By Paolo von Schirach

January 27, 2012

WASHINGTON – As if it did not have enough problems with its never ending fiscal crisis, Europe is also afflicted by long term, possibly terminal, demographic decline. Across many countries there are fewer families, with fewer children or no children at all. This trend shows in the progressive decline of fertility rates, now below “replacement level” for most European countries. Simply put, populations are declining. By comparison, the US , with an average of 2.06 children per woman, is doing a bit better. 2.06 is not great, but it is acceptable, as it shows a small population increase.

Low fertility rates

Whereas all of Europe has fertility rates below replacement level. France is the exception, because the State provides economic incentives so that people will have large families. And so France has the best numbers, with 1.96 children per woman. This is almost replacement level.  Great Britain is just a bit below, with a rate of 1.91.

But everywhere else there is population decline. What varies is the speed. Northern countries do a little better. Norway, Denmark and Finland have an average rate of 1.75 children per woman. But as we go further south it gets worse. Germany, Austria and Hungary are at 1.40. And then we have Italy and Greece with 1.39 and 1.38.

Italy’s case

Let’s look at Italy a bit more closely, as it is at the bottom of the class. In Italy there were 556, 000 children born in 2011, 6,000 fewer than 2010. Meanwhile, 592,000 people died, 4,000 more than in 2010. And so, for the fifth consecutive year Italy experienced net population decline. This is now the trend line.

And this is not all. The population is not only declining, its composition is changing. While Italy’ population shrinks, immigrants are the only growing  segment. And this is problematic, since most of the immigrants are ethnic and religious minorities, largely coming from North and Sub Saharan Africa.

Population shrinks, immigrants grow

These mostly unskilled newcomers usually have a hard time integrating, and they often settle at the bottom of society. But their numbers grow fast, while the native population is beginning to decline. In 2011 the immigrants grew by almost 290,000. These are not huge numbers; but the trend indicates increases in the years ahead. And this is because of both, more arrivals and more children per immigrant woman. Indeed, if we break down Italy’s fertility rates, we see that immigrant women have a rate of 2.07, while Italian women have only 1.33. So, expect more immigrant children. (Italy’s national average of 1.38 children per woman is jacked up a bit because of immigrant births. This also applies to other countries with even larger immigrant populations). 

Difficult to integrate the immigrants

If most immigrants could harmoniously integrate and contribute to society just like all the others, or even more, immigration would be a net plus. But, so far, it is not so. And therefore a more African Italy may fare worse in the years ahead. Although this is going to be a slow process, (immigrants in Italy are only 4 million out of population of 60 million), if these birth rates continue unchanged among Italians and immigrants, the number of immigrants will increase both in absolute terms as well as a percentage of the total population.

So, unless these newcomers and their Italy born children find their own upward social mobility by improving their education levels and by joining the professions this trend may well translate into further economic decline for Italy and other countries affected by similar dynamics. 

Impact of shrinking numbers for welfare state financing

While the impact of larger, difficult to assimilate, immigrant populations will be slow, the overall stagnation and decline of the indigenous European populations already have noticeable effects, none of them good. Fewer births also mean on average older populations, as people live longer. And all this has negative economic implications.

Fewer young people, results into a reduced pool of active workers, reduced economic dynamism and a smaller tax base. This translates into lower revenues to fund complex and expensive welfare and retirement programs benefiting a larger number of seniors receiving payments for a longer period of time, as old people live longer. 

Lack of revenue, more public debt

Usually the benefits to the retirees are paid by the contributions of active tax payers. For this to work, all societies relying on these systems need to have more workers than retirees. If the ratio is inverted, then entitlement  programs come under stress, as the revenue generated is insufficient to pay out the benefits that people expect. Lacking revenue to meet their obligations to seniors, government resort to borrowing. And public debt then piles up. Sounds familiar?

Decline

As I said, the picture of declining populations is not inspiring. It suggest slow but steady decline. Italy and the rest of Europe will not suddenly sink, like the ill fated Costa Concordia cruise ship. But shrinking numbers and aging populations, with additions coming mostly from hard to integrate immigrants, suggest harder times ahead.

In all this, the only meagre consolation is that other developed countries are doing even worse. In South Korea and Japan the average fertility rate is 1.21, much worse then Italy or Greece. And they do not like immigrants. And so, at some point, there will be no one left over there. As famed British historian Arnold Toynbee aptly put it long ago, civilizations do not perish because of foreign invasions or famine. They commit suicide.

Posted in Economy Entitlements Europe Featured Fertility Rates France Germany Greece Population Public Debt Skilled Immigrants
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