Organisation of households: Causes of demographic aging

Organisation of households: Causes of demographic aging

Phuah Eng Chye (24 February 2018)

Economies undergo transitions from agriculture to manufacturing to services and now to sharing. Each phase represents an elevation in the use of information which in turn raises the intensity of the information effects[1] of intangibility, size, speed and transparency. These forces cause economic behaviour to deviate from previous norms and have disruptive effects on society. This series of articles explores how information effects may be reshaping the organisation of households and the consequential effects on the economy.

Generally, economic attention has focused on demographic aging rather than on the changes in household organisation. This is partly because of the close association of aging with the economic depression or secular stagnation. The 1930 US and the 1990 Japanese depressions lasted decades with lingering effects. Chris Weller notes “Japan has entered a vicious cycle of low fertility and low spending that has led to trillions in lost GDP and a population decline of 1 million people, all within just the past five years…falling spending shrinks the economy, which discourages families from having kids, which shrinks the economy further.”

The onset of demographic aging arises from a combination of decreasing fertility rates (falling number of births) and increasing longevity (falling number of deaths). Ronald Lee notes aging is “in most of the world either is occurring now or will be soon…As birth rates fall to low levels around the world, the population growth rate slows and elders replace children in the population age distribution.” When the replacement fertility falls below a critical threshold, this signals a future loss of population.

These trends have been commonly identified as causing birth rates to decline.

  • Changing social norms. Industrialisation and rising economic affluence has dissipated the traditional social pressures to get married and have a large family. In addition, higher levels of education and the changing role of women is associated with the trend of falling marriages and births. This is compounded by changing social views on contraceptives, abortions and divorce. Changing social norms can be self-perpetuating. In UK, Sarah Harper and Mark Walport notes a “decrease in fertility is increasing childlessness…Individuals may have few or no vertical kin: no children or grandchildren, or no surviving parents or grandparents. This may be due to childbearing and mortality patterns, but may also be socially constructed – for example men, in particular, may lose contact with their biological children following divorce…levels of childlessness are projected to increase over the next decades, with a disproportionate impact on 65-74 year old men. In addition, the autonomous landscape of an information society means individuals are more likely to acquire information from and identify with their social network than with their family or community leaders. The loss of hierarchical discipline is another factor reducing the motivation to maintain a large family.
  • Urbanisation and rising costs. Families were larger in communities that relied on low-cost labour to work in farms or a small business. But as population congregates in cities, as the costs of supporting a family rises (education, healthcare, rentals and transport) and time pressures worsened (e.g. travelling time, work schedules). The costs of maintaining a large family begins to exceed its benefits. The shrinking size or modularisation of families (staying single or having fewer children) can be perceived as a response that seeks to lower costs and to increase flexibility. The modularisation of households is accompanied by the evolution of economic services to allow individuals to reduce their dependence on their families. 
  • Uncertainty and transience. Employment, income uncertainty and the burden of high (student) debt can discourage individuals from starting a family. Increased transience – greater frequency of switching jobs, homes (relocation and divorce) and traveling – have similar dissuasive effects.

While birth rates have fallen, medical advances, better nutrition and sanitation have contributed to longevity. The dramatic improvement in survival rates has also reduced the need for a large family as a precautionary measure.

Though there have been incidences of demographic aging in the past, there is a crucial difference with recent episodes. Past aging trends were largely caused by involuntary depopulation arising from extraneous events such as disease, war, famine and large-scale emigration or even deliberate policies to limit population growth. In contrast, the recent influences on demographic aging are economic-driven; encompassing individual reactions to a changing landscape shaped by information effects. The next article will review demographic aging from the perspective of household organisation.

References

Chris Weller (21 May 2017) “This is death to the family: Japan’s fertility crisis is creating economic and social woes never seen before”. Businessinsider.com http://www.businessinsider.com/japan-fertility-crisis-2017-4

Phuah Eng Chye (2015) Policy paradigms for the anorexic and financialised economy: Managing the transition to an information societyhttp://www.amazon.com/dp/B01AWRAKJG

Phuah Eng Chye (15 July 2017) “The significance of information effects”. Economicsofinformationsociety.com. http://economicsofinformationsociety.com/the-significance-of-information-effects/

Ronald Lee (20 August 2014) “How population aging affects the macroeconomy”. Presented at the Federal Reserve Bank of Kansas City’s symposium on “Re-evaluating labor market dynamics”. http://www.kc.frb.org/publicat/sympos/2014/105514.pdf

Sarah Harper, Mark Walport (July 2016) Future of an ageing population. Government Office for Science. Foresight. http://www.jp-demographic.eu/wp-content/uploads/2016/07/gs-16-10-future-of-an-ageing-population.pdf

[1] Phuah Eng Chye “The significance of information effects”.

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