Apex Fallacy 2.1: How it Works?
So, the previous post that since the 1960–70s the Western countries went deep into the demographic transition: contraception was discovered, cultures changed, and birth rates dropped dangerously.
That’s a really cool story, but why it should be interesting for you, me, and the guy with a dog over there?
Four Stages of Gr… Collapse
Let’s drop the “why” of the process for a moment and go into the “how”. How the ephemeral demographic decline influences the real things that do matter: the population, the economy, the way of living?
Phase 0: Beginning
(Year 0) Everything is stable at relatively high fertility. Nothing changes. Population pyramid actually looks like a pyramid: broad base of pale green kids and teenagers under 15 (technically not in the labor force yet), then narrower, but still powerful blob of green adults, and a small percentage of autumn-colored aging population.
Then suddenly in our little hypothetical country the fertility starts falling by 0.05 a year, and after 15 years it stabilizes at 1.75 kids per mother, the modern US level.
Phase 1: Improvement
(Year 0 till 25) Transition starts and things get better: less kids, more things. Birth rate drops, but nothing else changes yet.
Actually, economy improves for a while: the secret of getting higher income per capita is having more income and less capita. The production is distributed among slightly less people, so everyone gets slightly larger piece of the production.
On the other hand, the fertile-age people who would otherwise be parents are even better off: it’s one thing to divide a hypothetical family income by 4.5 (at average fertility of 2.5), and totally another to spend the same amount of money at 3.7 or even 2.9 family members (the fertility rates in the USA and in South Korea nowadays are 1.7 and 0.9).
At the tail end of this stage people start noticing small things going wrong: there are less kids around, schools aren’t as crowded, universities get less students, and even legendary toy manufacturers could find their revenues drop (don’t worry, Lego was able to reach 2016 sales again in 2019 and topped them in 2020).
Phase 2: Momentum
(Years 25 till Year 40) First signs come into the workspace. The smaller generations have finally finished their education and started working full-time. But wow, there aren’t as many of them as just few years ago! And it’s really easy to notice the difference now: starting-level jobs are clearly understaffed.
However, the total working-age population still grows: the retiring 65 year-old cohorts are smaller in number than the young adults just starting at their first jobs. The fertility may have dropped dead, but the population is so much larger than few generations ago when the now-elderly were born.
Notice, by the way, the waves on this graph. As soon as the fertility stabilized at 1.75, the number of births started climbing again: for a while, the number of 25-something potential parents continued growing every year as they were born when population growth was still stable. This peak (let’s call it “a boom”) is then mirrored again as the boomers have kids, then again as boomer-kids have some too. This wave, smaller and smoother, will repeat itself forever, but we won’t see it behind the background noise soon.
Phase 3: Depression
(Year 40+) There are less and less workers, more and more elderly. After year 40, the working-age population finally starts dropping down.
At last the demographic catastrophe that happened more than generation ago is visible in the economy. Less workers means less production, less production means less things to consume: food, cloth, houses, cars, entertainment… even stocks and bonds for retirement.
And, to talk about retiring, some of this ever-dwindling amount of goods has to be funnelled into the ever-growing elderly. For the first few years of the depression phase future looks really bleak, but after the “boomers” go into retirement, the older population stops growing that quickly.
Yet, the population never starts growing and the economy never gets any better.
If you like to look at boring tables, have some here:
What’s in it for me?
It depends on where you are in the table. After the transition begins, for a while most people will live better than their ancestors. Then, after the dreaded year 40, it gets worse. But where are you?
