I have nothing against Europeans (some of my best friends .....), but I have never worried that the world will run out of them. This sets me apart from the NYT magazine which devoted a lengthy piece to this "problem." Some of the discussion is reasonable. Several countries in Europe, like France and the Scandinavian countries, have adopted work and child care arrangements that make it easier to raise kids in two worker families. Other countries, like Italy and Spain, lag badly in this regard. Certainly it makes sense to have policies that allow workers the option to raise children without extreme hardship. But, let's say we adopt these policies and populations still decline. Why should we fear being able to go to beach and not fighting for a place to put a blanket? Will the world collapse if we go to work and there are no traffic jams? And, should we be upset that it will be easier to reduce greenhouse gas emissions if there are fewer of us emitting? The article seems to rely on some loon tune economics to make the prospect of declining populations seem like a serious problem. For example, it warns about rising rates of retirees to workers. Guess what, we have had rising rates of retirees to workers for the last century. Why on earth would anyone think that this is some sort of crisis? (The article actually tells us how much Germany and Britain's populations would have to increase to keep the ratio of retirees to workers constant. I suppose that is interesting trivia, but why on earth would anyone care?) The implication that we will have no workers to care for our elderly, or alternatively that future generations of workers would face some crushing tax burden can be seen to be ridiculous with the most basic economic analysis. As one commentator quoted in the piece notes, there is a large amount of unemployed and underemployed labor in Europe. This could be put to work in the event that there was a labor shortage. Once underutilized labor was fully employed, we would expect to see workers go from less needed jobs to more highly valued jobs. That means fewer people working in restaurants, as house cleaners in hotels and homes, and working the midnight shift at convenience stores. I still don't see the crisis. Note that as the labor shortage develops, wages get bid up. So our impoverished young people will be earning really high wages. They also will pay much less for housing. In the U.S., rent averages 30 percent of expenditures. It can often be 40-50 percent in highly populated areas. In our declining population scenario, rents will fall since there will be an excess supply of housing. So, our impoverished young people will be getting high wages because of the labor shortage and paying low rent because of the glut of housing. Yes, but their taxes will rise. Excuse me, but this sort of argument is tripe and it has no place in a serious newspaper. Standard projections for the growth rate of wages show that the rise in before tax wages should easily outpace the impact of any tax increases necessitated by a higher ratio of retirees to workers. There is no plausible story in which demographic pressures will cause future generations of workers to have lower standards of living than we do today. (The article even puzzles over the question as to whether we can have economic growth with a declining population. The correct answer is, "why would anyone care?" Suppose the population is falling by 2.0 percent annually and the GDP is falling 1.0 percent a year. This translates in per capita GDP growth of 1.0 percent a year. What is the problem with that?) It would be useful if the NYT would have an editor with some knowledge of economics review a piece like this before turning over 10 pages in the Sunday Magazine.
--Dean Baker
