In the second part of my adventures into impact entrepreneurship, we’ll dig into a topic that I knew nothing about two years ago but that has since really impacted my view of our future: and it’s the demographic reversal that we will likely experience in the 21 century.
As a note here, what follows is a summary of what I’ve been reading the past two years, but if you want yourself to dig this rabbit hole I can only recommend these two books which really opened my eyes on this topic.
Fertility rates are plunging worldwide
According to Un projections the world population will likely peak by the end of the 21 st century. But a growing number of experts expect this event to happen much earlier. Some say as early as mid-21 century which is the lowest scenario predicted by this UN study.
According to this same UN study By the middle of this century the proportion of over 60s in the world’s population is set to reach 22%, almost double the 2015 figure.
This demographic reversal is due to plunging fertility rates across the globe and the two main reasons behind this plunge are urbanization and women’s education.
In an agrarian society a kid is an investment. People have more kids because they know they will help run the farm and produce more, whereas in an urban society a kid is a liability: they cost a lot and won’t be a source of revenue for most parents. Basically the unit economics of kids are great if you’re in an agrarian society and poor when you live in a city. This is why people tend to have far less kids in urban areas.
When it comes to women’s education, many studies show that the more women have access to education, job opportunities and overall less inequality with men, they have less and less children.
These two factors explain why in most western countries the fertility rates are mostly below 2 children per woman, so below the 2.1 replacement rate. But this decreasing fertility rate trend is true everywhere in the world.
The other interesting aspect is that once this fertility rate stabilizes around the 2 children per woman mark, it’s almost impossible to make it increase again. So far all the initiatives created by western governments to push people to have more children, such as more help and even money incentives, have failed. Once most of the population ,lives in urban areas and have jobs and their hobbies, they don’t want to have more children for the sake of it.
Consequences of this demographic reversal
I know that for climate change reasons a lot of people think that a decreasing population is a good for the planet,, but the problem is that this transition from a world with way more young people than older ones to a world with as many old people as young one is very problematic for our society and it will create many challenges.
The first obvious challenge will be elder care. As people live longer and longer, we’ll have many more old people with mental or physical disabilities who need care. And as much as we speak about software and robots replacing human labor, elder care is one of the areas where automation is the lowest. So if we want to be able to provide good care to mosz elder, we’ll need new solutions.
But the challenges created by this ageing population go beyond healthcare. For example, we’ll continue to have housing problems as older people tend to stay longer and longer in their house or flat, leading to ever rising real estate prices in urban areas and the inability for the new generation to live where most of the jobs are. As a plug here, this is why I think that companies such as colette, which I already spoke about a lot in this newsletter, are really useful for our society.
We can speak about retirement plans too, which are an unsolved challenge for many governments. Since older people will be more numerous and have more voting power than the younger generation, it is unlikely that they will vote for politicians promising retirement benefit cuts. The more likely scenario is that governments will tax more businesses and working people.
In conclusion, we might think that these challenges are still far in the future for us. In twenty or thirty years. But the reality is that they will likely start to be felt much sooner than that, if not already. And this is why I believe that entrepreneurs in that space contribute as much as entrepreneurs fighting climate change. Because with a broken society it will be impossible to make people change their way of living.