Driving To Our Demographic Destiny

Demographics

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Knowing the demographics of the country is one of the most powerful tools for policy makers. Once established that social security and government expenditures on public services are necessary to help increase the living standards of individuals, the next step is to figure out how to properly allocate these funds.

For example, referring to the Canadian “demographic time bomb,” Professor Klassen gave some examples of how a large baby boomer cohort is influencing government as well as private decisions.

“The TTC is putting elevators everywhere, in part because of an aging population. You probably don’t want to build a lot of schools right now, because there aren’t going to be a big group of children to attend schools in the next 20 years.…[And] you probably want to encourage people to stay at work (which is why they’ve taken away the mandatory retirement age).”

Determining what sectors of society need more public spending was one of the major contributions of the Mandatory Census, which was recently converted into a Voluntary Survey by the conservative government. The move has been criticized widely for many reasons, including its effect on public policy.

“Some decisions could be skewered,” said Professor Klassen, adding that those most affected by it will be precisely those groups that depend the most on sound government policy. “It will be poor people…single parents who are too busy cooking and cleaning” after coming home from their jobs to fill out a 45-minute survey. The head of Statistics Canada agrees, suggesting that it will be aboriginals and new immigrants that will most likely not respond.

As healthcare costs rises because of over 70 million people going into retirement over a relatively small time period, taxes need to be collected accordingly and a proper account of all other groups in need is necessary so that resources that should go to them do. Moreover, tracking the mobility of people, including new immigrants, is imperative in the formulation of what Naomi Alboim, the vice-chair of the Policy Forum at the Queen’s University School of Policy Studies calls a “cohesive immigration framework” whose objective should be to integrate more newcomers into the economy.

The Toronto Region Immigrant Employment Council website reports that the number of temporary foreign workers has skyrocketed compared to the number of skilled labourers who settle permanently in Canada. The report also shows that there is massive underemployment and underpayment of newcomers who have post secondary education. A framework of sound policies overseeing this problem can only be made with full statistical data, and not with a 50% response rate, as Statistics Canada expects the Voluntary Census to be.

Conclusions: Smoothing the Curve

The size of a population by itself does not give us very much information about the economic prospects of a nation. Professor Klassen disagrees with arguments suggesting that in the face of population decline, economists struggle to maintain a growing economy. “Many [wealthy] countries today, like Japan, Germany, Italy, have populations that are declining,” he points out. The demographic composition of the country, on the other hand, together with efficient government planning, including sound economic policies and public spending on social securities, are much better indicators.

Flickr - by Sreejith K

Professor Klassen also stressed the fact that urbanization, education, and moving the economy toward higher value-added products will help improve the condition of people.

We’ve already seen how providing education can help reduce the number of unwanted pregnancies, helping to smooth the demographic curve. Research also shows that fertility rates begin dropping as income rises, to which education is a precursor. Typically, higher income per capita is a strong indicator of a healthy economy and healthy demographics.

Urbanization is also imperative for personal and national economic success and demographic stability. Both India and China have low levels of urbanization, with only 29% and 43% of the population living in urban areas respectively. In particular, India is a country where services are the major source of economic growth, “accounting for more than half of India’s input”; having more than half the population still working in agriculture is counterproductive. Canada and Luxembourg, both wealthy nations, have rates of 80% and 82% respectively.

Raising the standards of living should be among the first objectives of the government. A country like Ecuador, despite comparatively higher personal incomes than Chinese or Indians, may not be said to be economically healthy when more than 30% of its population is unemployed and services like employment insurance are nonexistent or at best exceedingly inefficient, inadequate and even promoters of informal labour markets. In India, it makes little difference that the GDP is the fifth highest in the world when over 25% of the population lives in squalor.

During the recent global financial crisis, millions of workers were laid off and thousands of companies closed their doors. Had governments worldwide not stepped in with bailouts to provide stability and increased security to the markets, we may have seen an even deeper hole in the financial markets.

Despite some high levels of unemployment in these countries, it is quite possible that these rates could have skyrocketed had the subprime debacle been allowed to continue without government intervention. This supports the argument that government intervention in the market actually can help regulate demographics, in this case, the unemployment rate.

The other piece of the puzzle imperative for the formulation of sound policies is the need to have a clear sketch of what the population’s demographic composition is. In the case of Canada, research has shown that to mitigate the effects of the baby-boomers retiring, the levels of economic development must be maintained (even with a smaller workforce).

“[Health and Welfare Canada’s] research indicate[s] that…income per person, and income per household…” are affected minimally by changes in the size of the population. The economic growth levels of the last 30 years must be maintained to mitigate the blast of the “demographic bomb” for at least, as calculations have it, another 50 years.

So what aspects of a country’s demographics can be used to determine whether or not it has a healthy economy? We looked at some key issues that helped promote higher standards or quality of living, and they all suggested that the size of a country’s population doesn’t have a strong correlation—positive or negative—with its economic well-being. Rather, a combination of high education, low fertility and low unemployment rates tends to be a strong indication that a country has the right demographics to also have a healthy and prosperous economy.

These demographic factors are able to be influenced by government policies, which for Canada increases the importance of having a mandatory census. A mandatory census is much more accurate and effective in determining government policy. With complete and accurate data, policy makers will be able to better determine how we can maintain economic growth levels with a shrinking work-force.