VIDEO: "China’s Population is Vanishing"

This fits in nicely as a follow up to the video I linked the other day on China's probable collapse in the coming decades. Demographers have been warning for years that China's population was going to begin shrinking soon, so this is no great surprise (although that it started so early might have been). And the numbers don't seem too scary: the population decline was 850,000 over a one-year period, out of a total population of 1.4 billion. But this is a trend that will only accelerate as the CCP's efforts to reverse it were too little, too late. As the video explains, China's abandonment of the one-child policy doesn't mean much when the majority of young Chinese do not want any children. 

VIDEO: "China’s Population is Vanishing"

China Uncensored (10 min.)

It's not just China. As I've written before, most developed nations have birth rates below the replacement rate of 2.1 children per woman. Most developing (i.e., third world) countries outside of Sub-Saharan Africa have birth rates fast approaching the replacement rate. And Africa's situation will likely follow that of other countries--it is just trailing a decade or so behind everyone else.

    Aging populations are already dogging the U.S. I was planning on doing an article on the declining labor force participation rate and how it was starting to force wages higher and so I did a bit of research on the issue. Despite my doomsaying about demographics for many years, I was surprised to see that one of the key drivers of the declining labor force participation rate was the aging of the work force. 

    This CBS article from December of last year--"The labor force is shrinking. Here's what is keeping Americans from working"--actually gives a good overview of the issue. From the article:

    The labor market remains surprisingly resilient, with the U.S. adding more jobs than expected in November. Yet that job growth is masking a trend pressuring employers and the economy alike: The labor force is actually shrinking. 

    The number of people who either are working or looking for a job declined by 186,000 in November, marking the third straight monthly drop, according to Labor Department data released on Friday. 

    The labor force participation rate, or the percentage of working-age adults who have a job, fell to 62.1% last month, a 0.3-percentage point drop from August. And that remains a far cry from the pre-pandemic rate of 63.4%, which signals that the labor market is far from fully recovered. 

    The dichotomy of job growth combined with a shrinking pool of workers underscores the tensions facing the U.S. economy at a precarious moment. The Federal Reserve wants to put the brakes on the economy and cool the labor market — yet employers are pulling out the stops to find workers as many remain sidelined due to a combination of sickness and child care issues for parents. On top of that, baby boomers continue to retire in the millions each year. 

    The decline in the labor force participation rate is a "cause of concern," said Sania Khan, chief economist at Eightfold AI, which provides recruiting software. The decline is "one of the main reasons for this persistently tight labor market."

    As a result, employers are boosting wages to attract workers, pushing up average pay 5.1% in November over the last 12 months — or twice as high as economists had expected, according to Julia Pollak, chief economist at ZipRecruiter.

    First, some background. "The U.S. civilian labor force participation [LFP] rate is the sum of all those who are either employed or officially considered unemployed divided by the total population over age 16." The LFP peaked in 2000 at 67.1 and has been declining ever since. This 2013 article from the St. Louis Federal Reserve Bank outlined the LFP rates from 1948 to 2012 and projections going forward to 2050, none of which were good. But of the three projections, it was the lowest projection which appears to be most accurate based on last month's numbers. And according to it, "the LFP rate is projected to reach 58.5 percent in 2050, an LFP rate lower than what it was in the early 1960s, when the rate began its steady increase."

    The St. Louis Fed's article notes the primary drivers of the declining LFP:

The BLS lists the following factors as primary drivers of the decline in the LFP rate since 2000: (1) the aging of the baby boomer cohort; (2) the decline in the participation rate of those 16-24 years old; (3) the declining LFP rate of women (since its peak in 1999), and (4) the continuous decline of the LFP rate of men (since the 1940s). The main factors that keep the aggregate LFP rate from falling further are the increase of the LFP rate of those 55 and older and the strong attachment to the labor force of Hispanic and Asian people, who constitute the main share of the immigrant population.

Moreover, the authors of that piece "found that the change in the age composition of the population accounted for most (2.18 out of 2.20 percentage points) of the decline in the aggregate LFP rate over the period."

Specifically, this 2.18-percentage-point contribution to the LFP rate decline was mostly driven by a 3-percentage-point decrease in the population share of those 45-54 years old. In contrast to the 2.18-percentage-point decline in the LFP rate that resulted from changes in the age composition of the population, the change in the aggregate LFP rate due to the changes in the LFP rates of different age groups is almost zero on net. It is important to note that this value is the result of dissimilar dynamics of individual groups rather than consistent behavior of the population. For example, the largest contributions to the increase in the aggregate LFP rate are posted by those 55-64 years old (0.63 percentage points) and 65-74 years old (0.65 percentage points). Yet the increases in the LFP rates of these older workers are almost completely nullified by the decreases in the LFP rates of those 16-19 years old (–0.55 percentage points) and 20-24 years old (–0.44 percentage points).

    But while the 2013 article concentrated on the declining participation rate among younger workers--who are likely too busy with school to work--the Philadelphia Fed stated in a 2017 article:

For men of prime working age, it has been falling for more than half a century. And the fall has been particularly acute among black men. The decline in participation has also accelerated since the Great Recession, largely due to the start of retirement by baby boomers. 

 It continued:

By far the main drivers of the overall participation rate are secular forces, usually demographic trends and cultural shifts in society. In the final 25 years of the 20th century, the secular force driving the dramatic increase in participation was women’s entry into the labor force. That steady increase has now ended, and women’s participation has largely stabilized. The largest demographic factor influencing participation now is the aging of the population and the start of retirement for the baby boom generation. During the current recovery, the rising tide of retiring baby boomers has outweighed any modest cyclical recovery in participation. 

