United States American Foreign Policy and International Relations Geopolitics and the Global Economy Geopolitics of Oil and Natural Gas
Visionaries
Humor, Satire, WhimsyI Heard the News Today Higher Education
Examples of Bilateral Oligopoly MARKET DYNAMICS AND INFORMATION: HOW MARKETS WORK This group of posts emphasize the dynamics of economic growth and development, They highlight the role of information in the functioning of modern markets.
John von Neumann, Alan Turing, and Claude Shannon (creator of information theory) knew each other, knew of each other’s work, and discussed their ideas with each other. John von Neumann Sees the Future
(2010)GEOPOLITICS OF OIL AND NATURAL GASThe geopolitics of oil will continue to remain important until the switch to substitute renewable resources and EVs. Energy and Geopolitics I: The United States(2015)
Surprisingly, some of the comments in the following essay may be somewhat relevant to the United States, more dependent on fracked oil and lagging in innovating substitutes that drive future economic growth and development.
China’s dominance of the interconnected group of high-tech products will make China the dominant manufacturing country in the world. China will also dominate the global economy, exporting its high-growth products at falling prices and developing joint production in many countries.
This includes renewable energy. China is the world’s largest and lowest-cost producer of most renewable energy technology, especially solar panels and batteries. China is also developing and installing many new technology nuclear reactors.
Combined with China’s surge in exports to the world outside of the United States, as a reaction to American tariffs and bans on Chinese exports, most of the world’s advanced technology will be based on Chinese technology.
China will have to deal with internal, domestic problems. The long-term problem will be the large decline in population, especially the shrinking of the working age cohort. this is one reason that China is concentrating on the development and deployment of industrial robots and AI applications.
INTRODUCTION
According to the World Bank, China’s Gross Domestic Product (GDP) was $18.7 trillion in 2024, compared to $29.2 trillion for the United States. China’s economy was 64% the size of the American economy; a generation ago, in 2000, China’s GDP was only 12% of America’s.
China has been a spectacular economic success story. China has increased its share of global manufacturing from 6% in 2000 to 32% in 2024. Manufacturing makes up 28 percent of China’s economy, compared with 11 percent in the United States.
China sees it dominance of interrelated advanced technologies as key to its geopolitical global dominance of the United States.
THE BEGINNING OF CHINA’S ECONOMIC RISE
After the death of Mao in 1976, a more pragmatic group of Communist leaders seized power and began to change China. Their model was Singapore, whose population was mostly Chinese. Singapore’s economic growth model was that the dominant political party would direct economic growth. It invested in infrastructure, including condos for most of its population. It directed investment. It invited foreign companies to invest in the country. It became part of the global economy.
China did much of the same but since it is much larger, it had to go further. It liberalized agriculture, going from huge communes to allowing individual farmers to rent land. That doubled food production. Then it concentrated on manufacturing, with subsidies and favorable tax laws. They established Special Economic Zones for foreign companies (little Singapores). Foreign companies were welcomed but they had to partner with a Chinese company, which accelerated China’s absorption of foreign technology and management techniques. By combining low labor costs and modern infrastructure with the production and assembly technology of foreign corporations, China became the world’s largest industrial producer and exporter. But, unlike Japan at the same stage in the 1980s, China went further. The Chinese government’s strategic plan was to make Chinese companies the leading developers, innovators and producers of “cutting-edge” products. This included becoming the world’s largest producer of solar panels, lithium-ion batteries, wind turbines, automated factories, robotics, rare earth minerals, drones, robotaxis, and electric vehicles (EVs).
SUMMARY OF CHINA’S CURRENT ECONOMY
China mines about 90 percent of the world’s rare earth minerals and it does the chemical processing for over 90 percent of the world’s total. The country also makes more than 80 percent of the world’s batteries, more than 70 percent of its electric cars, and about half of the world’s steel, iron and aluminum, according to data from the International Energy Commission.
China has the second largest economy in the world. According to official statistics, it has the fastest growth rate of any industrialized country. But economic growth has slowed down, from highs of 10% per year to the current reported growth rate of 5%. Probably closer to 3% – see
CHINA’S ECONOMIC STATISTICS
Because of China’s immense population, 1.4 billion people, per capita income is in the “middle-income” range. China is still a low-consumption country; consumption expenditures as a percent of total output is a little more than half that of the United States, about 40% compared to about 70% in the United States. Chinese have a very high savings rate, partly because of small social welfare and retirement programs.This creates and frees up a huge amount of investment capital for expanding production and exports.
China’s spending on research and development increased from $70 billion (in constant dollars) in 2000 to $470 billion in 2023 (Economist estimate). State-controlled banks have lent $1.9 trillion over the last four years to build new factories and upgrade existing factories with robots and automation. This is probably an attempt to deal with the beginning of a decline in the size of its work force and a substitute for the decline in housing construction.
China’s BYD (BYDDY) sells more electric vehicles in the world than any other company, including Tesla. Although banned in the United States, BYD’s global sales continue to rise quickly while Tesla’s global sales are falling. In early 2025, BYD’s sales in Europe passed Tesla’s sales.
Chinese companies, plus foreign companies in China like VW, produce more EVs than the total auto production in the U.S., Mexico and Canada combined.China is the world’s largest market for EVs; over half of the cars sold in China are electric vehicles (EVs) compared to 20% in Europe and about 10% in the United States. In 2024, EV sales in China were about nine times greater than in the United States.
In 2023, 2024, and 2025, China installed more industrial robots than the rest of the world combined.
China produces, installs and exports most of the world’s solar panels, about 80%. To avoid high U.S. tariffs, many are assembled or trans-shipped through other Asian countries. Biden and Trump have placed high tariffs on solar panels shipped from China and these countries. Combined with new American domestic policies unfavorable to solar energy, these policies will probably slow down installation of solar panels in the U.S., unless reversed at a later time.
China has surprised the world with its rapid advances in developing AI models, including DeepSeek. New Deep Seek models might rival ChatGPT’s most advanced models.
Huawei, a giant Chinese telecomm company, accelerated its development of semiconductor chips after the company’s chips and telecomm equipment were banned in the U.S. The CEO of Nvidia, exports of whose high-end chips to China were banned until recently by U.S. policies, has stated the ban has been a failed policy, only accelerating development of similar chips by Huawei and other Chinese companies. The ban has been partially lifted.
China’s AI models are open-source (free) and are used by a number of American and European companies.
CHINA’S ECONOMY
China’s economic strength is based on turning inventions into innovations, the mass production of commercial products. This has been achieved through a combination of massive government support of research and development, followed by subsidies to private corporations to produce and improve the new technology.
China has a manufacturing sector that is larger than those of the United States, Germany, Japan, South Korea, and Britain combined. It produces some of the world’s most advanced technology in the interrelated “cutting edge” industries.
China builds industrial capacity anticipating high future growth rates. As a consequence, there is excess capacity in many industries, including EVs and solar panels. Also in construction industries like steel and cement. China produces more steel than the rest of the world combined; the industry is currently in a recession because of less housing construction. Construction in housing is being replaced by new construction of factories with new machinery and robots, and construction of overseas infrastructure projects under the Belt and Road program.
China is installing more renewable energy technology than any other country; the increase in the amount of electricity produced by solar in 2024 was greater than the total amount ever produced in the United States. But China is also the world’s largest producer of coal. Chinese cities have some of the worse air quality in the world; China’s interim strategy is to shut down old factories near cities, especially Beijing.
Coal production is not going down because of expanding demand for energy. China needs both, especially with large internal investments in new data centers. But by 2030, China hopes to start reducing coal production and replacing coal with renewable energy technologies.
China also relies on imported oil and natural gas, especially from Russia and Iran. The country buys oil at a discount from world prices.
China is the world’s largest producer, and consumer, of cars. China is rapidly replacing gasoline-powered cars and other vehicles with EVs. China’s strategy is to replace imported oil for gas-powered cars with domestically produced EVs built with Chinese batteries and in the long run, have electricity for EVs generated by domestic renewable sources.
China is rapidly expanding its EV robotaxi fleet. China is also starting to increase exports of EVs everywhere except in the United States, where Chinese EVs are effectively banned. China will probably become the dominant seller of EVs in most of the rest of the world.
China’s economic development has been spectacular but growth is slowing down. The development strategy in the past was massive construction, both public and private, joint ventures with foreign companies, exports, and limiting domestic consumption. Internal construction relying on housing is less important because of the huge amount of housing already in place that is either unsold or empty.
There will be little if any growth in housing construction in the future because of low family formation due to a very low birth rates and the large inventory of unsold apartments. (See the section below – China’s Housing Crisis – for details.)
China’s economy can continue to grow because of high levels of investment, overcapacity in new technology, and a large number of unemployed young people and college grads with technical degrees. The current strategy is to invest heavily in innovative new technologies such as advanced computer chips, AI, robotics, automated factories, new drugs, EVs, batteries, hydrogen energy, nuclear power, and solar panels. Investment in these industries will come mostly from domestic sources.
In addition to being the world’s largest producer of solar panels and wind turbines, China is investing heavily in “green” hydrogen as a renewable resource. This is produced using electrolysers to split water molecules into hydrogen and oxygen. China already produces about 40% of the of the world’s electrolysers. The country is building pipelines from production centers to industrial centers such as Shenzhen, which already has a fleet of buses powered by hydrogen.
China is catching up in areas of chip production. The country has rapidly improved its chip technology; it can now produce all but the most advanced chips in the world. U.S. bans on selling advanced chips to China is less effective than it would have been in the past. There is in addition a thriving global black market in Nvidia’s advanced chips.
China has employed its advanced chips to develop AI models such as DeepSeek, which are already almost as good as the most advanced American AI models.
The Chinese government has just approved a new $137 billion venture capital fund to accelerate development of robotics and AI.
China already has some of the most automated plants in the world, especially in electric vehicle production.
RARE EARTH METALS AND ELECTRIC MAGNETS
China controls the entire supply chain of rare earth metals, from mining to processing to producing electric magnets. China produces over 90% of the rare earth minerals and almost all of the processing equipment and processing.
Electric magnets are inputs into producing a wide range of modern weapons and automobiles, both gas-combustion and electric. A single gasoline-powered car can have more than 40 different rare earth magnets inside electric motors that power the brakes, seats, steering, power windows and other systems. Electric cars have even more rare earth magnets.
Thousands of companies world-wide use Chinese rare earth magnets. China has announced widespread export controls on the magnets and products that use the magnets. This seems to be an attempt to pressure Europe to relax tariffs on imported Chinese electric vehicles, at a time when Europe wants to step up armaments production to aid Ukraine.
China produces more than 200,000 tons of rare earth magnets a year. Most are used domestically. Much of the production is sold to CATL and BYD, the world’s largest producers of batteries. BYD is the world’s largest producer of electric vehicles (EV). About 40,000 tons are exported to the United States and Europe. The only other large producer is Japan, which makes about 40,000 tons of magnets a year, most for car companies in Japan and South Korea. The United States and the rest of the world are trying to increase production but the current total is negligible. Production is difficult because of tight quality control and a long learning curve for employees.
China’s domination of the entire supply chain from rare earth minerals mining to final products like EVs and drones is the result of decades of investment in research and development. A majority of undergraduates in China major in math, science, engineering or agriculture, according to the Education Ministry. And three-quarters of China’s doctoral students do so. By comparison, only a fifth of American undergraduates and half of doctoral students are in these categories. Over half of the graduate students are foreign.
China has close to 50 graduate programs that focus on either battery chemistry or the closely related subject of battery metallurgy. Only a handful of professors in the United States are working on batteries.
Much of the research and development is done at Central South University in Changsha, a city in south-central China. Central South University has nearly 60,000 undergraduate and graduate students with extensive, modern labs.
Chinese companies have been buying up mineral producers in other countries. China’s largest battery producer, CATL, which produces 40% of the global production of batteries, wants to produce in the United States for the American market. Building and equipping an electric-car battery factory in the United States costs six times as much as in China, said Robin Zeng, the chairman and founder of CATL. The work is also slow — “three times longer,” he said in an interview.
This is mostly a summary of an excellent series of articles by Keith Bradsher of the New York Times.
Update (11/25). In a recent trade agreement with the U.S., China has promised to remove its embargo of rare earth minerals and electric magnets for one year. This will probably slow down America’s drive to find and develop alternative sources of supply. In exchange, China has agreed to buy an undisclosed amount of American soybeans.
DRONES
China is the world’s largest producer of drones. DJI, based on Shenzhen, produces about 70% of all commercial drones sold in the world. They are used for hobby and industrial applications, including aerial photography, package delivery, and weather research. Versions of the DJI drones cost between $300 and $5,000.
China produces millions of drones a year. The U.S produces about 100,000 drones a year.
Drones have become an important weapon in the war in Ukraine. Ukrainian forces beat back the Russian invasion by innovating deadly modifications to drones bought from DJI. Russians cannot use tanks to support infantry because of the threat from Ukrainian drones. Russian drones are used in indiscriminate bombing of Ukrainian cities. Drones and other AI-controlled weapons are rapidly changing warfare.
When U.S. drone manufacturer Skydio was sanctioned by Beijing in October 2024 over arms sales to Taiwan, that quickly cut off the company’s supply of batteries, according to the Financial Times. China produces more drones in one week than Skydio produces in a year.
American drones that carry Predator and Reaper missiles cost between $3 million and $5 million.
A few months ago, the U.S. army carried out a four-day exercise testing drones produced by U.S. startups. They were failures. The only one that partly performed was a drone an American company bought from Ukraine and modified.
