Wednesday, July 08, 2009

More on Cuban population futures

Cuba's population aging, which I blogged about back in August 2006, is starting to gain more press attention.

This country reached a tipping point in 2006. It wasn’t any one event in particular, but according to Cuba’s Office of National Statistics, the island’s population of 11.2 million stopped growing that year, and dipped slightly. And it has been falling ever since.

Cuba’s population is projected to decrease by 100,000 by 2025, and the arithmetic behind that decline is a simple matter of subtraction: More and more Cubans are leaving the island, and Cuban mothers are having fewer children. The country’s fertility rate of 1.4 children per woman ranks as the lowest in Latin America.

The statistics highlight a risky demographic experiment that has been developing here for years.

While Cuba’s socialist health care system takes good care of the elderly and has prolonged life expectancy rates, the island’s lousy economy--squeezed by U.S. trade sanctions and its own inefficiencies--is driving young people to emigrate, while limiting family size.

As a result, senior citizens will be one of the fast-growing sectors of Cuba’s population in the coming decades. Life expectancy in Cuba is now 75 years for men and 79 for women, roughly on par with the United States, where those figures are 75 and 80, respectively, according to United Nations statistics. By 2025, according a recent article on the topic in Cuba’s communist newspaper
Granma, 26 percent of Cubans will be 60 or older--the highest percentage of seniors in Latin America.


The article goes on to note that, with strained pension and other welfare systems, the standard of living for Cuban seniors may be quite low. Moreover, as the article notes, Cuba's aging isn't helped by emigration; the abstract "Cuban International Migration and Low Fertility Conditions ..." makes the point that Cuba's natural increase is diminished substantially by emigration. This will alter Cuba's standing in the Caribbean: A G. Edward Ebanks notes in his paper, continued high population growth in the Dominican Republic can expected to make that country the largest Hispanophone country in the Caribbean by the mid-21st century, while--he does not say, but this can be inferred--the Dominican Republic's lack of controls on internal migration allows for more fluid population distributions more suitable for an effective capitalist economy.

The UNFPA paper Social policies, family arrangements and population ageing in Cuba, by Rolando García Quiñones, goes into substantial detail. The findings are relatively predictable: Urban and developed areas are relatively older than rural and underdeveloped areas, the size of the average family has declined even as younger people find it necessary to stay in the family home on account of housing issues, and so on. The raising of the retirement age is something that receives extended treatment.

Until 2008, retirement age was 55 years for women and 60 for men. A new Law on Social and Security Assistance, approved by the end of last year by Parliament, came into effect on January 2009. Among other aspects, the new law modifies retirement age, increasing it by 5 years. But this increase will be gradual.

From 2009 onwards, retirement age will be raised six months each year, up to the year 2018, when it would be established at 60 years for women and 65 for men. Its application during the next ten years defers the retirement of more than 285 thousand people, with a saving of 4.5 billion pesos to the Social Security coffers. In the mean time it has been decided to increase the retirement benefits and to establish other benefits.


Of course, things can and will be complicated by migration. I've blogged about the division between Cubas A and B, a relatively developed west and a relatively underdeveloped east that traditionally produces migrants. Let's not forget the United States, home to a Cuban-American community with members numbering more than a tenth of the population of Cuba itself and concentrated in a south Florida that's the nearest point of American land to Cuba itself, providing beside numerous human links to sustain chain migration.

These migrations, on top of the general population aging, will certainly have a major impact on Cuba's long-term prospects. Replacement migration is a possibility, I suppose, but where from? Cuba's high human development doesn't correspond to the sort of high economic development that attracts migrants. It may well be that even with a best-case post-Castro transition, Cuba's economic prospects may be hamstrung by an excess of seniors and an insufficiency of workers. What the consequences of this would be for Cuban stability I leave to others to imagine.

22 comments:

Cicerone said...

Looks like Cuba faces a very poisonous combination of very low fertility with emigration. In my opinion, the population prognosis is too optimistic. If the population already shrinks now, and the fertility rate stands at 1.4, the population momentum has to decline very quickly. Emigration also creates a negative population momentum, as the young people emigrate, so the number of potential mothers is shrinking even faster than the total population.

Cuba is not only in a low fertility trap, but also in an emigration trap. Only the Ukraine is in the same serious situation.

ironrailsironweights said...

Emigration also creates a negative population momentum, as the young people emigrate, so the number of potential mothers is shrinking even faster than the total population.

If I'm not mistaken, Cuba tightly restricts emigration. Almost all of the Cubans who've arrived in Florida in recent years have escaped by boat.

