(Drivebycuriosity) - There is a lot talk about global aging. People are getting older, thanks to better medical systems and nutrition, and birthrates are falling in all developed countries. In China & Japan the population is already shrinking, Europe and even the US may follow. If we believe the Cassandras the world is doomed.
The pessimists say that even if the population doesn't shrink, "aging harms a country’s living standards by increasing the old-age dependency ratio — that is, the ratio of people over 64 to people aged 15-64" ( noahpinion).
I really like the term "old-age dependency ratio".
First, I think a smaller population is a big win for the environment and could be the answer to global warming, another favorite subject of the doomsayers.
Fewer people burn less energy and emit fewer greenhouse gases. Fewer people also eat less therefore the incentive to destroy forests to gain more land for farming becomes weaker.
A shrinking population also slows down the trend of turning forests & meadows into one-family houses, streets, strip malls, store houses & parking places. When the population is smaller the world becomes greener & cleaner.
A smaller population is also the answer to another doomster alert:
"The robots are coming"
Automation will destroy our jobs!" (" thehill).
Both trends are mostly compensating each other: A shrinking demand for workers (automation) meets a declining supply (aging).
I agree that "science is making exponential advancements in the field of robotics and artificial intelligence" and will churn the economy and the labor markets in the coming decades. Many jobs will be done by machines driven by software, which is getting more and more sophisticated. The steep rise of ChatGPT and other incarnations of machine learning, known as Artificial Intelligence, accelerate the automation progress.
(source )
But, the automation process has been going on over many centuries. Machines have been replacing labor for a very long time (wind & water mills, weaving looms, steam engines and so on). The ongoing automation process has been raising productivity of labor considerably.
We need less & less labor to produce things & services. Automation reduces working hours and lifts the living standard for everybody.
People don´t need to work more then 60 hours weekly to make a living. Children aren´t needed to work on farms, at factories & in mines to support their families and to be able to eat.
( source)
Less Work, More Income
Today even farmers are using robots, for instance for harvesting strawberries or milking cows (wikipedia). Drones are being used in warehouses and yards for inventory management. Robots also help restaurants to deal with the scarcity of labor.
"Domino’s Pizza Inc. is putting in place equipment and technology that reduce the amount of labor that is required to produce our dough balls", reports time.com.
3D-printers are also replacing workers, even in construction.
"A 3D printer can build the walls of a house in as little as two days versus weeks or months with traditional construction materials" notices today.com.
The accelerating automation process is reducing the costs of producing things significantly, making them cheaper and more affordable. A study by economists John G. Fernald and Charles I. Jones from Stanford & the Federal Reserve Bank of San Francisco claims that "it becomes possible to replace more and more of the labor tasks with capital" (robinhanson ). Fernald & Jones define capital as physical capital (machines including robots & computers), plus human capital (knowledge & skills) plus discovery of new ideas (inventions like computer, internet etc.). According to them "artificial intelligence and machine learning could allow computers and robots to increasingly replace labor in the production function for goods", meaning that the society can produce more things without increasing hours worked or even with a shrinking labor force. As a result the growth rate of income per person and the long-run growth rate (now around 2%) will rise as well: "The possibility that artificial intelligence will allow machines to replace workers to some extent could lead to higher growth in the future".
Naive observers claim that a shrinking population reduces the demand for goods & services and will destroy many markets and businesses (noahpinion). These pessimists ignore that:
Demand is:
The # of X Purchasing potential buyers power per capita
I reckon that technological progress leads to:
- rising salaries (for those still working),
- climbing dividend incomes, and
- stock market gains
which raise the purchasing power of most people enough to compensate the shrinking number of buyers.
Even those who don`t invest in the stock market may participate via pension funds and insurance investments.
For instance, if the population shrinks 1%, but the remaining people consume per capita 5% more, then demand climbs about 4%.
The productivity gains will finally translate into higher tax incomes for the governments. Some day a much greater part of goods & services will be produced by robots and other machines. Then many fewer people may work than today and many things will cost less. Then the time could come for an universal basic income, paid to everybody, and financed by productivity gains delivered with automation (driveby ).
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