Singapore will start
paying almost $55,000 for each child to boost its birth rate after the
fertility rate fell to a record low of 0.87 children per woman last year.
And it isn’t the only
country trying to tackle the problem with money.
Australia pays up to
$2,834 for the first child and $1,418 for subsequent children. China provides
3,600 yuan a year for each child under three, around $535 a year, and up to
$1,605 over three years. Japan’s public health insurance system pays 500,000
yen, around $3,400, for each child at birth. And the list goes on.
Yet low birth rates
remain a problem, with more than half of the world’s countries below the
replacement level of 2.1 children per woman in 2024, according to the UN.
Why?
People are having
fewer children because of a shift toward careers and self-development,
uncertainty about the future, high education and childcare costs, and housing
costs. In short, money and time are the main constraints.
As for the
repercussions, while robotics and AI
can replace workers, they can’t replace consumers, so a shrinking
population can weaken demand even as technology boosts productivity.
An aging population
also puts pressure on government budgets through higher pension and healthcare
costs, forcing governments to raise taxes, borrow more or cut spending
elsewhere.
That could become a
problem for the economy and, eventually, markets, including the Dow Jones and S&P
500.
One solution is
immigration, with a focus on skilled workers. For the past 40–50 years, the US,
for example, has brought in talent from around the world, helping its economy
outpace Europe. Now, though, Washington
is tightening immigration policy, with the current administration proposing
a fee of more than $100,000 for new H-1B visas.
What does this mean
for investors?
Automation and
robotics are likely to keep attracting investment as companies look to offset
labor shortages. Healthcare and elderly care are another long-term winner, with
pharma companies focused on age-related diseases, nursing home operators and
health insurers likely to see steady demand regardless of the business cycle.
As for the risks,
countries with the weakest demographics face rising pension and healthcare
costs and a shrinking tax base, putting long-term pressure on government debt
and potentially their currencies.
This article was written by IL Contributors at investinglive.com.