Peter

snakeoilbaron said...

Between people smugglers and rafts they manage something like 1.5 people per thousand residents in emigration if I remember correctly. (Seventh happiest nation on Earth they tell me - says something about Earth I tell them.)

While somewhere (likely this blog, I think) I was informed that total fertility rates can be inacurrate when reproductive patterns are changing, Cuba has an average female age close to forty so even if fertility rates rise above replacement levels it would probably take a long time to reverse the decline right?

Pete Murphy said...

Many people, including most economists, see never-ending population growth as the only way to head off concerns about how to deal with "an aging population." But, since simple laws of physics dictate that never-ending population growth is impossible, this approach is doomed to failure and only assures that we'll be faced with an even bigger problem at some point in the future.

The biggest obstacle we face in changing attitudes toward overpopulation is economists. Since the field of economics was branded "the dismal science" after Malthus' theory, economists have been adamant that they would never again consider the subject of overpopulation and continue to insist that man is ingenious enough to overcome any obstacle to further growth. This is why world leaders continue to ignore population growth in the face of mounting challenges like peak oil, global warming and a whole host of other environmental and resource issues. They believe we'll always find technological solutions that allow more growth.

But because they are blind to population growth, there's one obstacle they haven't considered: the finiteness of space available on earth. The very act of using space more efficiently creates a problem for which there is no solution: it inevitably begins to drive down per capita consumption and, consequently, per capita employment, leading to rising unemployment and poverty.

If you‘re interested in learning more about this important new economic theory, then I invite you to visit either of my web sites at OpenWindowPublishingCo.com or PeteMurphy.wordpress.com where you can read the preface, join in the blog discussion and, of course, buy the book if you like.

Please forgive the somewhat spammish nature of the previous paragraph, but I don't know how else to inject this new theory into the debate about overpopulation without drawing attention to the book that explains the theory.

Pete Murphy
Author, "Five Short Blasts"

Edward Hugh said...

Hello Pete,

"Many people, including most economists, see never-ending population growth as the only way to head off concerns about how to deal with "an aging population." "

Well I think we need to be careful here. I personally don't think we need "never ending populatioon growth" to deal with ageing, but I do think we need more sustainable ways of restructuring the population pyramid. Simply having thirty years of 1.3 child per family is only going to crash your national economy.

Basically, you don't need to have more children in the first world if you don't want to, you can simple move the deckchairs around by inviting immigration. But many people don't seem to feel happy with that. So raising fertility back to replacement rate in the developed economies is the second best solution given the constraint that people don't want the other one, and that we live in democracies.

Of course in those countries where fertility is above replacement it needs to be brought down to replacement, but I think this is obvious, and beneficial for everyone.

If you have proposals as to how the developed and rapidly ageing socities can sustain economic growth and pay for the rising proportions of dependent elderly without a combination of large scale immigration and rising fertility to replacement, then I as an economist would be pleased to hear about it.

Anonymous said...

But that replacement level is the problem. I don't see how you could get there when you consider that some people can't get children and other stay single during their fertile years. That means that those others need to get on average 2.5 children and that is way to hard to implement socially.



ps. I know there are those who are not single and can get children and decide to not get children but outside they are insignificant outside the German speaking countries

Pete Murphy said...

Edward, since you are an economist, I'd like to offer you a complimentary copy of my book. I have been trying to win over economists to my theory and you seem to be among the few who would advocate for even a stable population. If you'll contact me with a shipping address, I'll be happy to get a copy into the mail to you - free of charge and no strings attached. I promise you that the theory I've advanced in this book is entirely new and I think you'd find it quite intriguing.

To briefly respond, though, I certainly don't advocate thirty years of a 1.3 fertility rate. In the book, I propose a very slow, steady decline in population by reducing the fertility rate to 1.79 while dramatically reducing immigration.

The purpose of this population decline is to actually improve our economy, not in macroeconomic terms but in micro terms. GDP would decline, of course, but more slowly than the decline in population because of the positive effect a lower population would have on per capita consumption.

This theory also has significant implications for trade policy.

I don't deny that the "aging population" problem in an environment of a stable or even declining population will present a problem, but it's a problem that has to be faced one way or another, eventually. Better to deal with it now than when the population of our aged is much larger.

Edward Hugh said...

Hello Pete,

"In the book, I propose a very slow, steady decline in population by reducing the fertility rate to 1.79 while dramatically reducing immigration."