 It also adds:

The reasons behind the decline in prime-age male participation remain less well understood than the predictable impact of aging baby boomers on the overall participation rate. One factor that is likely playing a role in the decline in participation of less-educated men versus more-educated men is the increasing wage gap between high- and low-skill workers. 

     Moving closer to today, S&P Global Market Intelligence published an article in September 2022 warning that "Declining labor participation rate threatens long-term growth of US economy." Although the initial focus on the article was getting people back to work after the pandemic, it went on to point out: "Annual population growth stalled at 0.1% in 2021, the lowest rate in the country's history, so a falling participation rate means the U.S. faces long-term constraints to the labor supply that reduce the potential for growth in a country that has 11.2 million job openings and only 6 million people currently looking for work." Moreover, "[d]emographic changes mean the trend will likely worsen. While Market Intelligence expects a short-term recovery in the labor participation rate to 62.7% as the lingering effects of COVID-19 fade, the rate is forecast to grind down to 60.7% by 2035."

    Part of the long-term decline is due to more teenagers staying in school. The labor participation rate of 16-19-year-olds fell from over 48% in 2002 to 37.7% currently. Participation is dwindling at the other end of the age range, as well, as the baby boomer generation reaches retirement age. The demographic surge caused by high birth rates in the '50s and '60s — and the relative affluence of many of those people — means that an unusually large percentage of the working-age population is in a position to retire early. Meanwhile, reduced birth rates in subsequent decades have slowed the pace of younger people coming into the workforce to replace their grandparents.

    This dynamic will not last forever. As the distribution of ages in the labor force smooths out, more workers will likely remain on the job; but these trends will persist for another 10-15 years until the boomer and Generation X anomalies are cleared out, pushing the participation rate lower, according to Wendy Edelberg, a senior fellow at the Brookings Institution and director of The Hamilton Project, an economic policy initiative within the institution.

    "If labor force participation stays depressed, that means that even as the economy in the U.S. begins to bounce back, there are not going to be the workers there to fulfill that demand, and that's going to drive up prices in an unwelcome way," Edelberg said.

While the article goes on to discuss various reasons for declines in LFP and methods to address those declines--even looking at what Japan is doing to reverse the declining labor pool it faces because of an aging population--the article concludes, of course, that the only solution is to import more foreign labor.

    What are the consequences of a shrinking labor pool? Well, according to the Philadelphia Fed article cited earlier:

The effects of nonparticipation on society are potentially severe: slower economic growth and a rising dependency ratio. ... So a steadily shrinking participation rate means that the fraction of the population that is either gainfully employed or actively seeking work is steadily dwindling. This slows the growth of GDP, because fewer people are contributing to the nation’s output of goods and services. In addition, the economic returns generated by fewer workers must be spread more thinly via transfers through government programs such as Social Security and Medicare, or through family assistance or charity, to support the growing fraction of the population out of the labor force. As a result, a society with a lower participation rate is also burdened with higher tax rates because the government has a narrower tax base from which to draw revenue.

    Interestingly, this is not just an American problem. "Global labor force participation has shown a steady decline since 1990. According to the World Bank, the global labor force participation rate stood at 59% at the end of 2021, down from 62% in 2010."

Related articles:

• "ANALYSIS: ‘Massive shortage’ in trade professionals was inevitable"--Campus Reform. Discussing the shortage of trained tradesmen and why the shortage will probably not disappear.
• "The Daily Chart: Fertility Regulation"--Powerline Blog. Noting a connection between land use regulations and fertility rates.
• "Car Seats as Contraception"--Jordan Nickerson and David H. Solomon. Something I've argued for decades, so it is nice to see that it was demonstrated as true. From the abstract:

Since 1977, U.S. states have passed laws steadily raising the age for which a child must ride in a car safety seat. These laws significantly raise the cost of having a third child, as many regular-sized cars cannot fit three child seats in the back. Using census data and state-year variation in laws, we estimate that when women have two children of ages requiring mandated car seats, they have a lower annual probability of giving birth by 0.73 percentage points. Consistent with a causal channel, this effect is limited to third child births, is concentrated in households with access to a car, and is larger when a male is present (when both front seats are likely to be occupied). We estimate that these laws prevented only 57 car crash fatalities of children nationwide in 2017. Simultaneously, they led to a permanent reduction of approximately 8,000 births in the same year, and 145,000 fewer births since 1980, with 90% of this decline being since 2000.

• "America's baby bust laid bare: Just half of women under 45 have children — amid 'changing family values' and rising cost of living"--Daily Mail. This article also illustrates the relationship between hypergamy and polygamous relationships: "The average American woman under 45 has 1.1 children, while the average man has 0.8, the CDC reports," and "Men are now having their first child at 26.4 years old on average, while women are giving birth for the first time at 23.7. Both have increased greatly in the last two decades."
• "Shocking Brand New Research: Testosterone in Total Freefall, May Account for Explosion in Transgenderism"--PJ Media. 
• "The Global Fertility Collapse" by Brink Lindsey. Be sure to check out the chart on the number of years it took a particular country to fall from the average woman having more than 6 children to having less than 3: for the UK it was 95 years and for the US it was 82 years; for Iran it was 11 years and for China it was 10 years. And this excerpt:

With all due awareness of the fact that fertility rates could well rebound, it is important to recognize what the current widespread “birth dearth,” if it is not reversed, portends over the longer term. Look at South Korea, a country known for its rapid economic rise, industrial prowess, and now its blockbuster cultural exports — but which also has the dubious distinction of possessing the lowest fertility rate in the world [ed: 0.8]. If current trends persist, South Korea’s population — currently just under 52 million — is projected to drop below 38 million by 2060; by 2100, its population will have dropped below 16 million, less than a third of what it is today.