4 Conclusion
UN estimates and projections for the OECD over the period 1950-2050 show population growth slowing, the proportion of the population in the younger age groups declining, the proportion in the older age groups rising, and intermediate age groups left relatively unchanged. For most purposes, the countries and regions considered in this paper fall into two groups, with New Zealand, Australia, the recently developed countries, and North America in one “high fertility” group, and Europe and Japan in a “low fertility” group. The slowing of population growth, reduction in the share of the young, and increase in the share of the old are more marked in the low fertility group than in the high fertility group.
Summaries of the paper’s conclusions about specific demographic trends and the effect of these trends on New Zealand’s GDP per capita, relative to the rest of the OECD, are given in Table 5. As the table shows, neither New Zealand’s comparatively high fertility, nor its relatively young working age population, are likely to have much influence on New Zealand’s relative economic performance. The fact that the proportion of the population in the working ages will decline less quickly in New Zealand than elsewhere in the OECD (other than the recently developed countries of Korea, Mexico, and Turkey) will be to New Zealand’s relative advantage, though the effect is unlikely to be large. There is much greater uncertainty about the effects of growth in the absolute size of the working age population, and the effect of differences in the balance between old and young dependants. The former may either help or hinder the high fertility countries such as New Zealand, while the latter will almost certainly be of some help, though how much is unclear. The combined effect of the demographic trends is likely to be positive, though the magnitude is uncertain.
| Demographic trend | Effect on relative GDP per capita |
|---|---|
| Proportion of population in the working ages projected to decline less in NZ than elsewhere in the OECD, except for the RDCs. | Slight advantage over rest of OECD, other than RDCs, via “population” term W/P. Magnitude of effect moderate but predictable. |
| Working age population projected to continue increasing over next 20-30 years in New Zealand, Australia, North America, and RDCs, and to decline in Japan and Europe. | Potentially conflicting influences on productivity (Y/H). Positive influences through agglomeration effects, and negative influences through reduced returns to investment in capital and labour-saving technologies. Net effect extremely uncertain. |
| Fertility levels higher in New Zealand, Australia, North America and RDCs than in Europe and Japan. | Little evidence for common assumption that higher fertility implies lower participation (H/W). Effect likely to be small. |
| Working age population younger in New Zealand, Australia, North America and RDCs than in Europe and Japan. | Changes in the age structure of the working age population smaller than generally thought, and have only a minor influence on average participation (H/W) and productivity (Y/H). Effect small and predictable. |
| Old-age dependency low and youth dependency high in New Zealand, Australia, North America and RDCs, compared to Europe and Japan. | Fewer fiscal pressures, and hence less likelihood of tax rises or expenditures cuts threatening participation (H/W) and productivity (Y/H). Effect positive, but highly uncertain. |
Assessing the importance of demographic change to growth in GDP per capita currently involves a large element of subjective judgement. It is reasonable, however, to hope that future progress in the economics of population will reduce some of these uncertainties. Of the potential areas for future research indicated in Table 5, the effects of growth in the working age population perhaps deserves the greatest attention. The size of working age population is one variable over which governments can exert substantial control, through migration policy. But at present, the research literature gives no clear answers on whether the net effect on GDP per capita of continued labour force growth is positive or negative.
Despite all the uncertainties, however, there is an important sense in which judgements about the importance of demographic change can be less tentative than judgements about other influences on future economic performance. Demographic trends are one of the few social trends for which predictions 20 or 30 years into the future are not just speculative. It is reasonable to expect that demographic trends will help New Zealand gain some economic ground on Europe and Japan, though perhaps not Australia and North America. This serves as a reminder that, for all the disadvantages it is believed to face, New Zealand’s economy also enjoys a few advantages.
Recognition of New Zealand’s relatively favourable demographic conditions is important when assessing the relevance of imported advice for dealing with the “old age crisis”, particularly if this advice originates from Europe or Japan. The differences between New Zealand’s demographic conditions and those of Europe and Japan are differences of degree rather than kind. But population issues that deserve urgent attention in Europe and Japan do not necessarily deserve the same attention here. Setting appropriate priorities depends, among other things, on a proper understanding of ongoing demographic change.