The first part seems fine with me, I even see this as inevitable, although I don't think fertility levels can be planned. But why the dickenms do you want to reduce immigration. Isn't the problem an global one, and don't we need to address it globally. If we don't attach poverty in the third world, any minor adjustment in fertility we may see in the first world is likely to be dwarfed by high fertility amongst the poorest poor, and planetary population will shoot up as a result.

Pete Murphy said...

Edward, my book addresses problems with the American economy. My theory is that, beyond a certain "optimum" population density (the point at which over-crowding begins to erode per capita consumption), further population growth becomes cancerous, driving up unemployment and poverty. Thus, the goal is to stabilize and even reduce our population. Since rampant immigration is the source of most population growth in the U.S., achievement of a stable population is impossible if allowed to continue at its present rate.

If we preach to the world that population stability must be attained through a reduced fertility rate, but we allow our population to continue to climb through immigration, what message does that send to the rest of the world? That it's OK for us to sustain population growth in the U.S., but we want you to cut yours. This kind of approach is quickly denounced by the rest of the world as elitist and even racist.

In addition, our high rate of immigration serves as a population relief valve, allowing other nations to maintain a high fertility rate without consequence. They can simply export to the U.S. their excess population. Thus, we become enablers of further population growth.

Edward Hugh said...

Hello again Pete,

First off, I am certainly not thinking of calling you racist or elitist. But I am looking at the population and resource issue on a global scale, and am interested in finding stability.

Basically, my view is that the current economic depression (yes depression, not recession) has the population imbalances at its heart, and countries like Japan, Germany and China with very low levels of long term fertility and highly usntable pyramids have been saving at very high rates in an attempt to stabilise their situation, while this has flooded the planet with liquidity, producing bubbles all over the place, and especially in the UK, the US, and Spain, where I live.

We need to address some of these imbalances as soon as possible. Part of the answer from where I am sitting involves increasing long term fertility in some key countries (not the US) to make them more sustainable, while accepting large volume immigration from countries which are under huge population pressure.

Raising living standards in those countries and reducing fertility by better female eduction and more empowerment is obviously a key component in any exit strategy here.

Basically, I'm not sure "density" is an issue, while I do think age structure distribution is. I mean, population density is far higher in the UK were I come from than it is in Germany, yet it is German consumption which is wilting on the vine.

"They can simply export to the U.S. their excess population. Thus, we become enablers of further population growth."

I don't think the mechanism works quite like this, since remittances raise living standards, and increased living standards tends to lower fertility (the inverse of what Mathus imagined), and recent behavioural studies (eg the World Bank in Pakistan) seem to suggest that the information feedback via immigration spreads lower desired family size ideals.

Basically, in the longer term I'm sure we would agree, we need another model for economic growth (possibly even contraction, as populations ultimately decline). The current one seems more like a pyramid game. What I would like to try and see achieved is a balanced transition from one state to the other, without collapsing everything in the middle, although the present global crisis is getting damn near to system breakdown. Too near for my liking anyway.

Pete Murphy said...

Edward, the problem with relying on economic development to stabilize a population is that economic development is actually the primary cause of population growth - not the cure. Yes, it does very slowly reduce the birth rate, but much more quickly reduces the death rate.

I'm not saying that the undeveloped world should be kept impoverished. Rather, we need to recognize that, as development takes root, we need to focus intently on reducing birth rates quickly, to avoid the otherwise inevitable explosion in population.

Again, I encourage you to think about population density and what happens to per capita consumption in situations where it becomes extreme - places like Japan, Korea, India, etc.

Edward Hugh said...

Hi Pete, and briefly, since I ma busy this afternoon trying to persuade people in Latvia to have more children, which I know you would disapprove of, but I have to do what I believe to be right.

"Rather, we need to recognize that, as development takes root, we need to focus intently on reducing birth rates quickly, to avoid the otherwise inevitable explosion in population."

We have a large common grounfd of agreement here. Ther are 6 billion people on the planet. My argument is that if we concentrate on 5 billion of them (in developing countries, and soon to be 8 billion) and have a real push to pring fertility down to replacement level all over the globe, this could be really effective.

Compared to this, an extra 2,000 a year in Latvia should be chickenfeed-

I also agree that this needs to be given a global strategic priority as part of the measures we adopt to move foreward out of the present crisis. This would involve a large deployment of resources, and a significant transfer of wealth from rich to poor, but I think it must be done, since if it isn't, I fear the resource issues some 50 years from now could be just like you are describing.

Edward Hugh said...