CHINA’S AUTOMOBILE INDUSTRY AND GLOBAL DOMINATION OF THE ELECTRIC VEHICLE (EV) MARKET
China today has enough capacity to manufacture half of the world’s 80 million cars in annual sales, or 40 million vehicles. Current production is about 28 million and rising. (Total U.S. production is around 9 million, although American car companies assemble cars in Canada and Mexico.) Over half of Chinese production is now EVs. China’s electric vehicle companies continue to build new capacity. By 2030, China’s capacity could climb to 75% of the world’s volume, most of it to produce EVs.
The total production capacity figure above is misleading. There is massive over-capacity of gas-powered car manufacturing. Production of gas-powered cars has fallen by over 10 million units since reaching a peak of 28 million in 2017 with little reduction in production capacity. Thus, China’s EV industry can double sales just by replacing gas-powered cars.
American car companies in China, producing mostly gas-powered cars, have falling sales and are losing money. In the past, General Motors and VW were the largest car producers in China. Now they are not even in the top 20 because of Chinese EV sales. General Motors just took a $5 billion write-off of their investment in China. Michael Dunne, an observer of the Chinese auto industry, believes that the position of foreign auto producers can only get worse and some, including General Motors, will eventually leave China.
Hyundai has closed a modern production plant in China; many foreign plants are operating far below capacity. Ford has announced they have lost money over the last five years from their Chinese operations.
When Volkswagen opened a huge electric car assembly plant last year in Hefei, China, it ordered just one robot imported from Germany (for display). The company bought the other 1,074 robotsfrom a factory in Shanghai. VW intends to source all of its parts in China.
Volkswagen has also moved its R&D from Germany to China, hiring 3,000 Chinese engineers. The China factory will be the source of VW EVs sold in Europe. At the same time, VW announced a massive cost-cutting program in Germany and the rest of Europe.
Total EV production in 2024 was 12.4 million cars, close to half of all car production. Forecasts for 2025 are uncertain because of major reductions in government incentives and subsidies after September 30 of 2025.
To increase production of electric autos quickly, China is stepping up exports. Exports of all EV exports in 2024 was around 1.25 million. EV exports may be around 2 million in 2025.
Besides autos with Chinese nameplates, foreign automakers are using China as the manufacturing base for exports under their own names. Foreign companies originally build large plants in China with Chinese joint venture companies to produce gas-powered cars for the Chinese market; at least one has been closed (Hyundai) and others are operating at a low percent of capacity. They are forced to stay open by local authorities, who are afraid of local unemployment.
Tesla shipped 344,000 China-built EVs to Canada, Europe and other markets in 2023. Volkswagen, Renault and BMW export made-in-China EVs to Europe. GM’s best-selling Chevrolets in Mexico are produced in China. Hyundai and Kia expect to sell 200,000 cars made in China back to South Korea and into global markets. Ford is exporting about 100,000 trucks and SUVs to Asia, Africa and the Middle East.
BYD, China’s largest EV producer, will produce more EVs than Tesla globally this year. Tesla sales on falling in China. In Europe, Chinese nameplate EVs are gaining market share as Tesla sales fall. For leading companies like BYD, export sales are increasingly important.
Chinese EV buyers are younger than those in the U.S. and Europe. They are more interested in a car’s software and entertainment systems.
Chinese EVs companies are teaming up with China’s large electronics corporations to install “wizzy” electronics and “infotainment” systems in their vehicles. Some see EVs as “smartphones on wheels.” This has created an opportunity for China’s huge tech firms. Huawei, Chinese huge producer of smart phones and other electronics, has teamed up with Chery to become a major EV producer. Xiaomi, sometimes called “China’s Apple,” produces popular high-end cars that compete with Porsche’s Taycan SUV but sells at half the price.
Baidu is a leader in the development of autonomous-driving software for robotaxis. China is testing robotaxis in 50 cities and has more robotaxis than any other country.
With improving engineering and attractive operations, some Chinese EV companies are trying to compete at the top end of the market. These companies intend to compete with top-end cars in the global market.
There is massive overcapacity in gas-powered car production and probably overcapacity in the EV sector. About 100 companies are producing EVs, many of which started production in the last few years.
Collectively, EV companies offer a wide range of models and options. Because of the industrial overcapacity and economies of scale in production, a price war to gain market share has broken out. EV prices start at around $23,000; BYD says they are coming out with an even cheaper model. Profits of the industry leaders are falling. The industry as a whole is probably losing money.
With lower government tax exemption and other subsidies, EV companies are planning on reducing wholesale prices to dealers in 2026. Growth will probably be lower than in the past few years and total financial losses will probably be greater.
China dominates the global supply chain to produce EVs, from mining to mineral processing of rare earth mineral to the production of electric magnets to the production of battery cells.
For reasons discussed below in the sections on demographics and housing, China’s EV industry may not grow, or grow slowly, after it replaces domestic gas-powered car production. Further growth will depend on foreign demand.
Domestic demand growth may be low because:
Extremely low birth rate (far below replacement),
shrinking numbers of labor force age group,
high youth unemployment,
large number of temporary or marginal “gig” workers,
low family formation; wedding are down,
loss of family wealth because of housing market collapse.
China’s electric and hybrid manufacturers have set up, or are in the process of setting up, factories in Hungary, Indonesia, Russia, Thailand, and Turkey. Also, three assembly plants in Brazil. One is in a plant closed by Mercedes and another in a plant closed by Ford.
SOLAR PANELS
Gigantic new solar panel field
China has built the world’s largest solar panel installation on a 10,000 foot high plateau in western China. The area, 162 square miles, is seven times the size of Manhattan. In addition, the country has built a huge wind turbine farm and five dams for hydropower at this location.
The massive amount of new electricity is planned to power new AI data centers and manufacturing. The government plans to build 50% more solar panels here in the next three years. The current capacity of the three sources of renewable energy can generate about 30,000 megawatts. This could provide enough electricity to power 15 million to 30 homes, or enough power for 60-120 million people. When increased by 50%, enough power for 90-180 million people. (By coincidence, this is the amount of energy that OpenAI says it will need to power data centers to develop and commercialize its AI platforms and applications.)
This is part of a national strategy to reduce coal consumption. China, with solar, wind, nuclear, hydrogen, hydropower, batteries and EVs, is also the world’s largest producer of renewable energy and related technologies.
There is a geopolitical consideration. China imports large amounts of oil and natural gas. Much of it comes from the Middle East and passes through the Strait of Malacca, which is controlled by the United States navy.
Keith Bradsher, New York Times,”Why China
Built 162 Square Miles of Solar Panels on the
World’s Highest Plateau,“ October 10, 2026.
Besides massive renewable energy projects at home, Chinese companies are selling low-cost rooftop solar panels abroad. Solar panels and complete kits are produced by private companies. Chinese companies dominate exports to poorer countries. For example, in Pakistan, Chinese solar panel prices have fallen 70% between 2022 and 2024, and unit sales have gone up fives times. Electricity from the national power grid is unreliable, with frequent power outages; also, prices have gone up 50% in the last two years.
Energy now generated from solar panels is greater than energy generated from the unreliable national electricity grid.
Many less-developed countries including Nigeria face a similar situation as Pakistan and are markets for Chinese solar panels and batteries. These relatively cheap, small-scale solar panel systems are also available in Europe.
There will be serious geopolitical consequences for the United States if Chinese technology dominates renewable energy production in countries outside the United States.
In summary, solar panel production meets five goals of the Chinese government:
Reduce dependency on imported oil and natural gas. Reduce domestic coal output.
Develop a new source of economic growth.
Develop a bundle of new technologies, including the critical technology of batteries.
Exports help increase volume of production, drive down unit cost, and increase demand for follow-on sale of batteries.
Sale of solar panels and batteries to other countries is part of China’s geopolitical rivalry with the United States. Both countries recognize that technological competition is a key part of global geopolitical competition.
China continues to make huge investments in all forms of renewable energy. The goal is to greatly reduce reliance on domestic coal and fossil fuel imports. America, under Trump, is pushing for more domestic production of fossil fuels and eliminating subsidies for renewable energy. Off-shore wind turbine projects have been shut down. Through subsidies, volume production and price competition, China is the world’s low-cost producer of solar panels and batteries.
Nuclear Power Plants
China began a plan in 2020 to build 150 reactors by 2035. China is currently building half of the world’s reactors under construction.
China is rapidly expanding its nuclear power, with reports from late 2025 indicating around 27 to 35 reactors under construction, more than any other country, as part of a massive buildout to meet energy demands and climate goals. The government consistently approves new units, aiming for 6-8 new plants annually, positioning itself to become the world’s second-largest nuclear power producer soon. Google AI
Using advanced technology, China’s basic reactor design is based on Westinghouse technology. Westinghouse is owned by Toshiba.
CHINA’S CONTROL OF GLOBAL SUPPLY CHAINS
Besides these advanced final products, China is developing and controlling their entire supply chain, using its superb transportation and distribution infrastructure. China intends to dominate global markets and the supply chain of advanced foreign producers. Some multinational American and European companies have relocated part of their R&D to China.
China also controls part of the physical transportation global supply chain. China is the world’s larges producer of merchant ships and Chinese companies own or manage about 90 ports around the world, including Piraeus and two containers ports on either side of the Panama Canal.
EXTERNAL FACTORS
Exports are rising but are facing higher tariffs and quotas from trading partners, especially the United States. Export growth will probably come from countries in East Asia, South America and Mexico, and Africa if the proposed very high tariffs are implemented. Chinese companies are targeting these regions for new assembly plants, distribution networks, and joint ventures.
Net Foreign Direct Investment (FDI) is probably negative – foreign firms are taking more money out of China than new investment going into China. Also, wealthy Chinese are smuggling large amounts of their wealth out of China.
Like almost all other countries, China runs a yearly fiscal deficit. The amount is opaque because much of it is incurred by city and
provincial governments promoting new factories. Local finances are in deep trouble since revenue is tied to land sales to housing developers and contractors. Total government debt/GDP is estimated to be around 120%, higher than the United States.
POLITICAL CONTROL
Foreign companies don’t vote and Chinese companies are expected to follow Party directives. The government owns or controls much of the financial sector, so it can direct loans to favored companies and favored industries. Local governments often provided land and buildings for new plants. The different levels of government and state-owned banks are the sources of funds and subsidies for startups and expansion in favored industries.
But huge social media and e-commerce companies are not like manufacturing companies; their owners and managers started to act too independently for the Party’s taste. In addition, the Party feared, with some justification, that social media could become an uncontrolled outlet for independent thinking and writing. Even worse, social media could become the outlet for criticism of the government.
In the 2010s, the Party under Xi began to crack down. The most successful and famous entrepreneurs were reigned in. Communist Party cadres were installed in all large companies, with veto power. The government closely monitors the Internet and closes down sites that annoy them. Any dissent or criticism of the government is quickly repressed.
Overriding any economic discussion is that China is a totalitarian state and its political elite will not tolerate any independent source of power or wealth. The Party sees them as an actual or potential threat. All individuals and their behavior are monitored and rated by a social credit system; a low score can have bad consequences.
A member of Communist Party is planted in every large corporation, and many smaller corporations, to watch owners and managers. As a result, many entrepreneurs are scared to make decisions. Many wealthy people want to leave China. Again, a huge amount of wealth is being smuggled out of China.
CHINA’S HOUSING CRISIS
In the past, investment in housing has accounted for about 20% to 30% of China’s spectacular growth.
Housing construction will be a less important source of economic growth, partly because of the massive investment over the last 40 years and the huge number of unsold and empty apartments.
A large part of foreign investment in housing was from Southeast Asians speculating in apartment condos. There are empty apartments held for price appreciation. Many Chinese families own two or more units as a form of savings; China has a small social safety net, especially for retired citizens. The latest estimate (November, 2024) is that the number empty apartments is around 49 million.
Domestic and international investors in empty apartments are now losing money as apartment prices fall. There are about 30 million unsold homes on the market as sales prices fall. Home sales in yuan are the lowest since 2013.
Housing prices continue to fall. This means that the main source of savings of Chinese families is going down in value. This is a contributing factor in the lack of growth in consumer spending.
About 20 million families put down payments of up to 50% on housing that has not been built or is unfinished. Some of these units may never be built. And yes, it was a Ponzi scheme. Many Chinese developers have gone bankrupt. The Chinese government has some small programs in place to limit the damage, worried that the anger may be directed at the government.
AMERICA’S TRADE WAR WITH CHINA
In the first 11 months of 2025, China has set a record $1 trillion trade surplus in goods, despite a large decrease in exports to the United States. Overall exports are up from 2024. Exports to Africa and Southeast Asian countries are up substantially.
How much China has improved its chip technology will be seen by the new operating systems. Huawei is unveiling on its new smart phones. Huawei intends to challenge the operating systems of Google (Android) and Apple (iOS), which are used on almost all Chinese smart phones. Huawei’s new phones are based on advanced chips made in China. As part of the Chinese government’s strategy to become self-sufficient, it is beginning to ban the buying of foreign phones (read Apple) by government agencies. If the trade war intensifies, there will probably be more internal bans on the usage of American chips and smart phones.
This is part of a concerted effort of China to increase its Research and Development. For example, Huawei has completed a new research center for 35,000 engineers. It is ten times larger than Google’s R&D center in Silicon Valley.
Besides domestic companies, responding to Xi Jinping’s exhortation for “high-quality growth,” many foreign companies have increased their R&D in China. They include VW, Bosch, Bayer, AstraZeneca, HSBC, and global pharmaceutical companies. Total corporate R&D spending is now equal to that of Europe. On the other hand, some foreign companies, including Microsoft, are closing their R&D operations in China in anticipation that the trade war between China and the United States will become worse.
