Thinking About Fertility Rates, the Economy, and the Next Generation

A factor that gets little attention in the press today is the relationship of fertility rates to the economy.  This point struck a chord yesterday when I had the opportunity to hear economist Stuart Varney address a gathering of near 1000 accountants and financial professionals in Atlanta. With a bit of humor and unsettling reality, Varney explained why he thinks the fertility rates of the world should be of top concern.

A little background here—for a country to merely remain even in terms of population, it requires a fertility rate of at least 2.1.  There are 45 countries in the world that are well below this rate.  These countries include much of Europe, Russia, China, and Japan among others.  Translated, this means that population growth is negative for these countries.  The U.S. maintains close to a fertility rate of 2.1 only because of the number of immigrants here.  Of all the countries, the lowest fertility rate according to one report I read was in Spain, which was near 1.15.

Think this through with me for a moment in relationship to the economy.  An older, graying population that is living longer these days will need healthcare, housing, pensions, and other retirement benefits.  The model for providing these needs includes economic input from the younger generations.  If the populations are declining, who will help fund these needs for the older generation?

The governments think they can help. But again, with declining populations the tax rates must be much higher to even make a dent in these needs. Today, the governments sit in the unenviable position of trying to figure out the current economic crisis and it appears they struggle each day to fix on a strategy that is elusive.  The quest for a solution lingers no matter what is done.

When I observe the next generation, I see a generation less concerned with wealth creation and more concerned with solving the world’s issues.  I might suggest to them that the economy is one of the single-most important issues.  This is not to say that we want to preserve certain negative aspects of wealth creation, but that we want to consider how wealth creation enables us to address some of the other issues we face. I would ask, “What are the positive aspects of wealth creation?” This might help us adopt a better way to solve economic issues while at the same time addressing other complex issues.  The world is changing, and the next generation needs to be in a position to wisely lead when the baton is passed.  Let’s make sure we help them understand the times and extend ourselves as counselors and mentors.