The Decline of Demographics

"Demography, not democracy, will be the most critical factor for security and growth in the 21st century", said Lee Kuan Yew, Singapore’s founding father. While democracy remains a key pillar for peace and prosperity, his emphasis on the value of human capital wasn’t misplaced. The scale and ability of the labor force are important foundations for long-term economic progress.

Globally, demographic risks were evident well before the pandemic. Then, COVID-19 took a steep toll on the labor force and altered broader demographic dynamics. From fertility to life expectancy to mortality to migration, demographic challenges have only compounded.

The world’s population continues to grow, but the pace of growth has slowed to a rate of under one percent, a pace not seen since 1950. The populations of 61 nations are projected to decrease by 1% or more between now and 2050.

Global fertility rates have been in secular decline for years. Prosperity is a key contributor: over time and across geography, countries that get wealthier have fewer children. (The opportunity cost for parents missing work to raise families is higher in those cases.) Periods of economic uncertainty tend to depress fertility: evidence from the 2008 financial crisis supports this thesis. In this respect, the COVID downturn was typical; early evidence suggests births fell in the pandemic.

And at the other end of our life cycles, COVID-19 also had a tremendous impact. Excess mortality increased even further in 2021, while life expectancy decreased in many countries. Global life expectancy at birth fell to 71.0 years from 72.8 in the two years of the pandemic. The elderly remain at greatest ongoing risk of succumbing to COVID-19. Many survivors have been dealing with the limitations of "long COVID."