Georgia’s Shrinking Population

Georgia’s Shrinking Population

Georgia’s Shrinking Population

The FINANCIAL -- According to the population projections of the United Nations (constant fertility scenario), by the end of this century the Georgian people will count only 2.8 million.In 2013, Georgia has been among only 19 countries in the world with a population that decreased year on year.

An aggravating factor is the sex ratio of babies, which in Georgia is heavily skewed towards males.While globally about 107 boys are born per 100 girls, in Georgia 111 boys are born per 100 girls, the fourth highest ratio in the world. Women are the limiting factor when it comes to procreation, and under normal circumstances population growth in the next generation depends on how many girls, not how many boys, are born today. (The troubling sex ratio in Georgia was previously discussed in two articles on the ISET Economist blog: “Sex Ratio at Birth: is the South Caucasus Heading the Way of China?” by Yaroslava Babych and “Toxoplasma Gondii and the ‘Missing Girls’ in the South Caucasus” by Lasha Lanchava). 

Responding to concernsregarding the(economic) future of the Georgian nation, the government initiated a number of counter measures, primarily aiming at increasing the birth rate. There are two questions: (a) are these steps really needed, and (b) can they reverse the downward trend in population size?

WHAT’S THE PROBLEM WITH LESS PEOPLE?

Most economists think thata shrinking populationleads to tremendous economic problems, arguing that the economy will run out of labor,one of the main inputs in the economic production process. 

Yet this reasoning is not as waterproof and unshakable as it isoften presented. What really counts for economic progress is income per capita, and if there are less people in a country, less total output is needed to keep the income per capita constant. The problem is not that a society is shrinking, but it is the shift in the age structure which causes trouble. An ageing population has relatively more old people, who are only consuming what others produce, and relatively less young people, who need to provide for themselves and the pensioners. A shrinking population usually comes along with an unfavorable shift in the age structure, so that both problems are often equated, but this is a dubious practice, as the economic grief caused by an ageing population may differ considerably among countries whose populations decrease at the same rate. Ina high-income country like Japan, life expectancy stands at 83 years, sothat, roughly speaking, on average people arealive for another 18years after they retire (neglecting the fact that 83 years is the life expectancy at birth – the life expectancy of somebody who has reached age 65 iseven higher). In Georgia, on the other hand, life expectancy stands at 73 years, so that people on average consume only about 8 more years after they retire. Therefore, the economic problems caused by an ageing population are way more severe in a country like Japan than in Georgia, though the populations of both countries decrease at a similar pace. 

As the problem is the age structure and not the decline in the population size as such,policies which aim at stimulating the reproduction rate are only indirectly tackling the problem. A more direct approachis to increase the retirement age – a solution which is implemented in some countries, e.g. in Germany, where until 2031 the standard retirement age will be gradually moved to 67 years. If throughout the 21st century, life expectancy in Georgia will soar and the population will age, this will only cause additional economic problems if the retirement age will not be adjusted accordingly.

The standardargument about the economic perils of an ageing society treats labor as a both indispensable and homogeneous input in the production process. In the 21st century, however, we observe that an accelerating automatization takes place, and it is rather unclear how much labor will still be needed in in the production processes of tomorrow. There is no doubtthat certain kinds of labor, namely unskilled work, willhardly be demandedin the future. Germany, together with Japan, has worldwide the biggest problem with its age structure (the positive attitude towards the inflow of refugees is partly driven by an anticipated future shortage of labor), and already today, each German worker has to feed half a pensioner.  Yet while labor is feared to become scarce, the unemployment rate of unskilled workers in Germany stands above 20%, and nobody believes that it will go down again in the upcoming decades. It is clear that what is needed is not any labor, butskilled labor, the supply of which is very often not achieved through measures which stimulate general reproduction rates, as we will argue further down. 

Finally, the global perspective is often neglected in this debate. A world population of about 10 billion, as it is expected by the middle of the century,is not sustainable for the planet, in particular if these people want to live under economically decent circumstances (Nobel Prize laureate Konrad Lorenz makes this point convincingly already in his 1973 book Civilized Man's Eight Deadly Sins). One may therefore argue that a constant (or temporarily declining) population is an achievement, and instead of being reversed where it has occurred, itshould be realized on a global scale.