The thing is this, we are going to 8 billion people whatever. But we can't support 8 billion people with the kinds of energy consumption levels we currently practice in Europe and the US, so something has to be done, although I doubt that politicians are going to risk explaining this to their electors.So I fear we will come at this the hard way.

In this sense, the current crisis is just a warm up.

Pete Murphy said...

Why are you encouraging population growth in Latvia? It must be because you believe it will boost their economy. This is the same approach taken by all economists.

I applaud you for your concern about resources. Most economists simply dismiss it, claiming that we're ingenious enough to overcome such obstacles through recycling, substitution, improvements in efficiency and so on.

But my concern is not with resources. Even if resources were not a limitation, population growth is driving unemployment and poverty. It will be poverty that will prove to be our undoing, even in wealthy (formerly?) countries like the U.S., where the unemployed are dying every day for lack of proper medical care. Again, please think about population density and over-crowding and what that does to per capita consumption and per capita employment. (Start with the products that require the most space to "consume" - things like housing and vehicles.

Just as an example, consider the per capita consumption of housing in Japan, a wealthy country like the U.S. but ten times as densely populated. The median Japanese home is less than one third the size of the median American home (which is rather modest - not the "McMansions" you hear about), not because the Japanese like living in tiny homes but because there is no room for anything larger. Now, think about what that does to per capita employment in all the industries involved in building, furnishing and maintaining those homes.

The same thing holds true for virtually every product imaginable, with the exception of food and clothing. An excessive population density drives down per capita consumption.

Also, think about what happens when a reasonably populated nation attempts to trade freely with a nation that is badly overpopulated. In such a situation, a trade deficit and loss of manufacturing jobs is virtually assured - tantamount to economic suicide. It is this relationship that has been the driving force behind global trade imbalances, ultimately leading to the bankrupting of America and the global financial crisis.

Anonymous said...

How does a higher population lead to a higher unemployment? Don't get that so enlighten me.


The Japanese live in tiny houses because of government policy, not because of lack of space. Government like to constrict size and number of dwellings to keep prices high.

Pete Murphy said...

Whether Japanese homes are small because of government intervention or market forces, the root cause is the lack of space.

One may counter that housing isn't a concern because we can just stack people higher and higher in apartment buildings. However, such efforts to "create" additional space only exacerbate the problem. When people begin to share walls and one person's ceiling becomes another person's floor, the per capita consumption of products used to construct housing falls even further.

The same effect is seen in the per capita consumption of vehicles. It falls dramatically as societies become more densely populated.

Here's an even more graphic example - the per capita consumption of pleasure boats. The per capita consumption of boats in Denmark is less than half that of Norway and Sweden, whose population density is one eighth of Denmark's, in spite of the fact that Denmark is almost completely surrounded by water.

The per capita consumption of virtually everything (again, with the exception of food and clothing) declines in overpopulated societies. Think about the effect upon per capita employment. The only way that such societies are able to maintain low rates of unemployment is to manufacture products for export. That means that a nation like the U.S. must forever endure a huge trade deficit, which we've recently learned is impossible.

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Edward Hugh said...

Hello again Pete,

Well look, I certainly welcome amicable and well informed excahnges of views. I mean, it makes such a change from so many people out there who are quite frankly rude. But look:

"The only way that such societies are able to maintain low rates of unemployment is to manufacture products for export. That means that a nation like the U.S. must forever endure a huge trade deficit, which we've recently learned is impossible."

The main difference between us is you are working these movements on one single variable, population density, while I am using population median age and life expectancy.

Now would you accept an empirical test? I am thinking of the case of Latvia, where the population is one twentieth of that of Poland, but the land mass is roughly one third. There is lots of potential for agricultural development in Latvia, but unfortunately there simply aren't the people, or not at the right price to make investment in agriculture interesting.

But... Latvian consumption is about to follow the Japanese example, and Latvia will ultimately become an export dependent economy. It is in trasition there right now. I guess you can imagine why I think that is.

Aslak said...

Edward,
Just out of curiosity, assuming your theories are correct (and I think they're very plausible), what do you suppose will happen with the world economy when the three centers Europe, the US and East Asia, of the world economy are all aging. The US will admittedly get there slower, but who will everybody export to? India and Africa certainly can't take up the slack?

Also, shouldn't countries like Spain already be export-dependent? Why is Spain running such a persistent trade deficit?

Edward Hugh said...

Hello Aslak,

Well let's answer the eay part of your question first.

"Why is Spain running such a persistent trade deficit?"

Well, this can be answered on two levels, the first one why is Spain ABLE to continue to run such a large CA deficit, answer becuase the eurosystem makes it possible. But that wasn't your real question, what you want to know is why Spain hasn't yet become an export dependent economy?

