Why boosting immigration or fertility won’t fix our ageing population

Sleeper: we’ll retire later even with a boost to fertility rates. AAP

Many public debates come down to facts – issues like “Whose costing of the Opposition’s spending plans was correct?” or “How many people died in Iraq?” Too often the media report a strident opinion from both sides and we have to guess that the truth lies somewhere in between. Surely we can do better when it comes to facts.

Some issues of course depend not on facts but on values. For instance, I cannot convince someone on the issue of gay marriage by quoting a scientific study. But many issues require us to agree on a set of numerical facts.

Once we have these, we make our own value judgements and trade-offs. Often though, you cannot discover the facts by a quick browse of the web. You need some expertise and experience to find the relevant numbers and to interpret what they mean.

One hot public issue that comes down to numbers is Australia’s population. Is the population in danger of decline or is it exploding? How serious is the oft-quoted ‘ageing’ problem and what can we do about it?

These are not questions to be settled by door-stops from politicians or opinionated commentators.

In fact, fertility is at a 30-year high and the population will inevitably increase for at least 40 years.

Here are some numerical facts. Starting from a population of 22.1 million at the beginning of 2010 we can project the population in 2050 using simple arithmetic. With zero net migration and the current fertility rate of about 1.95, the population will be around 24.5 million in 2050.

If the fertility rate returns to its historical low of 1.73 it will still be around 22.9 million in 2050.

Here is another scenario to consider. Suppose that we drop the baby bonus and that fertility falls back to about 1.80 in response. Suppose that we also reduce net overseas migration to 100,000 per year from current levels of 250,000.

Under these two policies – which represent the absolute extreme of what would be politically possible in terms of reducing population pressure – does the population stagnate? No. It increases to 28.7 million in 2050.

You would think that this would be common knowledge and any public pronouncement that we might run out of people would be ridiculed.

The other key issue with population is the ageing problem. How serious is the problem and what should we do?

It is easy to run alternative projections and to discover that the population is set to age drastically over the next 30 years almost no matter what we do.

This is a consequence of seeing the post-war fertility rates of 3.5 children per woman fall to less than two in a generation.

Having more elderly workers is largely inevitable, and the very favourable age distribution that we had in the 1980s is an unsustainable deviation from equilibrium. Surely then, we would be better off debating how we are going to cope. Facilitating later retirement and encouraging savings are two pretty obvious policy responses.

How much effect does higher fertility or immigration have on ageing?

Projections tell us that the effects are small and that either higher fertility or migration is equally ineffective. If you crunch the numbers, you will find that with under zero population growth, by 2050 people will have to retire at age 73 instead of the notional 65, if we are going to maintain the current dependency ratio. If we increase fertility and/or migration by plausible amounts, this would reduce to about 71. Not a huge effect.

There is much more hand-wringing about the number of elderly than the number of children. No politician can talk about the burden that too many children might place on an economy. But let’s look at it now.

If we include children as dependents as well as the retired, then the picture is different. The best way to mitigate this total dependency problem is by a combination of migration and lower fertility rates. The reason is that fertility injects babies into the population who have to be fed and educated for 15 years whereas immigrants tend to be overwhelmingly in the more productive age ranges.

Lower fertility and moderate immigration sounds like exactly what we had 10 years ago before Peter Costello started suggesting that the ageing population was a problem that could be fixed by financial inducements.

Surely, these facts should be more generally known and public commentators who deviate from these facts should be reminded of them. We could then focus on more complex problems such as the implications of a larger population on the natural and urban environments, as well as the amount of cultural diversity people are comfortable with.

Let’s not blame the media for this though. Journalists run on a short news cycle, and most of them would love to be able to resolve an issue with the help of expert input.

Unfortunately academics, for various reasons, are often reluctant to become public commentators. But with the greater public accountability of universities, there is a new mood.

And with developments like The Conversation, the barriers to participation are suddenly less.

I sense that there may be some change coming with the next generation of academics. For the sake of intelligent democracy, I hope so.

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