The American Treasury Department has circulated a draft “that would ban American firms from investing in AI, semiconductors, microelectronic and quantum computing in China.” (The Economist, “Research developments: China is the West corporate R&D lab. Can it remain so?”, July 20, 2024, 49-50.) Both countries see that future economic growth will depend critically on developing new technology.
For the last few decades, China has sold about $3 worth of goods to the United States for every $1 worth of goods that it buys. That imbalance partly reflects Beijing’s many tariffs and informal limits on imports, as well as an enormous government effort during three decades to replace imported manufactured goods with domestic production.
Sino-American trade has grown rapidly in the past. So the lopsided ratio has translated into a large American trade deficit. But the growth in U.S. deficit from trade with China has slowed down. The deficit has been in the range of $300 billion – $350 billion in the last four years. What has changed is that China’s trade surplus with the rest of the world has gone from near $0 in 2018 to about $450 billion in 2023. Both Asian countries as a whole and the European Union countries now import more Chinese goods than the United States.
The U.S. response is the Inflation Reduction Act to subsidize investments in EVs and battery plants. Supply chain plants are being built in Georgia, Michigan and North Carolina. Construction of Hyundai’s Georgia plant has been suspended as American deportation cops seized and deported 300 South Korean workers. Seeing Koreans being led away in chains has not endeared America in South Korea. Europe, like the United States, is considering higher tariffs on Chinese auto imports. German auto companies are fighting this because many of the EVs they intend to sell in Europe will be produced in China
It is not obvious how higher U.S. tariffs will affect China. In the past, domestic U.S. producers of substitutes for Chinese imports like solar panels have gone bankrupt or not been able to produce enough to hurt Chinese imports. Also, it will be difficult to find substitute sources for many industrial products in other countries. China has a deep, integrated supply network and a superb transportation infrastructure. China could also give subsidies to companies hurt by high American tariffs. Currently (2025), U.S. production of batteries, EVs, robotaxis, and drones is substantially more costly than similar products in China.
The net result might be some increase in U.S. manufacturing, a lower trade deficit with China, and higher prices for many goods in America. But the U.S. will still be very dependent on imports for industrial inputs, solar panels, batteries, and many consumer goods. As discussed above, Chinese companies continue to improve their EVs, batteries and computer chips.
In light of threatened American tariffs on Chinese exports to the U.S., Chinese companies have set up subsidiaries in many other countries, especially in Asia. While this may reduce America’s trade deficit with China, depending on how China retaliates, America’s overall trade deficit will probably not go down very much, if at all.
I doubt if China will accept any trade deal with the United States that they consider unfair. Chinese are aware of Chinese history when China succumbed to foreign pressure and gave up part of its sovereignty. Trump’s bullying tactics might have been more effective in 2017 than now. The Chinese economy is about twice as large, less dependent on importing foreign hi-tech inputs and products, and exports to America are a
smaller percent of total exports, only about 10% in 2025. America’s protectionist trade policies open up opportunities for China increasing trade with other countries.
DEMOGRAPHICS
Demographics Update (August 8, 2025)
China’s slowly decreasing total population masks rapid and large changes in its age distribution.
Between 2021 and 2024, the number of pre-school children (3 to 6 year olds) fell from 48 million to 36 million. The number is expected to fall another 14 million in the next five years as the birth rate of 1.0 is one of the lowest in the world. In contrast, over the same period, the number of people aged 65 and over is projected to rise from 211 million to 256 million, according to UN projections.
China’s population has been shrinking since 2022. This means more deaths than births. This should continue as births remain low and deaths from an aging population should increase.
China’s most serious long-term problem is not U.S. trade policy and tariffs. It is the projection of a huge decline in total population, particularly in labor force age groups.
The latest long-run population projections indicate that China’s current population of 1.4 billion people has peaked and will fall to about 750 million in 2100! China will account for most of the global decline in population for the rest of the century.
China will probably experience a 200 million person decrease in its working-age population by 2050. China is dealing with the large, future decrease in the number of workers through a better educated and trained work force for an advanced hi-tech economy. Two-thirds of people turning 18 now enroll in a university or college. China’s universities graduate about 350,000 mechanical and industrial engineers per year, as well as electricians, welders and other trained technicians. This is eight times the number of mechanical engineers graduated each year in the United States.
It is unlikely that China will allow any substantial immigration in the near future. But China is rapidly increasing the number of industrial robots as part of a major program to automate manufacturing.
Keith Bradsher, The New York Times,
“Army of Robots Gives China Edge in Trade War, “April 24, 2025, Section A, Page 1.
(This article also told of 12 humanoid robots that entered a half-marathon in Beijing; 6 finished.)
China’s population is slowly falling; the yearly reduction will accelerate in the near future. It is also rapidly aging because of below replacement birth rates since the 1970s. Birth rates were below replacement (an average of 2.1 children per woman) during the “one child” period of the 1970s to 2015 was about 1.5. They are even lower now, about 1.1 children per woman. This is one of the lowest birth rates in the world.
The number of babies born each year has dropped by almost two-thirds since 1987.
The number of marriages keep falling. One reason is that the “bride-price” women are demanding is very high. The average “bride-price” has doubled since 2005. This is a function of supply and demand; there are 119 males for every 100 females in marriageable ages. There is a great deal of discussion on social media about what price women should ask for, so women have information when they negotiate with the groom’s family.
Women also demand a high dowry because China has a high divorce rate, higher than the U.S. Women keep most or all of the dowry if divorced.
China has had a relatively young average-age population but the average age is rising very rapidly because of the very low long-term birth rates and an average life expectancy equal to that of the United States. This year China’s median age (half above, half below) will pass that of the United States.
Although China’s total population is failing slowly at present, the age distribution is changing faster. The number of children is going down. China’s working-age population is already shrinking. By around 2050, the decrease in work force age groups since 2012 will be about the size of the current U.S. total labor force (170 million). Or about 25% fewer workers.
The number of Chinese over the age of 60 has been increasing rapidly. China’s over-60 population of over 300 million is already close to the total population of the United States. Projected over-60 population is expected to be around 400 million in 2035 and, by around 2050, the over-60 population is projected to be around 500 million, over 40% of China’s total population.
China has a special problem that could affect future demographics. Chinese youth, ages 19-24, have a very high unemployment rate, probably over 20% and possibly much higher. The government stopped publishing statistics and then came out with a new series with a lower unemployment rate. Colleges graduates in particular are finding it hard to get a decent position; many are unemployed, accepting menial jobs just to earn small amounts of income, or moving in with relatives. The government’s policy is to tell the unemployed youth to “eat bitterness.”
A high percent of its young, male work force are “gig” workers who work part-time or move from job to job. Many, probably most, have moved from rural to urban areas and are unable to get an urban hukou (residency permit). They are permanent second-class citizens, undocumented internal immigrants.
This large “floating” labor force of about 200 million is about 40% of the urban labor force.
In addition to construction workers and temporary manufacturing employees, about 84 million rely on platform-based forms of temporary employment, including ride-hailing drivers and food-delivery riders.
These gig workers may never marry and have children, worsening the aging of China’s population. The government sees them as a possible source of economic and political problems in the future, but has done very little to improve their legal status or provide educational and health services.
This is a clear example of exploitation of the proletariat.
A peculiarity of the Chinese labor market. In China, there is widespread discrimination again hiring anyone over the age of 35. If people cannot establish a career when they are young or are fired when they are 35 or over, they have little chance of getting a comparable or better job or have rising income until retirement. Many companies and government departments will not hire anyone over the age of 35. The number of people over the age of 35 is rising rapidly.
All of these trends will probably affect future demographics and economic growth – lower income for a larger part of the total population, fewer and later marriages, fewer children. This is in addition of a dearth of females because of the past “one child” policy that led to tens of millions of abortions of female embryos and female infanticide.
This will increase the problems associated with urbanization. China is already highly urbanized. Shanghai has four times as many people as New York City. Twelve cities in China have more people than New York City. Over 100 cities have populations of one million or more.
China’s first reaction to these trends has been to slowly raise their low retirement ages over the next 11 years. For men, the retirement age is being slowly raised from 60 to 63. For women, from 55 to 58 for white-collar workers and from 50 to 55 for blue-collar workers. A related reason is that the public pension costs are “squeezing” government budgets. Chinese economists believe that public pension funds will run dry over the next 10 years (sound familiar?). The long-run effect might be slowing down the fall in the size of the labor force as Chinese will have to work more years before retirement.
The Economist, “Sunset Delayed,” September 21, 2024, 38-40.
This policy will be unpopular. Traditionally, families were multi-generational and children (daughters and daughters-in-law) were expected to care for aging parents. But hundreds of millions of the working-age population have migrated from rural areas to cities, leaving their children in the care of grandparents. A rising percent of women in the cities are working. If retirement ages are raised and grandparents in both the cities and countryside have to work longer, there may be less baby-sitting. This might lower the birth rate even more. Again, China has strong age discrimination, so that the older population might have to wait longer between permanent employment and receiving a retirement pension.
A COMPLICATED STORY: CHINESE DEMOGRAPHICS AND HOUSING
Many women now demand a diamond engagement ring; China is the largest market for diamonds. In addition, there are expected male “dowries.” The families of prospective grooms are often expected to buy the married couple an apartment. Some relatively prosperous parents in the past planned ahead and bought apartments for sons at low prices. Since 2015, housing prices doubled and then fell about 20-30% from the top. Still, down payments are about 10 times the average urban wage. So, unfortunate sons cannot marry or they and their families must save for many years for a down payment.
Young men without permanent and high incomes are not desirable prospective husbands.
SUMMARY
Like Japan after their bubble economy collapsed in the 1990s, China is facing adverse demographic trends, the collapse of a real estate bubble, excess manufacturing capacity, and high and rising public debt.
While China’s future demographic path will like Japan’s, China is not like Japan in other respects. The big difference is that China continues to invest in a group of new, cutting-edge technologies which will drive future economic growth and exports. These technologies are related; combinations are leading to new applications like EV robotaxis.
China will continue to be an exporting powerhouse unless tariffs and quotas begin to bite. But there are ways around most restrictions – trans-shipments and building plants in other countries. Because so many of the inputs that the United States and Europe need come from China, tariffs and quotas will probably be selective. Maybe mostly limited to EVs, solar panels and high-end computer chips and software.
The future of China is a race to solve internal, domestic problems and continue to grow the economy through investments in import substitutes, new technology, and exports. In the longer run, the demographic decline plus an aging population present serious problems, although there are possible solutions.
But in the near term, China is a facing a combination of slower growth; high youth unemployment and underemployment including that of recent college graduates; a loss of the total value of savings (wealth) because of the fall in the market value of housing; underfunding of pensions and health care for a rapidly growing number of retired population.
The current regime has rejected all but small increases in China’s pitifully low pensions, which
start at $20/month. The solutions will be more difficult if China continues to have an authoritarian regime for whom control is the main objective.
In the long run, China will have to continue to move away from labor-intensive manufacturing as a source of growth. The huge investment in robotics and factory automation is a step in this direction. This trend may intensify as the long-run demographic trend of fewer workers leads to higher wages. This implies more automation and movement to the information economy, including a large investment in AI and its applications. Also, Chinese companies may be able to move some of their operations to other, lower wage countries, which are the primary source of increased exports. But critically it means innovation; whether China can continue to do this in a regime of political control of entrepreneurs and information is an open question.
For a summary of statistics from many sources and an excellent discussion of China’ current problems, see John Mauldin, “Broken China,” mauldineconomics.com, October 26, 2024.
For excellent ongoing coverage of China, see The Economist at economist.com.
Official Chinese economic statistics have to be used with caution. For a look at the problems with their reported statistics, see
This is a summary and overview of the demographics and population projection essays on this blog (links below). The world is at the beginning of a major shift in population, from large population increases since 1950 to decreasing populations in many countries and, in the long run, in the world as a whole. This historical shift in global and national populations will have a big influence on what happens in the future.
In summary,
·Huge population increases since 1900, especially after 1950.
·Because of a big decrease in birth rates, global population will increase until the 2060s and then start to decrease.
·Some countries are already seeing a population decrease. More will follow in the near future, including the United States. Yearly population decreases will grow larger. At the same time, working-age populations will grow smaller while over-65 population will grow larger.
·These trends will have a big effect on all other changes – economic, political, environmental.
Think of the world as divided into Africa and Not-Africa (rest of the world). Between now and sometime in the 2060s, the increase in population in Africa will be greater than the decrease in population in Not-Africa. From the 2060s to 2100, the decrease in population in Not-Africa will be greater than the slowing increase in population in Africa.
DEFINITIONS AND BIRTH RATE PROJECTIONS
Demographics is the study of populations and how a population breaks down by age, gender, race, and other variables.
There is one concept that is crucial for population projections:
Total Fertility Ratio (TFR). This is the ratio of the average number of children of women in child-bearing ages. For a population to be stable, women must have an average of 2.1 children each. Any smaller number means the population is “below replacement” and may decrease in the future.
The global birth rate (total fertility rate) is now about 2.3, slightly above the replacement rate of 2.1, and falling. How fast it falls depends critically on how fast it falls in India and in Africa.
The global Total Fertility Ratio (TFR) is forecasted to be 1.7 in 2100, well below replacement. Currently, the lowest birth rates in the world, at around 1.0, are in East Asia – China, Japan, and South Korea. Europe as a whole has birth rates almost as low.
A population may have below replacement birth rates and for some time also have expanding population if in the past it had above replacement birth rates, a large percent of its population were children and young adults, and the adult population is experiencing rising life expectancies. Or, the decrease in population is offset by immigration.
