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Fertility Rates Keep Dropping, and it’s Going to Hit the Economy Hard

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The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

Total fertility rates, which can be defined as the average number of children born to a woman who survives her reproductive years (aged 15-49), have decreased globally by about half since 1960.

This has drastically shaped today’s global economy, but a continued decline could have much more severe long-term consequences. If the world has too many elderly dependents and not enough workers, the burden on economic growth will be difficult to overcome.

Global Fertility Rates

Fertility Rates Start to Decline

First, it’s important to address some of the reasons for these falling fertility rates.

In developed nations the introduction of commercially available birth control has played a large role, but this also coincided with several major societal shifts. Changing religious values, the emancipation of women and their increasing participation in the workforce, and higher costs of childcare and education have all factored into declining fertility rates.

Birthrates Wane, Economy Gains

Initially, reduced child dependency rates were actually beneficial to economic growth.

By delaying childbirth, men and women could gain an education before starting a family. This was important in a shifting labor market where smaller, family-run businesses were in decline and a more skilled and specialized labor force was in demand.

Men and women could also choose to start their careers before having families, while paying more in income taxes and enjoying the benefits of a higher disposable income. Increased spending power creates demand, which stimulates job growth – and the economy benefits in the short-term.

A Global Phenomenon

46% of world population is in countries with rates below replacement

Worldwide fertility rates began to fall substantially in the mid-1960s. While each country has its own underlying causes for this, it is interesting that in developed and developing nations, the downward trend is similar.

Part of this is due to developing countries’ own efforts to rein in their rapidly expanding populations. In China, the One Child Policy was introduced in 1979, however fertility rates had already dropped significantly prior to this. India’s government was also active on this front, sterilizing an estimated 8.3 million people (mostly men) between 1975 and 1977 as a method of population control.

The Age Imbalance

So here we are now, with a global fertility rate of just 2.5 – roughly half of what it was 50 years ago.

Today, 46% of the world’s population lives in countries that are below the average global replacement rate of 2.1 children per woman.

Because these countries (59 to be exact, including BRIC nations Brazil, Russia, and China) are not repopulating quickly enough to sustain their current populations, we are beginning to see a substantial imbalance in the ratio of elderly dependents to working-age people, which will only intensify over the coming decades.

Aging Population Map

By 2100, the U.N. predicts that nearly 30% of the population will be made of people 60 years and older. Life expectancy also continues to increase steadily, which means those dependents will be living even longer. Between 2000 and 2015 the average global life expectancy at birth increased by around 5 years, reaching an average of 73.8 years for females and 69.1 years for males.

Economic Reversal

What does this mean for the economy?

As this large aging population exits the workforce, most of the positive trends that were spurred by declining fertility rates will be reversed, and economic growth will face a significant burden.

Working Age Population

The global increase of elderly dependent populations will have serious economic consequences. Health care costs for the elderly will strain resources, while the smaller working population will struggle to produce enough income tax revenue to support these rising costs. It’s likely this will cause spending power to decrease, consumerism to decline, job production to slow – and the economy to stagnate.

Solutions

Immigration has been a source of short-term population sustenance for many nations, including the U.S. and Britain. However, aside from obvious societal tensions associated with this strategy, immigrants are often adults themselves when they relocate, meaning they too will be elderly dependents soon.

Several nations are already experiencing the effects of a large proportion of elderly dependents. Japan, with one-quarter of its total population currently over the age of 65, has been a pioneer in developing technologies, such as robotics, as a solution to ease strained health care resources. Many countries are restructuring health care programs with long-term solutions in mind, while others are attempting to lower the cost of childcare and education.

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Markets

Will Tesla Lose Its Spot in the Magnificent Seven?

We visualize the recent performance of the Magnificent Seven stocks, uncovering a clear divergence between the group’s top and bottom names.

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Will Tesla Lose Its Spot in the Magnificent Seven?

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

In this graphic, we visualize the year-to-date (YTD) performance of the “Magnificent Seven”, a leading group of U.S. tech stocks that gained prominence in 2023 as the replacement of FAANG stocks.

All figures are as of March 12, 2024, and are listed in the table below.

RankCompanyYTD Change (%)
1Nvidia90.8
2Meta44.3
3Amazon16.9
4Microsoft12
5Google0.2
6Apple-6.7
7Tesla-28.5

From these numbers, we can see a clear divergence in performance across the group.

Nvidia and Meta Lead

Nvidia is the main hero of this show, setting new all-time highs seemingly every week. The chipmaker is currently the world’s third most valuable company, with a valuation of around $2.2 trillion. This puts it very close to Apple, which is currently valued at $2.7 trillion.

The second best performer of the Magnificent Seven has been Meta, which recently re-entered the trillion dollar club after falling out of favor in 2022. The company saw a massive one-day gain of $197 billion on Feb 2, 2024.

Apple and Tesla in the Red

Tesla has lost over a quarter of its value YTD as EV hype continues to fizzle out. Other pure play EV stocks like Rivian and Lucid are also down significantly in 2024.

Meanwhile, Apple shares have struggled due to weakening demand for its products in China, as well as the company’s lack of progress in the artificial intelligence (AI) space.

Investors may have also been disappointed to hear that Apple’s electric car project, which started a decade ago, has been scrapped.

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