FIGHTING THE TREND

The Georgian Dream government began formulating demographic policy goals already in 2013 when it established theDemographic Development Foundation. Inthe same year, relevant changes were made to the labor code. Paid parental leave duration wasextended from 126 to 183 days, unpaid leave from 477 to 730 days, and state payments per baby were increased from 600 to 1000 GEL.In 2014, the Government set up a targeted incentive program, providing the parents of three or more kids with financial assistance of two years after birth. Only people residing in regions which experienced a population decline during the last 2 years are eligible, and benefits varyby settlement type, rangingbetween 150 and 200GEL per month.Just inAugust 2015 the government spent more than half a million larion this program.

The impact of monetary incentives on the birth rate is hotly debated since many decades (see “On Two Schools of the Economics of Fertility” by Warren Sanderson, Population and Development Review2, 469-477, 1976). There is plenty of evidence from high-income countries that the procreation behaviors of those who are well-qualified and have economic opportunities are hardly influenced by some payment that will be received after birth. The consumption opportunities forgone through raising kids can hardly be compensated for by state assistance, and having children may often conflict with the lifestyle and time allocation envisioned by economically successful people. This was already true for 19th century Victorian England, as J.A. Banks writes in one of the first studies on the subject: “The attitude towards the material comforts of modern existence and the growing expensiveness of children and adolescent contributed their share to acceleration in the fall of the family size.” (Prosperity and Parenthood, 1954). Even in the Roman Empire under Emperor Augustus, low birth rates were perceived as a problem and men were fined for not getting married, but according to Tacitus, these attempts were not successful at all. More recently, neither Singapore’s “National Nights”, South Korea’s “Wednesday-Family Days”, nor Japan’s baby robots worked. Only the brutal measures that were taken in Ceaucescu’s Romania, where condoms and any other kinds of contraception were forbidden, and women were forcibly examinedfor pregnancies (which always had to be carried to term), seems to have had an impact, yet this is infeasible and undesirable in a free society. 

The evidence comes from countries, however, which are all well-developed, and this may be an important factor explaining the failure of these programs. Germany is experimenting for a long time with various initiatives to incentivize procreation, which started already under the Nazis, who awarded badges to mothers (the infamous Mutterkreuz, the “Cross of Honor of the German Mother”, which was awarded in three classes for mothers who gave birth to 4, 6, and 8 children). After the war, a plethora of programs which set monetary incentives for reproduction were started, and an important lesson that was learned from these is that people who have low income and lack economic opportunities typically do respond to monetary incentives (for a summary in German language, citing some scientific studies, see “Wo kommen die Kinder her?”,by Carsten Germis and Inge Kloepfer, in Frankfurter Allgemeine Zeitung of 12/04/2009). Therefore, in Georgia, where incomes are low and big parts of the population suffer from a lack of economic opportunities, it may well be the case that monetary incentives will make a difference!

This is confirmed by data. According to the 2013 CRRC Caucasus Barometer, slightly less than half of Georgians considered three to be the ideal number of kids for a family. The fact that there is a clear mismatch between thesewishes and reality seems to be related to concerns about the economic circumstances in which children will grow up. Those who are more optimistic about the future of their children have stronger preferences for having more children. 

KEEP THE WOMEN IN GEORGIA!

Future policies should be driven by another aspect not mentioned so far. In 2013, Georgia had more births than deaths, and if there was no net emigration, the population would grow, not decline!There are only four countries in the world where net emigration is responsible for the population decline, reversing an otherwise positive population trend, namely Albania, Georgia, Puerto Rico, and Spain.

Therefore, one of the most promising strategies would be to implement gender-minded policies which reduce the emigration of women of childbearing age, as for many young women, it simply seems to be unattractive to stay in this country. Sweden, which managed to increase fertility rates almost up to replacement level, has achieved thisthanks to gender-minded policies (Sweden is number one in the 2012 Women’s Economic Opportunity Report, while Georgia is on place 59). Such changes may require policies that take into account the attitudes of people. In Georgia, the law does not openly discriminate against women, and even fathers can use paternity leave after a child was born. But almost no man makes use of this opportunity. In Sweden, on the other hand, there are bonuses for parents who split their parental leaves, and certain free days of parental leave are only available to fathers.

Anecdotal evidence suggests that many Georgian young women who leavethe country for work or studydo not come back to marry their Georgian sweethearts. This may be due to antiquated gender roles, which are still deeply rooted in in the mentalities of many Georgians, making it difficult forambitious women to combine their private and professional lives in this country.

Addressing this issue will be necessary if the Georgian people want to prevent extinction in the long run.