Total populations eventually fall, as the number of children fall, the number of adults below 65 fall, and then the number of senior citizens fall. A birth rate below replacement will lead to fewer children. Then it will lead to a smaller working-age population (18-65). And finally, a smaller over-65 population.
GLOBAL POPULATION IN THE PAST
Since the beginning of the Agricultural Revolution (farming and domesticating animals) about 10,000 years ago, demographics meant high birth rates, high infant mortality rates, low life expectancies, and high death rates. The world’s population didn’t change very much until the Industrial Revolution, starting in the late 1700s. Death rates fell faster than birth rates; better health and health care reduced infant mortality rates.
At the same time, much of the world’s population experienced rising standards of living. Better public health reached poorer parts of the world. Urbanization, which lowers birth rates, greatly expanded. Better education, especially of females, is correlated to falls in birth rates. One consequence was longer life expectancies and rising average ages in industrialized countries and then in poorer countries. The age composition of the global population changed, as the average age of the populations in most countries started rising.
During this transition period, from the late 1800s to the present, average life expectancies increased from roughly 30 years to 75-80 years in industrializing countries.
Global population:
1900 – Approximately 1.6 billion people
After World War II, the global population exploded:
1950 – 2.6 billion
2024 – 8.0 billion (November, 2023)
The global population has more than doubled since 1970, going from 3.7 billion people to the current (November, 2023) total of 8.0 billion (UN numbers).
The period from 1950 to 2000 was unusual. Not just in the United States, the global population experienced high birthrates and high population growth rates. In the middle of this period, partly due to more effective and more available birth control, birth rates began declining in the industrialized countries. The growth rate of the world population began to slow.
POPULATION PROJECTIONS
The global population is projected to be:
2064 – 9.7 billion (the peak global population)
2100 – 8.8 billion
By the 2060s, the global birth rate will be below replacement. Over the next 40 years (2025-2065), the world’s population will rise by about 1.7 billion and then over the 35 years after that, decline by approximately 0.9 billion (900 million). By 2100, the global population will have fallen to 8.8 billion.
By 2050, 151 countries (out of 192) are forecasted to have a birth rate lower than the replacement rate (<2.1). 23 countries are forecasted to have population declines greater than 50% by 2100. China’s population is forecasted to decline by 48%, from the current 1.4 billion to about 750 million in 2100.
Compared to the present, Africa is expected to have about 2.2 billionmore people in 2100. The rest of the world is expected to see a decrease of about 1.4 billion people. One billion of the decrease will occur in China (about 750-800) and India (about 250-300). The rest of the decrease will occur mostly in Europe, southeast and southern Asia, and Japan. The US may be at the beginning of the downward population curve if the recent trends of a below (and falling) replacement birth rate and the current decreasein net immigration continue.
About 500 million of the African increase will happen in Nigeria. (See essay in this blog on Nigeria) Nigeria’s population growth will be so great that by 2100 the country may pass or equal China as the second most populous country in the world.
The global population is aging, with the over-65 age group becoming a larger percent of the total. By 2100, there will be 2.4 billion individuals older than 65 years compared to 1.7 billion individuals younger than 20 years.
The industrialized and modernizing parts of the world now have low birth rates – mostly below replacement – and low death rates. Birth rates are also falling in much of the rest of the world.
Declining population is already true in Japan, China and Russia, and is about to be true for most of Europe and much of Southeast Asia.
As the population and the labor force of a country decrease, it is possible that income per capita will continue to rise for a generation or two. But in the long run, income per capita will probably fall.
It is nearly impossible to predict technological and organizational change over the next 25 or 50 years. This will help determine if increases in productivity will counter the decrease in the size of the working population. This raises questions about the role robots in manufacturing and distribution (Amazon warehouses) and AI models in offices will play in the future. Robots are used more in countries with a declining number of employees now or in the near future (Japan, South Korea, and China).
GLOBAL DEMOGRAPHICS
Outside of Africa, the global birth rate is already below replacement but longer life expectancies will lead to continued population growth for one or two generations. Many countries already have or are about to have declining populations.
Countries with over a third of the world’s population and most of the world’s output now have birth rates below or at replacement. They are mostly the wealthy, industrialized countries, including the United States, Canada, Brazil, Western and Central Europe, Turkey, parts of Southeast Asia, Japan, Russia, and China. Collectively, the size of their workforces has stopped growing. India, the exception, has a birth rate that just fell to replacement and will probably continue to fall. This will add another 17% of the world’s population that has a below replacement birth rate.
There are falling birth rates for most of the rest of the world’s population, coming down from very high levels. But total population continues to grow, partly because of lower infant and child mortality rates, public health programs, better medicine, and longer lives in most of the world.
Regardless of what happens to the size of the labor forces in individual countries, the size of the global labor force after around 2100 will start to fall. An important question may be how it is allocated by migration.
GLOBAL FORECASTS
We are now in a period of a slowdown in total population growth rates. Global population is growing at about one percent per year and the rate continues to fall. But the increase in the number of people is large.
Changes in total population may be points on an exponential decay curve. The decline in numbers after achieving the maximum number of people in the 2060s will depend on how fast the African birth rate falls. Countries with birthrates well below replacement and aging populations may experience accelerating decreases in population.
The rate of decline could change with changes in the availability and cost of birth control, anti-aging medical technologies and more available health care for an aging population.
A big unknown is future medical technology that prolongs life expectancies. Technological advances might also decrease medical costs per capita. Regardless of the projections, the fastest growing age cohort in the foreseeable future is 80 years and older.
Countries with birthrates well below replacement and aging populations may experience accelerating decreases in population.
POOR COUNTRIES AND RICH COUNTRIES
Wealthy countries have below replacement birth rates, no growth or declining populations and labor forces, low real economic growth, and aging populations and labor forces. Population will continue to concentrate in cities; the population of a small number of cities will be responsible for technological innovation and economic development. Rural areas will continue to lose population.
Africa and a few poor countries outside of Africa will have the opposite problem. They will have above replacement birth rates for a generation or two. This will lead to high growth rates in labor force age groups and total population. Whether or not this will translate into high economic growth rates is problematic, depending on many other factors. These countries could be a source of large immigration to richer countries.
Many poor countries have poor infrastructure, poor education and health facilities, diseases, parasitic and corrupt political elites and bureaucracies, military coups, and internal violence including civil wars for political control. As an example, the next essay I will send you is a quick look at Nigeria.
All countries will sooner or later face the same challenges: With declining populations and smaller labor forces, will they be able to invest in economic growth and development (innovation and structural change), deal with environmental costs and climate change, and support aging populations?
(DISCLAIMER: MY LAWYER FORCED ME TO ADD THIS)
The posts on demographics contain long-term forecasts. They give the best estimates, given the assumptions. All contain large ranges of uncertainty (standard deviations or uncertainty interval), which is one reason to learn about statistics. Generally, the further out the forecast, the larger the uncertainty interval. It is impossible to forecast major changes in health care and AI technology, immigration laws, and other variables that could change the exponential trends.
This post is a summary of some of the themes of previous posts on demographic and population projections, with an emphasis on how demographics impact economic growth. See bibliography at the end of this post. For a list of all blog posts on a wide variety of topics, see List of Posts by Topicon my blog.
Almost all countries outside of Africa are already facing or will soon face below replacement birth rates. Without immigration, this could lead first to smaller labor forces with greater numbers of retired citizens. Eventually, however, both the number of workers and retired citizens will decrease. During both stages of the transition, there will be issues of how to increase total output, maintain standards of living, and allocate income between the two major age groups. For background, see Global Demographics and Population Projections.
Population and economies can growth even if birth rates are below replacement. But eventually both economic output and real income per capita fall unless countered by migrations, new technology that increase productivity, or organizational, political and societal change. Societies will have to manage these transitions to avoid economic and political crises.
The first country that has started on the demographic declining path for wealthy nations is Japan. The depopulation curve starts with a slow descent, then accelerating. Japan has until 2030 to prepare for the rapid decrease in total population and the labor force age group. For details, see Demographics and Population Projections of Japan.
Other countries – China, countries in Southeast Asia, and countries in Central Europe – will soon face the same demographic trends as Japan.
The countries outside of Africa will have a collective labor shortage; the countries inside Africa will have a collective labor surplus. Wealthy industrialized or industrializing countries with declining populations will have different problems and strategic alternatives than poorer countries that have above replacement birth rates and increasing populations. For details about global population projections and the demographics of these two types of countries, see Global Demographics and Population Projections.
Immigrants into the wealthier countries will be one way to counter a dwindling labor force. Some of the immigrant will come from countries with declining labor forces. Immigrants will be especially in demand in the “service” sector with rising numbers of older citizens needing medical care and other services. In the United States, immigrants, both legal and undocumented, are also crucial for new construction, farm labor, restaurants, and various service and maintenance industries. But until the labor shortage becomes critical, there will be continuing political opposition to immigration.
An aging population plus increased immigration of different ethnic and religious groups may be necessary for economic growth but also a recipe for political conflict. Aging populations tend to become more conservative, less likely to support change, but more in need of immigrant service employees.
Changing demographics will influence the national and global allocation of labor. Decisions about allocation of labor – outsourcing, immigration – will sharpen the conflict between national policies and the global economy. Corporations have different strategies and objectives then national governments.
Changing demographics will influence the mix of supply and demand. In wealthier countries, more of the economic and political decisions will be driven by the increasing population of the elderly, including public support for health care services and biotechnology research. In poor countries, the economic objective will be how to grow rapidly to employ a quickly growing labor force.
There are three substitutes for a country’s shrinking labor force – immigration, investment in innovation and new technology, and organizational innovation and more productive employees. Better educated and trained employees and researchers are crucial for innovation and economic development. The new technologies of robotics and AI may reduce the long-run demand for the human labor force, especially in areas of white collar data processing and analysis jobs, although both will create new jobs demanding a high skill level.
How will governments and societies cope with the triple problems of declining populations, supporting an aging population and the cost of mitigating global warming?
THE ACCOUNTING IDENTITY OF ECONOMIC GROWTH
The accounting identity here is a framework to explore implications of a shrinking labor force for economic growth and development.
An accounting identity says nothing about causality, assumptions or feedback. But it introduces some general issues.
The following accounting identity shows the sources of economic growth:
The economic growth rate (growth rate of total output) roughly equals the growth rate of the labor force plus the increase in labor productivity (output per member of the labor force).
If the labor force numbers are stable, all of the increase in output depends on the increase in productivity. The pressure on productivity is even greater if the labor force numbers are decreasing. So, for example, if a labor force is increasing at about 1% per year and productivity is increasing at about 1% per year, output will increase about 2% per year. If the workforce stops growing, productivity will have to double to 2% to yield the same economic growth. If the workforce were to decrease at 1% a year, as it is in some countries already, productivity would have to increase 3% a year to achieve 2% economic growth. This is a high productivity growth rate for a developed economy.
Declining population, declining labor force and some increase in productivity could lead to higher standards of living (real income and consumption per person). But the demographic trends, without other changes, might lead to less innovation and lower or negative rates of productivity growth.
Low rates of productivity growth with accelerating rates of labor force and population decline could also lead to less output (negative growth rates) and declining standards of living.
LABOR SUBSTITUTES
A member of the industrial/information labor force today is better educated, with new skills, working with better capital equipment and IT inputs, compared to a member of the labor force a generation or two ago. The difference should show up as an increase in labor productivity. Increase in total factor productivity is due to innovation in capital equipment – including information technology – combined with employees with new skills and knowledge. Other factors included economies of scale, network effects, public investment and organizational innovation.
Capital investment, technological innovation, and organizational change are substitutes for labor. The composition of the declining labor force will change.
2-3% sustained productivity growth is unlikely without a dramatic impact from AI-augmented robots, AI-augmented business software, advances in new energy and production processes, and, possibly, quantum computing. Unit costs and prices are falling for a wide range of new outputs – EVs, solar panels and systems, energy from other renewables, hydrogen, large batteries and carbon capture.
Changing demographics will help direct the actual products and services of the new technology.
Some white-collar, middle-class jobs will be eliminated and replaced by software like AI, which will become more sophisticated in the future. AI programs are already able to analyze large quantities of specialized data and quickly reach conclusions and devise strategies. While AI and other new technologies will create technology jobs there is a fear that for the first time in the history of the Industrial Revolution, more jobs may be eliminated than created by new technology. Labor-intensive manufacturing and white collar data processing may be hit the hardest. One possibility is that high-wage, advanced technology systems may replace labor-intensive economic processes in low-wage countries. The economic disruption may be less if matched by a decreasing number of workers.
The new information technologies may primarily affect white-collar jobs, unlike past industrial technologies that mostly affected blue-collar jobs.
There will possibly be a greater importance of a globally connected and managed economy. Multinational companies will develop and control technology and globally allocate labor and other inputs. This might increase conflicts between the objectives of multinational companies and national governments.
DEMOGRAPHICS AND DEMAND
Demographics also influence the demand side of economies. Americans spend more money on pet products and services than on childcare. In South Korea, which has the lowest birth rate in the world, consumers spend more money on “baby carriages” for pets than for human babies.
Companies use demographic information when planning marketing and advertising strategies. Changing demographics are analyzed when developing new products, changing product mix, and segmenting markets. The explosion of detailed demographic information about smaller and smaller segments, down to individuals, combined with online marketing technology and almost real-time data analysis algorithms, is revolutionizing marketing and advertising.
Companies are using this data and analysis to fine tune pricing strategies such as price discrimination and dynamic pricing.
Autonomous driving vehicles and robotaxis should find a huge demand from older Americans, the number of whom are expected to double in the next 20 years.
