Declining birth rate: Good or bad??

babies

By EchoFreak of http://economicsoftheworld.blogspot.com/

Population has been a major concern in many countries, specifically in developing Asian countries. Countries such as India, China, Bangladesh and Pakistan have always struggled to feed their ever growing population. China and India combined have around 36% of the world’s alive people. China on one hand has adopted “One child policy” and has been able to restrict the birth rate to a very low level, India on the other hand is still grappling with high-birth rate. Indian political and caste structure makes it difficult for the government to implement a policy like China’s. Though supporting a huge population can be a nightmare for any government and economy, but is encouraging people not to reproduce, good from a long term perspective??.

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There would be many advocates of the idea of declining population, but there are no less on the other side. There are many issues to be discussed here, particularly the increase in the number of aged people. Declining birth rate increases the dependency ratio i.e. there are more number of retired people than the number of people that constitutes active work force. Secondly, it results in higher taxes on the working people as the government needs to invest more in pension and health care services for the aged, hence in order to avoid a deficit, tax rates are raised. Thirdly and most importantly, there would be a shortage of labor which would lead to higher wages and firms would resist reinvestment into their business as their product’s cost would not be competitive in the global markets.
No matter how much technology advances, human workforce has been and will remain the major ingredient of production process. Human resource is the most vital resource for any business. Youth’s vibrant energy and creativity as well as aged’s experience and understanding are required for the development of any economy. Realizing this fact, many countries like Singapore with low birth rates are now providing financial incentives to their citizens to reproduce more, in addition to free education facilities. Legally forcing people to reproduce less can no doubt yield positive results at first, but these demographic changes would be very difficult to reverse when needed, as a tradition is established over time. And people then are fearful to differ as they are worried whether they would be able to support a greater family.
Whether large population is a liability or an asset, it is up to the relevant countries to decide. India particularly is doing a tremendous job in this regard. They have no law regarding how many children a couple should have, rather they are focused on producing more jobs and providing education to the people. Their Prime Minister Mr. Manmohan Singh believes that their people are the most important asset and have contributed to the growth the country is currently experiencing. Many MNC’s are compelled to set up their production units in India due to large scale availability of cheap and skilled labor. Now it would be interesting to see how China, which is being looked upon as the next “Superpower”, solves the problem of aged population.