The Baby Menace

President Vladimir Putin says it’s Russia’s "most urgent problem." Commentator Pat Buchanan argues it’s part of the reason America is "disintegrating." Former U.S. Commerce Secretary Pete Peterson calls it a "threat more grave and certain than those posed by chemical weapons, nuclear proliferation, or ethnic strife."

What is this global menace? Babies. Or, more accurately, the lack thereof.

In fact, if you listen to politicians and pundits, it’s the most dangerous threat we’ve faced since, well, overpopulation.

The trend is certainly real enough. The global fertility rate fell from five children per woman in 1950 to just 2.5 in 2011. In each of the G-8 leading economies, the fertility rate was below replacement level (roughly 2.1 children per woman) last year. Many economists argue that this demographic decline is an economic time bomb that will blow up when there are too few working-age adults to support the growing ranks of the elderly. But is our gray future really that dire?

University of Göttingen economist Klaus Prettner thinks it’s too simplistic to reduce a country’s productivity to a numbers game. "If workers are better educated or healthier, they are effectively more productive," he says. In a recent article for the journal Labour Economics co-authored by fellow economists David E. Bloom and Holger Strulik, he argues that the "effective labor supply" will actually increase even as populations fall.

"If fertility declines, people invest more in the education of their offspring and raise healthier children," Prettner says, noting that when women have fewer kids, they are more likely to join the workforce. "These effects can compensate for the fall in the total number of people in the labor market," he says.

Prettner and his co-authors looked at World Bank data for 118 countries between 1980 and 2005, and they found improved education and health outcomes in countries with falling fertility rates — which they think can more than compensate for a decrease in total labor force. In light of this, it might not be surprising that the countries with the world’s lowest fertility rates — like South Korea and Singapore — have some of the world’s top school systems.

At a certain point, Prettner concedes, fertility rates could fall so far that they counteract these positive effects. But for the time being, there’s no reason to panic, Vladimir. A grayer Russia could also be a better Russia.