IMPLICATIONS FOR ECONOMIC POLICY
In the past, there was a correlation between industrialization and secular increases in population. There were also national and international allocation of labor. A large number of people left Europe between 1815 and 1914, especially at the start of the second stage of the Industrial Revolution around 1870. An estimated 60 million people emigrated from Europe. They opened up new agricultural lands in other countries and provided some of the labor force for the new factories, mines, and railroads. The United States also experienced a large immigration of Latin American and Asian groups, starting in the 1960s. There was also large internal migration within countries. At the same time, the Industrial Revolution created new economic groups including industrial entrepreneurs, industrial work force, investment bankers, and a new technical and managerial middle class. This led to political conflict between traditional elites and the new groups, fights for political power and status. This also led to a call for economic and political reforms – the Populist and Progressive movements around 1900.
The standard economic models demonstrate that the demographic changes we saw over the last 200 years are a function of economic growth and development. Industrializing, urbanizing populations have declining birth rates. The experience of the poorer regions of the world tends to indicate that these demographic changes can occur even without economic growth and development because of imported modern health and the spread of primary education. The challenge for low and middle-income countries now is the danger of “getting gray before getting rich.”
Although wealthier countries concentrate on the costs of their rapidly growing retired population, for most of the world the critical question over the next two generations will be how to accelerate economic growth to provide jobs and opportunity for the growing working age population. The related challenge is how to improve education, training and economic opportunity to raise standards of living now to provide the resources for the aging population in the future.
For the entire world, these objectives are complicated by how to pay for the social costs of past industrialization and environmental degradation, and the future costs of climate change.
Over the next 40 years, the global population is expected to increase by 1.7 to 2.0 billion people, despite below replacement birth rates in most of the world. Although wealthier countries will concentrate on the costs of their rapidly growing retired population, for much of the world the critical question over the next two generations will be how to accelerate economic growth to provide jobs and opportunity for the growing working age population. Part of the challenge is how to improve education, training, and economic opportunity to raise standards of living now to provide the resources for the aging population in the future.
For the entire world, these objectives are complicated by how to pay for the social costs of past industrialization and environmental degradation, and the future costs of climate change. This will be a major part of future investment and a possible source of income and employment, especially for the technically educated.
In the long run, the positive side of declining global population may probably be less demand for resources. It depends on fewer people versus higher standards of living and changing preferences. Combined with substitute technology, global warming might slow down or stop. Climate change might not have quite the devastating effects trend projections indicate.
The advanced and industrialized countries with stable or declining populations and labor forces will have to consider the following:
Economic growth will have to come from large increases in productivity (output per member of the workforce). To achieve this, and also meet social welfare costs, most countries and regions such as the European Union will have to make changes in economic policies. Particularly disruptive and contentious will be the adoption of automated factories and offices. On the positive side they will increase labor and total productivity; on the negative side they will probably eliminate a large number of existing and future jobs. Retirement ages and requirements might change, depending on political resistance. Tax laws will have to change.
Even in the United States, a large increase in retirement age populations is leading to potential underfunding of public and private pension funds. Taxes to fund public pension funds are rising, both in amount and as percent of federal, state and local budgets. Despite this, unfunded liabilities – promised future benefits not covered by projected future revenue – are also rising. The $300 billion/year deficit in social security funding after the trust fund runs out in 2034 will probably be paid for by an increase in general government expenditures.
The United States is already experiencing large yearly fiscal deficits and a very large and rapidly-rising national debt. For the present and future impact of these trends on federal government budgets, see
Multinational corporations will develop and adopt the new technology. Countries that do not have quality education, invest in public infrastructure, fund scientific research, encourage innovation and change economic incentives will not be able to attract foreign and domestic investment and compete in the global economy. And their best educated and most motivated people may emigrate.
On the other hand, poor countries with decent transportation, energy and communication infrastructure will probably attract foreign investment. Real wages of at least part of the labor force will rise.
Attitudes towards immigration might change from the current restrictive policies of some countries. Attracting “human capital” will be just as important as attracting investment capital. Trans-border movement of people will increase. New national, regional and international agreements will have to be negotiated. Remittances back to the home country will be a more important part of the economy of many countries and global capital flows.
Attitudes about work, labor laws, retirement and retirement ages will change. The benchmark age of 65 was arbitrarily set by Bismarck almost 150 years ago when a very small percent of the German population lived that long. When the United States adopted Social Security, life expectancy was 56 years. The life expectancy of America’s younger workers is already around 80 years.
The Japanese government and elites seem to have accepted declining population, slow (if any) economic growth, social stability and rising per capita income. They are increasing immigrant labor but there is a limit. They will export capital, earning income from overseas investments. They will outsource production of Japanese companies and export manufacturing technology, including robots. Whether all industrialized, wealthy countries can adopt the same policies at the same time seems unlikely.
What is uncertain is whether or not the Japanese government can continue to fund domestic expenditures by running large deficits. Global interest rates were low until 2022. This assumes that Japanese are willing to lend their savings to the government. Maybe part of an implicit social contract that the money will be spend on services for the elderly.
Other countries facing a “Japanese future” do not have the resources (per capita income and tax base) that Japan has. Many other countries do not have the political and cultural stability that Japan has. Hardly any country realizes this is soon going to be their number one domestic problem.
Countries are already facing the domestic problem of needing more immigrants to augment the declining labor force in the face of rising opposition against immigration. Without immigration, some countries will be facing declining output and lower standards of living. This will probably increase domestic anger and stresses. Rather than Japanese stability, there will be further instability fueled by increasingly shrill populist, nativist politicians.
More people will see they are living in a “zero-sum” country where more domestic resources will have to be allocated to a rapidly increasing older population It could be that political battles will be fought over age-based “income inequality.”
If taxes on the working population go up, this might further discourage economic development (innovation and risk-taking) and growth. The exception may be for products and services aimed at senior citizens.
Demographics are heavily influencing the areas of investment in wealthy countries; these sectors will drive future economic growth. Three current active areas of research and net investment are robots and AI (reaction to declining workforce), autonomous driving and robotaxis (aging population) and biotechnology (aging population).
How will governments and societies cope with the triple problems of declining populations, the cost of mitigating global warming, and supporting an aging population? With dysfunctional societies and governments, large and growing budget deficits and national debts, opposition to immigration, on top of existing political, ideological and economic problems?
The solutions may have to be global. This suggests increasing conflict between national governments (and their power elites) protecting privileges, national identity and sovereingty. This appears to be happening in the European Union. Maybe national governments can by replaced by international organizations whose members are not national governments. Some possible alternatives might be multinational corporations and privately-funded NGOs.
Fighting global warming, especially reducing the burning of fossil fuels, may pose an economic threat to poor countries dependent on “extractive” industries. Developing and poor countries whose economies depend on exporting raw materials – fossil fuels, minerals, agricultural goods – may have a particularly difficult time.
Increasing population and rising real income in emerging economies, especially in Asia, are increasing the demand for energy. A dramatic increase in the number of cars in Asia is the main reason for the continuing increase in global demand for oil. Increased demand for electricity is being partly met with new power plants burning fossil fuels. For at least another generation, these trends will make it difficult to meet global goals to drastically slow down or stop global warming.
DEMOGRAPHICS AND DEMAND
Demographics also influence the demand side of economies. Americans spend more money on pet products and services than on childcare. In South Korea, which has the lowest birth rate in the world, consumers spend more money on “baby carriages” for pets than for human babies.
The large increase in the Hispanic population in the United States has created a demand for new types of food and restaurants, new source of popular music, Spanish language TV and radio, bi-lingual teachers, imported beer, shifts in airline travel, and higher income remittance services. Chili is the go-to food at many Super Bowl parties.
Companies use demographic information when planning marketing and advertising strategies. Changing demographics are analyzed when developing new products, changing product mix, and segmenting markets. The explosion of detailed demographic information about smaller and smaller segments, down to individuals, combined with online marketing technology and almost real-time data analysis algorithms, is revolutionizing marketing and advertising.
Companies are using this data and analysis to fine tune pricing strategies such as price discrimination and dynamic pricing.
An aging population has increased demand for health care, retirement communities, RVs, leisure activities such as cruises, robot companions (in Japan), and reverse mortgages. Autonomous driving vehicles and robotaxis should find a huge demand from older Americans, the number of whom are expected to double in the next 20 years.
South Korea has the lowest birth rate in the world. Sales of “baby carriages” for pets is greater than sales for human babies.
DEMOGRAPHICS AND SUPPLY
If there are labor shortages, the result may be larger salary increases. Corporations may then step-up investment in labor-saving technologies, especially if immigration in the wealthier regions is limited by the political backlash.
The shortage of workers may accelerate the development of robotics and AI to substitute for workers. Economic growth will depend more than in the past 250 years on economic development, innovation, new technology and productivity increases than on population and labor force growth. The quality of workers – their education, skills and knowledge – will be more important than their numbers.
Demographics will change attitudes about retirement, immigration, employment and unemployment, automation, work and leisure, and economic growth. Retirement programs may be especially strained as the ratio of retired people to working people goes up.
DEMOGRAPHICS AND FOOD PRODUCTION
Demographics is interacting with climate change in another important area – food production. Many scientists believe the most serious effect of climate change will be its impact on food production.
Global warming and more extreme weather events will make it more difficult to expand food production using current technology. As in other areas, trend projections can be changed by the development of new technology such as drought-resistant strains of grains.
The global population will include about 1.7 to 2.0 billion more people between now and the 2060s. The challenge here is how to feed them, on top of rising food consumption per capita in emerging economies and possible negative effects of rising temperatures on food production, especially in tropical areas.
Technology is a substitute for using more land. Yields per acre have gone up dramatically in the last 75 years. In the U.S in the last 100 years, tractors eventually replaced about 23 million horses and mules. About 60 million acres of cropland planted to feed the horses and mules were freed up. Farms became larger and reduced the number of workers needed to produce food. (The Economist, “A Short History of Tractors in English,” December 23, 2023, 20-21.)
Expanding agriculture, and highly productive modern agriculture, are now a threat to the environment and a cause of climate change and environmental degradation. Examples are the burning of tropical forests, depletion of aquifers, and heavy use of fossil fuels to run machinery and produce nitrogen fertilizer and farm chemicals.
Food producers in industrialized areas may find that declining populations mean lower sales. But exports to poorer regions with increasing populations may rise.
SPECULATIONS AND SUMMARY
Static or declining labor forces outside of Africa mean economic growth will mostly depend on increases in productivity. To counter demographic trends, technological innovation leading to high rates of productivity growth will be necessary to increase standards of living (real income per person).
Rising population in poor countries make high rates of economic growth both pressing and difficult. Emigration pressure from poor regions of the world will probably increase unless there are high rates of economic growth in poor countries.
Most of the world’s population increase will take place in cities and surrounding metropolitan areas, creating even larger massive urban areas. Large urban areas are increasing rapidly in poorer countries.
It is nearly impossible to predict technological and organizational change over the next 25 or 50 years. This will help determine if increases in productivity will counter the decrease in the size of the working population.
Demographics interact with global economic and environmental trends. More people mean more food and more consumption products and services, which means more energy and technological inputs. At the same time, new technology must reduce carbon-emitting energy and production processes.
BIBLIOGRAPHY
DEMOGRAPHICS AND ECONOMICS
I believe that projections and related analysis of demographics should be the starting point of any long-range planning. There is time to implement strategies that mitigate the probable negative impact of these trends. For the data, see
The classic book on colonial immigration is David Hackett Fischer, Albion’s Seed. For a much shorter study of colonial American immigration, and an introduction to some long-term consequences, see
For a case study of a country (multi-national empire) undergoing industrialization, internal migration, the rise of new classes, and heightened social and political tensions, see
Japan gets special consideration because it is further along the demographics declining population curve than any other large country. It has the oldest population (highest average age) in the world. It has one of the world’s lowest birth rates. Unless there are major changes in healthcare technology, immigration, public policy, and birth rates, most industrialized countries will follow Japan down the path of declining and aging populations, and smaller labor forces.
Japan’s demographics and immigration have become major political issues. In the July 2025 elections, two right-wing parties made substantial gains against the long-ruling Liberal Democracy Party (LDP). Two of their main issues were the rapid rise of immigration and the repeal of a 10% consumption tax used to pay for the rising costs of supporting the aged. Both parties appealed to young voters. The LDP has nominated a candidate for prime minister who also takes a hard line on immigration.
PROJECTIONS
Japan’s current (2024) population is around 122 million people. This is the 15th year of population decline, down from a high of 128 million. The yearly decreases so far have been small, both in numbers and as a percent of the total. This is expected to continue until 2030. Then population decreases are expected to accelerate to a population of 104 million in 2050 and 87 million in 2070. At the end of the century, Japan’s population is projected to be 60-65 million people, about half its current size.
The high dependency ratio (the number of elderly divided by the number in working age groups – 46%, the highest in the world) is expected to rise to about 70% in 2050, about 75% in 2070 and about 80% in 2100. Not everyone in the working age group is in the labor force. Thus, by 2100, there will be almost one Japanese over 65 for every employee in the labor force. Government budgets will find it increasingly difficult to raise tax revenue to meet the rising social costs of an aging society.
Figures are from The Economist, “Japan’s economic troubles offer a glimpse of a sobering future,” December 5, 2019.
Japan has one of the lowest birth rates in the world at 1.2 in 2023. Also in 2023, the number of deaths was twice the number of births.
Japan has the world’s oldest population, both as measured as average age and with the highest percent of residents over 65.