Well, my answer would be, don't worry, it is just about to. This is what the current "huge" Spanish economic correction is all about. And I don't ask you to believe me simply because I say so, lets go and see. This should all be empirically testable.

Basically what Claus and I are saying is not an exact science yet. There seems to be a "partage des eaux" at around 41 (an age which may be affected by things like life expectancy one way or the other). But Spain enetered the massive borrowing and housing boom just when she was 39 pushing 40, so she seems to have hit a kind of "sweet spot", which may later become a very bitter one, where there was enough momentum to keep sucking immigrants in (5 million in 8 years, ie massive, unseen before outside the US I think) and thus maintainingt the boom. As Pete Murphy would say, this type of growth where you build houses to sell to migrants who come in to build them in the first place is a straight pyramid scheme, and of course eventually goes bust.

Edward Hugh said...

But on the broader issue you ask, let me cite an earlier question I got on Afoe this morning, and the answer I gave:

“So it seems to me that you are saying that the growth model, on which our economies are based, is good for times of population growth, but will fail us once (if) we stabalise global population. Or is there a way round this one?”

I’m afraid so. This would seem to be the conclusion. But the point I am trying to get across is that there are a number of different dynamics at work here. The problem you mention is a problem in the very long term, ie after 2050, or whenever. As you also point out, in the shorter run global population is rising sharply, so there is plenty of scope in the system to move the deckchairs around to everyone’s benefit.

What most concerns me at the moment, is that we try and understand the short term dynamics of these imbalances. If we don’t, and don’t take measures to correct them then we are just headed into another - and even bigger - version of what we just experienced.

What we can see clearly is that surplus countries do risky lending, while deficit countries do risky borrowing, and in the end it all blows up. Now we can be sure that a lot more countries, including the US and the UK are now about to become surplus generating countries (ie net lenders). So who will be the deficit countries?

Well let’s try India and Brazil. Could you imagine what things might look like in 2020 if what just happened to Latvia and Iceland were to happen to India and Brazil? This danger exists I’m afraid. The first step to trying to avoid this kind of outcome would be to try and better understand the dynamics of the imbalances, and move away from simplistic ideas that countries like Japan, Sweden, Germany and China are simply “bad” becuase they run surpluses.

Or should that be the US, Spain, the UK, the Baltics, New Zealand etc are “bad” because they run deficits (according to your political preferences)?

Such thinking is entirely superficial, and misses the big picture completely. As Summers showed, it is quite possible to model what has been happening, and get results which are reasonably credible.

Basically, even if we need a new kind of growth (or non-growth) model in the long run, we need to manage the transition from high growth to zero (or negative) growth reponsibly, and try to avoid the more dramatic boom bust components of the process.

In the long run, as Keynes so aptly said, we are all dead.

And yes, I do favour central bankers targeting median ages, I think slowing down the *rate* of population ageing should be an objective, since allowing it to happening too fast will only crash welfare and pension systems, as we are about to see (unfortunately) in Germany and Japan. We are in the age of new monetary tools, than god for that, maybe as well as looking at what the longer term inflation expectations were, they could start giving equal importance to surveys on “ideal familiy size”, that would be a start.

Aslak said...

Thanks for both the answers. You're right, I should have phrased the question better.

It will be interesting to watch Spain and Italy (which is actually even older) over the next five years. It's good to have a theory to work with that not just sounds good, but is also empirically verifiable.

I wonder if the demographic problem might prove to have much worse consequences in East Asia than in Europe, since A)Aging seems to happen quicker there than here in Europe and B) Their economic model is already based on export-driven growth.

Having the demographic factor compound an already export-dependent economy seems potentially devastating.

Pete Murphy said...

Edward, regarding Latvia, it already has a population density greater than the U.S., and more than ten times greater than both Australia and Canada - agricultural powerhouses. It doesn't make sense that they need to increase their population in order to develop agriculturally.

Regarding your answer to another poster, I would hardly consider "beyond 2050" to be the "very long term." That's only 40 years away - a very short time frame in the grand scheme of things.

Yes, stabilizing (or even shrinking) the population will present some economic challenges, but they are challenges that can be faced much more easily now than in the future when the sheer size of the aging population is that much larger.

A new, vibrant economic model for a stable or shrinking population is much easier to visualize when you understand that per capita consumption will actually improve as population density declines. Although, measured in macroeconomic terms, the economy will seem to be in decline, individuals will actually be far better off as the demand for labor comes back into balance with the supply.