More children will not solve aging population problem

On Thursday, Turkish Statistics Institute (TurkStat) President Birol Aydemir held an important press conference. During the conference he presented the new TurkStat logo, while reiterating the fundamental principles of TurkStat like reliability and transparency. Mr. Aydemir also informed the press about their new policies that led to the revision of some statistics and then released revised figures on tourism revenue and expenditure. The bottom line of the revision is that the net and positive contribution of tourism to the balance of payments equals $2.2 billion. This is not an important amount considering the current account deficit is $49 billion.
In fact, the most surprising item to emerge at the press conference was the release of Turkstat's new population projections up to the year 2075. These new projections did not reveal anything new about the dynamics of Turkey's demographics, but they did contain new insight on the debate over the problem of the country's aging population. Turkstat's basic figures regarding total population in the long run assume a decreased fertility rate, moving from 2.0 to 1.65 in 2050, when the population will reach its peak at 93 million. The total population number is expected to decline to 89 million in 2075, and the share of the population that is older than 65 will continue to increase. This share from an actual 11.3 percent will rise to 14.9 percent in 2023, to 21.7 percent in 2035, to 32.9 in 2050 and 47.9 in 2075, which means close to half of the population will be made up of seniors. No doubt that the aging population will turn into a serious problem within two decades. The new population projections confirm my recent estimations (see my column of Feb. 4, “Fears of aging population”). The adverse effects of an aging population for the country like high public expenditure versus insufficient revenue will start to become devastating for the economy in the second half of the 2030s. From now until 2035 the population between 15 and 64, the working age population, will increase by 9 million, while the senior population will increase by 7 million. Nevertheless, even if we assume a high labor force participation rate – 80 percent, for example – the increase in the workforce will be just 7 million. That means that through 2040 the increase in the number of seniors will surpass the increase in the number of people added to the workforce. Some suggested solutions to the problem of an aging population, like a more rapid increase in the number of working women or the accelerated increase in labor productivity through better education and technological progress, but they will not remedy the situation. We do, however, have to implement the aforementioned solutions if we want to have sustainable economic growth that is close to the potential growth rate of the Turkish economy, estimated at around 5 percent. The suggested solutions are necessary in order to prevent problems like unemployment and poverty from becoming serious headaches in the near future. Can the three-child policy be part of the solution? I wrote in my Feb. 4 article that “more children can be part of the solution if an efficient way to reverse the decreasing fertility rate is found.” Well, the TurkStat projections show that even if this reverse occurs it will not be very helpful in avoiding the adverse effects of an aging population. Indeed, TurskStat looked at two alternative scenarios in population dynamics. In the first scenario the fertility rate starts to increase steadily from its actual level of 2.0 to 2.5, and in the second projection it would move to 3.0 by 2050. However, the extra number of people of working age by 2035 only amounts to 500,000 in the first scenario and 750,000 in the second. Obviously, the contribution of the three-child policy towards solving the aging population problem would remain very modest. Instead of trying to convince families to have more children through financial incentives it could be wiser to spend the money on education, for example. So, what to do? The more I think about this aging issue the more I am convinced that the only solution is to bring in a foreign labor force in the 2030s. What kind of workers and from where? Let me provide a reminder that Turkey has been importing labor from its neighbors since the 1990s, but the numbers are a state secret!