LABOR FORCE AND FUTURE ECONOMIC GROWTH
Over the past 20 years, Japan’s working-age population has declined by more than 10 million workers, about 14% of the workforce. The current labor force (age group 15-64) is 73 million. By 2050, Japan’s working-age population is expected to fall to 53 million. (U.N. World Population Prospects 2022) In 2100, the labor force age group is expected to be about 32 million, about 40 million less than the current size.
Japan’s 65 and older population of 37 million is about 25% of the total. As early as 2050, about 40% of the adults will be over 65. Surprisingly, the number of Japan’s elderly is already near the projected maximum.
Current statistics from Japan’s Internal Affairs Ministry, July 24, 2024.
Japan admitted few immigrant workers in the past to increase its labor force but the yearly number has been rising, up 330,000 in 2023. In 2025, there were 3.8 million immigrant workers in Japan. This was over 3% of its labor force. Most are on short-term or work visas (Japan calls them “trainees”) and are not expected to stay. Japan rejects 99% of applications for asylum. Under current law, it is very difficult for immigrants to become citizens or permanent residents.
In Japan, the labor force and the population are decreasing at about 1% per year. Productivity is increasing at about 1.3% per year, giving economic growth of 0.3% per year. But because of decreasing population, output per person is increasing at about 1.3% per year, or about the same as in the U.S. Growth rates are much lower but the increase in output per person is about the same. This may be one reason there is very little call for any economic, political or social reform in Japan despite almost no economic growth. And this has been going on since the 1990s. But the demographic trends may increase tensions between younger workers and retirees.
Japan’s real GDP has been basically stagnant over the last 25 years. Without structural changes to Japan’s political and economic system, Japan’s real GDP in the future will grow slowly at best and eventually decline along with its labor force and population.
As the size of the labor force decreases at a higher rate, and faster than the older age group, it is likely that output per capita will start to decrease.
THE STRUCTURE OF THE JAPANESE LABOR MARKET
The number of employed Japanese has not fallen as much as the decrease in the number of people in the prime labor force age groups. Until recently, this has been due to the increased participation rates of women in the labor force. But the high current female participation rate suggests little if any increase in workers from this past trend.
While female employment rates are high, over 50% of female employees hold part-time positions as seasonal or temporary workers. This means they are not covered under lifetime employment or job security guarantees. Many full-time female workers are classified as temporary to avoid giving them lifetime employment protection. As a group, female workers are probably underemployed.
As in other countries, employment does not stop at retirement age.
In Japan, as in the United States, many people over retirement ages own or work in small businesses. So the numbers in the prime working ages do not coincide with the number of employees.
Japan’s retirement age is 60, although older workers can request to work until they are 65. Many retired Japanese buy or work in small, local businesses such as noodle shops, small grocery stores or other kinds of small stores to supplement public or private pensions. Over 1/2 of Japanese aged 65-69 and more than 1/3 aged 70-75 are employed to supplement small retirement benefits. The percent falls to 12% for over-75. There are about 22 million in the over-75 category. Over-75s in Japan is about the average of over-65s in industrialized countries.
The Economist, “Japan’s 2025 Problem,” in The World Ahead
2025, 38.
As more people work beyond retirement age, countries will have to reassess retirement benefits and taxes on the elderly.
The Japanese government projects that social-security costs, including pensions, will increase by 60% between 2025 and 2040. A change in the pension system, probably to increase pensions, is scheduled for 2025.
Over 1/3 of the total foreign workers are from Vietnam, China or the Philippines. They tend to work in manufacturing or construction. Many recent immigrants come from Nepal or Myanmar. There is a lack of Korean workers. Japan is now attempting to attract foreign employees with technical skills or higher education.
About half of Japanese employees are between 45 and 54 years old. This indicates that about half of Japan’s current labor force could retire in the next 20 years.
Japan’s unemployment rate is low, between 2% and 3%. There is much discussion about companies finding it hard to hire as many employees as they would like. Government ministries are concerned about a national labor shortage that can only get worse. This would probably contribute to low economic growth in the future.
A peculiarity about the Japanese labor market. The definition of unemployed is more restrictive than in other countries. No one knows what the unemployment rate would be if Japan used the American definition.
The low unemployment rate, a slight decrease in the number of employed Japanese and the labor shortage, combined with higher inflation rates, are putting pressure on wage rates. In 2023, the average wage increase was around 5%, which is high for Japan. Wage increases might continue.
The overall impression is that the Japanese labor market is not very flexible and that workers tend to be less mobile than they might be under different rules and regulations. This may also be obstacle to raising labor productivity and a barrier to higher economic growth in the future.
JAPAN AS A MODEL – OLD AND RICH
Japan might serve as a model for future demographics of other countries in two different ways. One is as a model for countries with a high per capita income. The other is for countries that have a lower, often much lower, per capita income but are aging rapidly. This includes China and most of the countries of east and southeast Asia. They will grow old before they grow rich.
Most of the countries in east Asia, including China, have a birthrate equal to or lower than Japan’s. They are on a similar demographic curve, only a little behind. The difference is that Japan is much richer, with a substantially higher income per capita. If managed right, Japan has the resources to pay for adequate levels of support for its increasing numbers of senior citizens. The other countries will age before they achieve per capita incomes anywhere near Japan. This will probably put a greater strain on their public finances and they will not be able to provide adequate health and services support for their aging populations.
In economic theory, deficit-financed government spending is expected to make up for weak private consumption and domestic investment spending to ward off deflation and recession. In the future environment, however, demographics can overcome aggressive monetary and fiscal policy to stimulate economic growth. These policies have already failed in Japan. Zero interest rates on public debt, large budget deficits, high levels of government infrastructure spending and the highest national debt/GDP ratio in the world have not improved very low economic growth. A current (2025) rise in inflation rates and wages will put further strain on the Japanese economy.
The large budget deficits are financed by borrowing much of the country’s household savings at near zero interest rates. Japan’s central bank has just raised its equivalent to the Fed funds rate to 0.25%. Other central bankers are not impressed.
There is no chance of balanced budgets in the future. A rise in interest rates would make Japan’s financial problems worse.
Domestic demand is weak even though unemployment is low. Rather than raise wages, Japanese companies export manufacturing to other countries, especially China and other Asian countries. The is accompanied by substantial investment outside of Japan.
Japanese companies are starting to substitute robots for workers in Japan. Japan expects to greatly increase its use of robots, partly in health care services.
An aging population contributes to social and political resistance to structural reforms. The dominant political party substitutes government spending and subsidies, combined with appeals to Japanese traditions, for reforms that might threaten social stability. But there is a political backlash among young voters against the dominant party that they feel represents the interest of older voters.
All of this is before the economic costs of climate change and global warming. Japan in the past has suffered from devastating earthquakes. A recent tsunami destroyed a nuclear power complex.
HOW JAPAN IS DEALING WITH DECLINING LABOR FORCE
Japan is admitting foreign workers to increase its labor force. There are now about 3.8 million foreign workers, about 3% of the labor force. Foreign workers, as in Saudi Arabia, the United Arab Emirates and Singapore, are mostly segregated from the locals. Immigrant workers have no citizenship rights and can be deported at any time.
If Japan makes up the decrease in the size of its labor force with foreign workers, then by 2100 foreigners will make up about half of Japan’s workers.
Japan is a major producer of robots but the number of robots as a percent of employed workers is below China and South Korea but above other industrialized countries. This percentage (robots per 1,000 workers) is expected to rise. Japan is using some of its robots to provide services and companionship for senior citizens.
CONSEQUENCES OF JAPAN’S DEMOGRAPHIC DECLINE
Small number of children
The projection for Japan is that in 2100 there will be five times as many senior citizens over 65 then children aged 0-14. Children will make up less than 10% of the total population. No one seems to be thinking about the social and psychological consequences of this trend. Importing children for adoption? Surrogate mothers from other countries? Robotic pets and children as substitutes? (No joke – there are already robotic dogs and ponies.)
Continued cultural isolation?
Japan has been the most successful country in segregating its culture and moral values from outside influence, first as an island closed to outside influences (1600-1850s) and even now in the global communication world. Despite surface similarities to other modern economies and cultures, Japan remains opaque to outsiders. This might make it difficult to attract permanent immigrants and integrate them into Japanese society.
More outmigration of Japanese?
As the dependency ratio increases, putting a larger tax burden on working Japanese, it is possible that more Japanese will emigrate. One way might be to work for the overseas operations of Japanese corporations. Or join the Japanese communities in other countries such as Brazil or the United States. Or imitate the strategies of wealthy Chinese who are planning to leave their country. This will further decrease the number of births, the size of the labor force and the tax base.
Family vs. state care of the aged
With more Japanese not having children, the cultural imperative of children supporting elderly parents will be impossible to fulfill for many families, putting more of the burden on the state.
Part of the global economy
It is hard to see what future role Japan will play in the global economy besides as a source of financial capital. Japan might be relatively less important in the future. Already, Japan is not particularly innovative. The country is not a leader in most new tech industries – mostly robotics companies, a few pharmaceutical companies, some legacy technology in consumer electronics and online entertainment. Japan has already outsourced much of its manufacturing to other Asian countries, particularly China.
Global population has more than doubled since 1970, going from 3.7 billion to the current (November, 2023) total of 8.0 billion (UN numbers). The Lancet long-term projection is that world population will peak around 9.7 billion in the 2060s and then begin to decline, reaching around 8.8 billion people in 2100.
In the most recent United Nations projection (2024), global population is expected to peak at about 10.3 billion sometime in the 2080s and then fall to 10.2 billion in 2100.
By 2030, 1.4 billion people will be over the age of 60, with low- and middle-income countries accounting for 80% of older populations. About 25% of the total will be in China. This number is equal to China’s or India’s total population.
Compared to the present, Africa is expected to have about 2.2 billion
more people in 2100. The rest of the world is expected to see a decrease
of about 1.4 billion people. One billion of the decrease will occur in
China and India. The rest of the decrease will occur mostly in Europe,
southeast and southern Asia, and Japan. The United States and Latin
America (because of increasing population in Mexico) will see little
change. But due to recent changes in net immigration, the United States will probably see zero population growth by about 2031 (recent CBO projection) and then slowly decreasing population.
Nigeria’s population growth will be so great that the country will pass China by 2100 as the second most populous country in the world.
China has reached zero population growth. Between now and 2050, 43% of the world’s population increase will be accounted for by only five countries – India, Nigeria, Congo, Ethiopia, and Pakistan. India’s population is expected to peak in the 2060s and then gradually decline.
Europe has the oldest average (median) age. Its population began shrinking in 2020. In 2050, its population will be about 40 million people less.
The following is the summary in the Lancet study.
The global population is projected to peak in 2064 at 9·7 billion people and decline to 8·8 billion in 2100. Findings also suggest a shifting age structure in many parts of the world, with 2·4 billion individuals older than 65 years and 1·7 billion individuals younger than 20 years globally in 2100. By 2050, 151 countries (out of 200) were forecasted to have a TFR lower than the replacement level (TFR <2·1), and 183 were forecasted to have a TFR lower than replacement by 2100. 23 countries, including Japan, Thailand, and Spain, were forecasted to have population declines greater than 50% from 2017 to 2100; China’s population was forecasted to decline by 48·0% to around 750 million.
DEFINITIONS AND BIRTH RATE PROJECTIONS
Demographics is the study of populations and how a population breaks down by age, gender, race and other variables. In this post, I will concentrate on trends and forecasts of the future population of the entire world and by regions and countries. Other posts concentrate on Japan and the United States in greater depth.
There are two concepts that are crucial to population projections:
Total Fertility Ratio (TFR). This is the ratio of the average number of children of women in child-bearing ages. For a population to be stable, women must have an average of 2.1 children each. Any smaller number means the population is “below replacement” and may decrease in the future.
The global birth rate (total fertility rate) is now about 2.3, slightly above the replacement rate of 2.1, and falling.
The global Total Fertility Ratio (TFR) in the Lancet study is forecasted to be 1.7 in 2100. By 2050, 151 countries were forecasted to have a TFR lower than the replacement level and 183 countries (out of approximately 193 countries) were forecasted to have a TFR lower than replacement by 2100.
A country may have below replacement birth rates and for some time also have expanding population if in the past it had above replacement birth rates, a large percent of its population were children and young adults, and the adult population is experiencing rising life expectancies. Or, the decrease in population is offset by immigration.
For Europe, the birth rate went below replacement in the 1970s and population stopped growing in 2020. For China, an extremely low birth rate started in the 1990s (one child policy), never recovered even when the policy was abandoned. China’s population probably peaked in 2023.
Dependency Ratio. This is the ratio of the age categories (usually children plus over 65) to the working-age population. In aging societies, it is often the ratio of 65 and older to the working-age population.
MAIN SOURCES OF POPULATION PROJECTIONS
Until 2020, the standard source of long-run population projections was United Nations Population Division of the Department of Economic and Social Affairs, “World Population Prospects 2024.”
A new set of projections was published in Lancet in 2020:
Stein Emil Vollset, et al, “ Fertility, mortality, migration, and population scenarios for 195 countries and territories from 2017 to 2100: a forecasting analysis for the Global Burden of Disease Study,” Lancet, 2020, VOlume 396, ISSUE 10258, 1285–306.
It seems to me that the methodology use by the Lancet studyis preferable to the United Nations study. Lancet authors’ explanation of their methodology is quoted in the appendix.
The Lancet projections, based on trends into the 2010s, may be too high.
INTRODUCTION
The posts on demographics contain long-term forecasts. They give the best estimates, given the assumptions. All contain large ranges of uncertainty (standard deviations or uncertainty interval). Generally, the further out the forecast, the larger the uncertainty interval. It is impossible to forecast major changes in health care technology, immigration laws and other variables that could change the exponential trends.
