Global study confirms high birth rate is hurting standard of living

Friday, October 10, 2014

Dr. Teferi MergoSt. Paul’s University College Professor Teferi Mergo is co-author of a new global study conducted in 40 countries and published in the leading U.S. journal Science. The study confirmed that while a moderately low birth rate can boost a country’s overall standard of living, high fertility in some parts of the world continues to adversely affect overall prosperity.

“Our study shows that it is still advisable for governments to encourage people to have fewer children in countries with high birth rates,” said Teferi Mergo, also an adjunct professor in Economics at the University of Waterloo.

Led by researchers at the East-West Center in Hawaii and the University of California, Berkeley, research partners in 40 countries correlated birth rates with economic data and concluded that a moderately low birth rate of around two children per woman or less can actually boost a country’s overall standard of living.

Governments generally favour somewhat higher birth rates to maintain the workforce tax base needed to fund pensions, health care, and other government benefits for the elderly. Yet “higher fertility imposes large costs on families because it is they, rather than governments, that bear most of the costs of raising children,” said UC Berkeley Economist and Demographer Ronald Lee, one of the lead authors of the study. “Also, a growing labour force has to be provided with costly capital such as factories, office buildings, trucks, and houses to live in.”

Lee and East-West Center economist Andrew Mason co-direct the National Transfer Accounts project, or NTA, which studies how population changes impact economies across generations. Working with NTA network co-authors worldwide, they based their calculations for the study on finding the birth rate and age distribution that strikes the best balance between the costs of raising children and of caring for the elderly.

Their results challenge previous assumptions about population growth. For example, they found that the fertility rate in the U.S. and many other countries is nearly ideal for overall standards of living, but that birth rates in parts of Asia and Europe are so low that they reduce living standards when public and private costs are included.

Map showing births and government budgets

Map showing births and standard of living

Teferi Mergo,
St. Paul’s University College, University of Waterloo

Andrew Mason, East-West Center

Ronald Lee, UC Berkeley