With low birth rates in many parts of the world, an “exogenous” (outside) event like Covid or the war in Ukraine can affect intermediate (2050) or long term (2100) projections for an individual country, region, or the entire world.
Over the last few years, there has been major changes in global demographic forecasts. Generally, they have forecasted slower rates of growth, earlier dates for maximum population (2060s), and shrinking population from maximum population to the year 2100.
GLOBAL POPULATION
Since the beginning of the Agricultural Revolution about 10,000 years ago, demographics meant high birth rates, high infant mortality rates, low life expectancies, and high death rates. Until the Industrial Revolution, starting in the late 1700s. Death rates fell faster than birth rates; better health and health care reduced infant mortality rates.
At the same time, much of the world’s population experienced rising standards of living. Better public health reached poorer parts of the world. Urbanization, which lowers birth rate, greatly expanded. Better education, especially for females, is correlated with falling birth rates. One consequence was longer life expectancies and rising average ages in industrialized countries and then in poorer countries. The age composition of the global population changed, as the average age of the populations in most countries started rising.
During this transition period, from the late 1800s to the present, average life expectancies increased from roughly 30 years to 75-80 years in industrializing countries.
After World War II, the global population exploded:
1900 – Approximately 1.6 billion people
1950 – 2.6 billion
2000 – 6.1 billion
2020 – 7.7 billion
2024 – 8.0 billion (November, 2023)
This spectacular increase in population, combined with equally spectacular increases in energy-intensive production and consumption, has contributed to the current global warming crisis. This is more amazing because the earth was in a long-term, gradual cooling cycle. For an excellent book that explains the science and history behind long-term climate cycles, see Peter Brannen, The Story of CO2 is the Story of Everything: How Carbon Dioxide Made Our World, 2025,
Again, the Lancet global population projections are:
2064 – 9.7 billion (the peak global population)
2100 – 8.8 billion
The period from 1950 to 2000 was unusual. Not just in the United States, the global population experienced high birthrates and high population growth rates. In the middle of this period, partly due to more effective and more available birth control, birth rates began a rapid decline in the industrialized countries. The growth rate of the world population began to slow.
The industrialized and modernizing parts of the world now have low birth rates – mostly below replacement – and low death rates. Birth rates are also falling in much of the rest of the world. One factor that is seldom discussed is that birth rates continue to fall in countries that are already at below replacement. One example is the United States.
Declining population is already true in Japan, China and Russia, and parts of central and eastern Europe and much of East Asia (including Japan, Taiwan, and South Korea). European countries will see 30-50% decreases in the long run.
It is important to remember, but seldom discussed, that a projection of declining population or shrinking labor force to 2050 or 2100 does not mean that the decreases stop in those years. These are points on an exponentially declining curve. Decreases in total population eventually fall, as the number of children declines, the number of adults below 65 years of age fall, and then the number of senior citizens fall.
This assumes no technological or attitudinal changes leading to higher number of births, that a higher percent of heathier seniors will not work longer or retire later, that projections of longer life expectancies are not dramatically higher. Also, no speculation about the future possibility of massive migration, the long-term effects of global warming and climate change, or changes in retirement ages, laws, and programs. No speculation on when the research and innovation in health care technology will become widespread.
As populations and the labor forces of a country decrease, it is possible that income per capita will continue to rise for a generation or two. But in the long run, income per capita will probably fall.
Some of the more speculative projections are that a world of robots and AI may replace some or much of the future declining labor force and increase productivity. If so, it may be that a shrinking, aging population may also have a rising standard of living. But it is nearly impossible to predict technological and organizational change over the next 25 or 50 years.
GLOBAL DEMOGRAPHICS
Outside of Africa, the global birth rate is already below replacement but longer life expectancies will lead to continued population growth for one or two generations. About 43 countries already have declining populations.
Countries with over a third of the world’s population and most of the world’s output now have birth rates below or at replacement. They are mostly the wealthy, industrialized countries, including the United States, Canada, Brazil, Western and Central Europe, Turkey, parts of Southeast Asia, Japan, Russia and China. Collectively, the size of their labor forces has stopped growing. India has a falling birth rate that just fell below replacement. This will add another 17% of the world’s population that has a below replacement birth rate. There are falling birth rates for most of the rest of the world’s population, coming down from very high levels. But total population continues to grow, partly because of lower infant and child mortality rates, public health programs, better medicine, and longer lives in most of the world.
Barring catastrophe or economic collapse from increasing population, Africa will probably not reach zero population growth until some time around 2100. Possibly sooner if birth rates fall faster than currently forecasted.
Regardless of what happens to the size of the labor forces in individual countries, the size of the global labor force after around 2100 will start to fall. A global question may be how it is allocated.
All countries will face the same challenges: With declining populations and smaller labor forces, will they be able to invest in economic growth and development (innovation and structural change), deal with environmental costs and climate change, and support aging populations?
GLOBAL FORECASTS
The following are forecasts in the Lancet long-run projection. First, a summary of the global forecast.
Region
2017
Population in billions
Projected 2100
Population in billions
2017
Birth Rate
Projected 2100
Birth Rate
Global
7.64
8.79
2.37
1.66
The total global population in 2024 is around 8 billion. A maximum global population of around 9.7 billion is expected to occur around 2064. The global birth rate will be below replacement. So over the next 40 years (2025-2065), the world’s population will rise by about 1.7 billion and then over the 35 years after that, decline by approximately 0.9 billion (900 million). By 2100, the global population will have fallen to 8.8 billion.
We are now in a period of a slowdown in total population growth rates. Global population is growing at about one percent per year and the rate continues to fall. But the increase in the number of people is large, about 80 million people a year.
Changes in total population may be points on an exponential decay curve. The decline in numbers after achieving the maximum in the 2060s may be slow for a few years and then accelerate. The timing will depend on how fast the African birth rate falls.
The rate of decline could change with changes in the availability and cost of birth control, anti-aging medical technologies, and more available health care for an aging population.
The biggest unknown is future medical technology that will prolong life expectancies. Technological advances might also decrease medical costs per capita. Regardless of the projection, the fastest growing age cohort in the foreseeable future is 80 years and older.
Countries with birthrates well below replacement and aging populations will experience accelerating decreases in population.
POOR COUNTRIES AND RICH COUNTRIES
Wealthy countries have below replacement birth rates, no growth or declining populations and labor forces, low real economic growth and aging populations and labor forces. Population will continue to concentrate in cities; the population of a small number of cities will be responsible for technological innovation and economic development. Rural areas will continue to lose population.
Africa and a few poor countries outside of Africa will have the opposite problem. They will have above replacement birth rates for a generation or two. This will lead to high growth rates in labor force age groups and total population. Whether or not this will translate into high economic growth rates is problematic, depending on many other factors. These countries could be a source of large immigration to richer countries.
Poor countries typically have poor infrastructure, poor education and health facilities, diseases and epidemics, parasitic and corrupt political elites and bureaucracies, military coups, and internal violence including civil wars for political control.
INTERREGIONAL CHANGE
The global figures hide big regional differences. About half of the world’s projected population growth between 2022 and 2050 is expected to occur in eight countries, five in Africa (Congo, Egypt, Ethiopia, Nigeria and Tanzania) and three in Asia (India, Pakistan and the Philippines). Africa recently passed the combined populations of the United States and Europe. In 1980, Africa’s population was one-third that of the U.S. and Europe.
Most of the largest and fastest growing urban areas in the world are in populous poor countries, including Indonesia, Pakistan, Nigeria and India. Over half of the world’s population live in cities and the percent is rising. Almost all of the increased population in poor countries will live in or move to cities, which are already ecological disasters – traffic gridlock, poor air quality, lack of adequate infrastructure, sinking, raw sewage, and power outages. Many are coastal cities that are already experiencing periodic flooding and storm surges; rising sea levels and the increased number and severity of hurricanes will intensify urban problems. (See the example of Niger in The Economist (July 1, 2023, 15) for the human side behind the statistics. Niger has one of the highest birth rates in the world.)
Starting sometime in the 2060s, the world’s declining population outside of Africa will equal Africa’s population growth. Africa’s population is expected to grow from about 2.7 billion in the 2060s to about 3.5 billion in 2100. The rest of the world will see population fall from about 7.0 billion in the 2060s to 5.3 billion in 2100, or 1.7 billion. Of this total, about one billion of the decrease will occur in China and India.
The forecast is that the world’s birth rate in 2100 will be below replacement, at 1.66. How soon the world reaches zero population growth will depend critically on when the world’s birth rate falls below replacement, which in turn depends on how fast birth rates decline in Africa.
By 2100, Africa could have about as many people as Asia, about 3.5 billion. Together, Africa and Asia in 2100 could have about 80% of the world’s population. Europe and the United States together will have about 10% of the world’s population. Globally, this will be a world with substantially more people over the age of 65 than under 20 – 2.4 billion vs. 1.7 billion.
There will be significantly different population patterns by region and by country. Many countries in Africa will double or triple in population. Many countries outside of Africa will have a lower population. Some countries, 23 in all, including China, Japan, South Korea, Thailand, Spain and Bulgaria will see their populations cut in half by 2100.
The remaining populations outside of Africa will also be older. Countries with large population decreases mean old populations, with a high percent of over-65 and a low percent of children. Africa will have the “youngest” regional population, which is one reason that the region’s population can continue to grow even as birth rates fall below replacement.
THE DEMOGRAPHICS OF SPECIFIC REGIONS AND COUNTRIES
The Lancet projections for the six most populous countries in 2100 are India (1·09 billion), Nigeria (791 million), China (750 million), the United States (336 million), and Pakistan (248 million). The projections are probably too high for India and the United States if the birth rate in India continues to fall and the current (2025) immigration and deportation policies of the United States continue.
SUMMARY OF REGIONAL PROJECTIONS
Region
2017
Population
Projected 2100
Population
2017
Birth Rate
Projected 2100
Birth Rate
Africa
1,227
3,504
4.62
1.73
Central Europe
115
52
1.43
1.35
Eastern Europe (Includes Russia)
210
135
1.55
1.45
High Income East Asia
187
94
1.30
1.33
North America
361
380
1.79
1.54
Western Europe
433
375
1.59
1.64
Latin America
582
575
2.18
1.58
South Asia
1,783
1,440
2.27
1.33
Southeast & East Asia
2,159
1,435
1.72
1.61
Lancet
By the end of the century, every region and almost every country will have a birth rate below replacement.
By 2100, Africa could have about as many people as in Asia, about 3.5 billion. Together, Africa and Asia in 2100 could have about 80% of the world’s population. The United States plus all of Europe (including Russia) might have about 10% of the world’s population.
AFRICA
Year
Millions
% Increase
Millions
Increase
1960
284
29%
1970
366
29%
82
1980
483
32%
117
1990
644
33%
161
2000
831
29%
187
2010
1,072
29%
241
2020
1,381
29%
309
In 2024, Africa’s population was estimated to be 1,515 million (1½ billion). (UN numbers) Current UN projection is that Africa’s population will increase to about 2.5 billion by 2050 and 3.5 billion in 2100.
Region
2017
Population
Projected 2100
Population
2017
Birth Rate
Projected 2100
Birth Rate
Sub-Sahara
1,026
3,071
4.62
1.73
North Africa
201
433
Africa Total
1,227
3,504
Lancet projections
Between 2010 and 2020, in just 10 years, the African population increasedabout the same amount as the total population of the United States. The increase in African population in this decade (2020-2030) will probably be greater, despite the impact of Covid. Better vaccines and control methods of malaria, Africa’s health scourge, are being perfected and produced.
Africa is the poorest region in the world. Africa’s population is expected to triple between 2017 and 2100. By the end of the century, Africa will have 40-45% of the world’s population.
Sub-Saharan Africa’s 2024 birth rate is about 4.3 – 4.4 children per woman past child-bearing ages, by far the highest regional birth rate in the world. This number is expected to fall to about 1.7 in 2100. North Africa’s collective birth rate, dominated by Egypt, might be near replacement.
It will still be the highest regional birth rate in the world. Although below replacement, Africa’s population will still be increasing at the end of the century but may be close to its maximum.
Family planning, combined with urbanization and more education of females, could lead to birth rates declining faster than projected in high birth-rate countries. In Africa, Ethiopia, Malawi and Rwanda promoted family planning and have seen large decreases in their birth rates. Kenya, after investing in family planning clinics and information, has seen its fertility rate fall from 6.5 in the late 1980s to 2.4, marginally above replacement and half the rate of most African countries.
This is a good example of exponential growth. Although the growth rate remains about constant, around 30% per decade (2.4% per year), the 10-year increase in population gets larger as the base increases over time.
The working age population in sub-Saharan Africa will increase by about 700 million (!) by 2050. This will be roughly equal to the current working-age population of China or India. Although Africa will have a large increase in population, its young population will lead to a small percent increase in senior citizens.
Projected populations for the most populous countries are:
Most Populous Countries
2017
Population
Projected 2100
Population
2017
Birth Rate
Projected 2100
Birth Rate
Nigeria
206
790
5.11
1.69
Ethiopia
103
225
4.79
1.33
Egypt
96
200
2.66
2.08
Congo (DRC)
81
245
5.05
1.75
Tanzania
54
185
4.79
1.60
Lancet projections
I find the population number for Nigeria in 2100 astonishing. Nigeria’s population is currently around 230 million and is expected to be about 750-800 million by 2100. In that year, Nigeria’s population is expected to be about equal to China’s population and second only to India’s. The populations of the Congo and Tanzania are expected to triple. (For a detailed look at Nigeria, see Nigeria.)
Africa and some poor countries outside of Africa will have the opposite problem of richer countries and regions. They will have above replacement birth rates for a generation or two. This will lead to high growth rates in labor force age groups and total population. Whether or not this will translate into high economic growth rates is problematic, depending on many other factors. These countries could be a source of large numbers of immigrants to richer countries.
The long-term high birth rates and population growth rates partly explain why from 1970 to 2024 sub-Saharan Africa’s inflation-adjusted (real) GDP per person has not increased. Sub-Saharan population went from 290 million in 1970 to 1.3 billion in 2024, over 2% compounded yearly growth. Real income per person has remained around $1,500. Sub-Saharan’s economic future will partly depend on how fast the current birth rate declines.
RUSSIA
Russia’s population is declining. The UN projection is that Russia’s current population of around 145 million will fall to about 85 million by the end of the century, about a 40% decrease. The Lancet projection is around 105 million, about a 30% decline. Projected future birth rate of 1.43 is about the same as the current birth rate of 1.42.
Russia has avoided a large decrease in its population by encouraging immigration, mostly from former republics of the Soviet Union. While birthrates are below replacement, the decline of the national population has been offset in recent years by immigration. The Lancet projection was made right after a period of large immigration, which has since slowed down. Lower rates of immigration since 2018 have contributed to decreases in population.
Male life expectancies in Russia have been going down for decades but might have recently stabilized (Russian statistics are suspect). Russia was particularly hard hit by Covid because of low levels of vaccination from an ineffective domestically produced vaccine. Russia has the world’s highest per capita consumption of alcohol and poor health care facilities outside of the major cities. The war in Ukraine has resulted in a large number of deaths and serious injuries. Also a large recent migration among educated young male adults, which might affect future population and economic growth projections.
CENTRAL AND EASTERN EUROPE
Because of past very low birth rates and high levels of out-migration, central and eastern Europe is looking at population declines in this generation. It is already happening in the Balkan countries. The war in Ukraine has led to millions of emigrants; how many will return is unknown.
Some UN projections show that many countries in central and eastern Europe might have even larger total percent declines than Japan by the end of the century (over 50%). The region as a whole will probably see a population decline of about 50% by 2100 to less than 100 million people (without Russia). This means that the “borderlands” of Europe, a traditional source of violence and target for conquest, will be depopulated. Total population of all of central and eastern Europe might be less than the population of Russia.
WESTERN EUROPE
Western Europe is further along the population aging curve but because of immigration of younger people, the decline will not be as precipitous. Countries in western Europe draw in immigrants from central and eastern European countries in the European Union and from former colonies. And western Europe, like Japan, currently starts with more resources to support an aging population. But high structural unemployment rates, low economic growth, restrictive labor laws and generous early retirement benefits will strain western Europe’s ability to grow and maintain current social welfare levels. A few European countries realize that current levels of social welfare are not sustainable and have begun reviews of government retirement and health care programs. This problem is exacerbated by the currently very high unemployment and underemployment rates among younger employees.
Facing the future, a number of Western European countries have set up programs to encourage legal migration from outside the European Union, in addition to migration from central European countries within the EU. But increase in immigrants is currently being met with increasing domestic opposition and the rise of anti-immigration political parties.
CHINA
Demographics Update (August 8, 2025)
China’s slowly decreasing total population masks rapid and large changes in its age distribution. Between 2021 and 2024, the number of pre-school children (3 to 6 year olds) fell from 48 million to 36 million. The number is expected to fall another 14 million in the next five years as the birth rate of 1.0 is one of the lowest in the world. In contrast, over the same period, the number of people aged 65 and over is projected to rise from 211 million to 256 million, according to UN projections.
China, which enforced a “one-child” program from the 1970s to 2015, has one of the lowest birthrates in the world, around 1.1 (2023) and probably falling. Although the “one-child” program has been relaxed and then abandoned in recent years, the national birthrate is below that of the “one-child” period around 1.5 in the 1990s. The number of children is expected to fall about 50 million from around 2020 to 2035.
China currently has a relatively young average-age population but the average age is rising very rapidly because of the very low long-term birth rates.
China’s total population probably has already reached its peak of 1.4 billion people. The Lancet projection is a decline to about 750 million people in 2100. Thus China will account for most of the global decline of population.
China’s working-age population began shrinking in 2012. By around 2050, the decrease will be about the size of the current U.S. total labor force (170 million).
China has a special problem that could affect future demographics. Chinese youth, ages 19-24, have a very high unemployment rate, probably over 20% and possibly much higher. The government stopped publishing statistics and then came out with a new series with a lower unemployment rate. Colleges graduates in particular are finding it hard to get a decent position; many are unemployed, accepting menial jobs just to earn small amounts of income, or are moving in with relatives. The government’s policy is to tell the unemployed youth to “eat bitterness.”
At a minimum, this will probably affect future demographics and economic growth – lower income, later marriages. This is in addition of a dearth of females because of the past “one child” policy that led to tens of millions of abortions of female embryos and female infanticide.
As in the United States, a stagnant or declining population is not spread evenly across the country. Government policies to help rural and inland areas do not seem to be working. Between 2010 and 2020, 1,240 counties and county-cities out of 1,866 saw their populations shrink, many by up to 35%, as birth rates fell to record lows and people continued to go to cities in search of work.
The Economist, “China’s last boomtowns show rapid growth is still possible,” July 30, 2024.
Next year (2025) the median (half above, half below) age in China will pass that of the United States. China’s over-60 population of over 300 million is already close to the total population of the United States. By around 2050, the over-60 population is projected to be over 500 million, over 35% of China’s total population.
China’s first reaction to this trend has been to slowly raise their low retirement ages over 15 years. For men, the retirement age is being raised from 60 to 63. For women, from 55 to 58 for white-collar workers and from 50 to 55 for blue-collar workers. A related reason is that the public pension costs are “squeezing” government budgets. (The Economist, “The World in Brief,” September 13, 2024).
A mature, experienced workforce should help maintain high but falling economic growth rates for another generation. After about 2050, demographics will begin working against Chinese economic growth.
This policy will be very unpopular. Traditionally, families were multi-generational and children (daughters and daughters-in-law) were expected to care for aging parents. But hundreds of millions of the working-age population have migrated from rural areas to cities, leaving their children in the care of grandparents. A rising percent of women in the cities are working. If retirement ages are raised and grandparents in both the cities and countryside have to work longer, there may be less baby-sitting. This might lower the birth rate even more. In addition, China has strong age discrimination, so that the older population might have to wait longer between being employed and receiving a retirement pension.
China has massive internal migration. It is governed by hukou system, which has roots in Chinese history.
In the hukou system, everyone carries a household registration card with the individual’s place of birth. More than half of China’s population have a rural hukou. Individuals cannot legally change their hukou without official approval. But China’s need for large amounts of labor in cities and industrial areas has created a demand for “illegal” migrants.
The migrants have virtually no rights or legal protection. They have no access to social services, health care or education. Wages are often below the official minimum and they can be “deported” back to their home location at any time.
This creates an exploited underclass similar to illegal immigrants in other countries. The number of rural migrant workers in China is maybe around 300 million, comprising more than one third of the Chinese labor force. Official Chinese 2020 census figures put the rural hukou population at 376 million people.
Rural migrant laborers propelled the extraordinary boom of China’s economy over the last decades but are still subject to discrimination and unfair treatment. Their children are often separated from their parents for years and raised by grandparents. The government is slowly improving the legal status of some rural migrant workers but fears that former rural migrants might lead to higher unemployment in the major cities.
The minimum government-funded pension has been raised to about $22 a month. Migrant workers receive lower pension than those registered as city residences. They average about $28 a month. The government is slowly allowing some long-term hukou workers in cities to qualify for the higher pensions of city residents.
The Economist, “Sunset Delayed,” September 21, 2024, 38-40.
EAST AND SOUTHEAST ASIA – GROWING OLD BEFORE GETTING RICH
Most countries in East Asia are “middle-income” countries, with per capita income of $7,000 or less. They are becoming “aged” societies (14% of population over 65) with 1/5 to 1/10 the per capita income that Japan had when it reached this level.
South Korea has the lowest birth rate in the world of 0.7, followed by Taiwan with a birth rate of 0.87. Taiwan’s total population has already stopped growing.
Because of low birth rates in the past, these countries are aging rapidly, more rapidly than rich countries like Japan, western Europe and the United States did in the past.
South Korea and Taiwan are looking at demographic futures similar to Japan’s. South Korea’s current population of 51 million is expected to decline to 30 million or less by 2100. Taiwan’s population is expected to fall from 24 million currently to 11 million in 2100 despite a slight increase in the birth rate.
Indonesia, the Philippines and Vietnam are expected to have different trajectories. Indonesia, with a current population of 260 million and a birth rate close to replacement, might have about the same or slightly lower population in 2100. The Philippines has a high birth rate (3.2) and might see its population go from 105 million now to 170 million in 2100. Against this increase is the probability that the Philippines will continue to have high rates of emigration. Vietnam, with a current population of around 100 million, is expected to experience a decline to about 75 million in 2100.
Looking at Asia as a whole, “Asia will account for 70% of the expected increase in senior citizens in poor countries by 2050.” (The Economist, “Old before their time,” October 14, 2023, 31)
These countries, like China, are transitioning from having mature, experienced labor forces to retirement. A large mature labor force is good for economic growth. It is problematic how a country with a rapidly increasing percent of its population in the retirement ages will continue to experience economic growth.
As in China, families have been a traditional source of care for the elderly. This is starting to break down as children migrate to the cities and more women have entered the labor force. Governments have been slow to provide support for their aging populations, although this is starting to change.
SOUTH ASIA: INDIA, BANGLADESH AND PAKISTAN
India has a population of 1.4 billion people, about the same as China. The two countries together contain 35% of the world’s total population.
Unlike China, India’s population is expanding. The Lancet projection is that India will reach a maximum population of around 1.6 billion in 2048 and then begin falling to 1.1 billion in 2100. Thus, by 2100, India and China will account for a decrease of about one billion people from today’s total.
India’s birth rate is around 2.1, just at or above the replacement rate. Lancet’s projection is a continuous fall in India’s birth rate, reaching 1.3 in 2100.
India, like China, experiences massive internal migration. Based on a recent census, India has approximately 450 million internal migrants. They are mostly from the poorer north going to the richer south, replacing the south’s aging labor force.
Bangladesh’s population is around 160 million people. Lancet expects its population to decrease to about 80 million by 2100, a 50% decline. Bangladesh’s current birth rate is just below replacement but is expected to fall to 1.2 in 2100.
Pakistan is another populous country, with 215 million people. It also has a high birth rate, at 3.4. After reaching a peak population of about 315 million in 2062, Pakistan’s population is expected to fall to about 250 million in 2100, with a low birth rate of 1.3.
LATIN AMERICA
Latin America’s population of 582 million in 2100 is about the same as today. But without Mexico, Latin America’s population would decrease by 50 million.
Lancet projections for the largest countries in Latin America:
Latin America
582
575
2.18
1.58
Most Populous Countries
2017
Population
Projected 2100
Population
2017
Birth Rate
Projected 2100
Birth Rate
Brazil
212
165
1.76
1.44
Mexico
127
145
2.42
1.44
Columbia
51
47
2.12
1.45
Argentina
44
48
2.17
1.62
Total
434
405
The following is mostly a summary of The Economist, “Continent of discontent,” September 7, 2019, 81.
Gallup polls reveal that 31% of the population in Latin America want to leave their countries, about the same percent of the people polled in Africa and the Middle East. Latin Americans are fed up with violence and poverty, especially in southern Mexico, El Salvador, Honduras and Guatemala. Over 4 million people – about 13% of the population – have already left Venezuela. There have been recessions in Brazil and Argentina, in addition to 64,000 murders in Brazil in 2017. Drug gangs are a threat in many Latin American cities and countries. Much of the post-war increase in income and wealth has gone to a small percent of the population, a reason for the recent demonstrations in Chile. Overall, Latin America has had little economic growth since 2015.
Corruption is everywhere. 80% of those polled in Latin America think their government is corrupt. According to another poll, “the share of Latin Americans dissatisfied with how democracy works in their country has risen from 52% in 2010 to 71% in 2018.”
Since 2018, autocratic populists who campaigned against corruption and crime won presidential elections in Brazil (a conservative), Mexico (a leftist) and other countries. Argentina has elected an outsider who promises major changes in a society racked by high rates of inflation.
If voters remain disenchanted and disgusted, more autocratic leaders are likely to be elected. And emigration pressure on U.S. southern borders will increase.
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APPENDIX
Lancet Methodology (Quoted from the authors of the Lancet study)
We modelled future population in reference and alternative scenarios as a function of fertility, migration, and mortality rates. We developed statistical models for completed cohort fertility at age 50 years (CCF50). Completed cohort fertility is much more stable over time than the period measure of the total fertility rate (TFR). We modelled CCF50 as a time-series random walk function of educational attainment and contraceptive met need. Age-specific fertility rates were modelled as a function of CCF50 and covariates. We modelled age-specific mortality to 2100 using underlying mortality, a risk factor scalar, and an autoregressive integrated moving average (ARIMA) model. Net migration was modelled as a function of the Socio-demographic Index, crude population growth rate, and deaths from war and natural disasters; and use of an ARIMA model. The model framework was used to develop a reference scenario and alternative scenarios based on the pace of change in educational attainment and contraceptive met need. We estimated the size of gross domestic product for each country and territory in the reference scenario. Forecast uncertainty intervals (UIs) incorporated uncertainty propagated from past data inputs, model estimation, and forecast data distributions.
