Saturday, July 28, 2007

Ukraine Population and Fertility

This is the latest in a series of posts here at Demography Matters about population dynamics in Eastern Europe and the CIS countries. At the present time we are paying particular attention to these countries since their short term demographic situation seems so complex and it is important to get a much more general idea of the magnitude of the problem.

Today I am going to take a look at Ukraine. Now Ukraine may be considered to be an important strategic unit in the whole Eastern demographic puzzle, since many imagine that as labour supply runs out across the whole region, then countries as diverse as the Baltics, Poland, and Russia may be able to leverage Ukraine's population reserve to help them out of their difficulties, and hence that outward flows from Ukraine may serve to plug a lot of otherwise increasingly evident holes. People making this kind of assumption tend to forget three things.

1) The corrosive effect of long term lowest-low fertility on the numbers of people who become available in the labour market.

2) The fact that large migrant outflows produce labour shortages at home, shortages which when combined with a growing demand for new housing - which results from i) globally available non-local-currency denominated cheap credit and ii) a steady and growing return flow of remittances from those abroad - serve to push up wages rather dramatically

3) That these sending countries, and in particular as a result of the processes detailed in (1) and (2), do themselves start to experience fairly high rates of economic growth.

If we then look at how all of this is working out in the case of Ukraine, we find that:

1) The Ukraine economy has itself been growing quite rapidly in recent years (despite a slowdown in 2005), and indeed grew at an annual rate of near 7% last year, and at an annual rate of nearly 8% in the first six months of 2007.

2) As a result of the more rapid growth, employment is growing fairly rapidly, and official unemployment is now somewhere around 2.5%, while annual wage inflation is now in the 20 something percent range.

What we can deduce from the above is not that people will stop leaving the Ukraine for the west - this is unlikely to happen, since the wage differential is just too large - but rather that the Ukraine economy will itself need to import labour if it wishes to continue to grow at the present rate. And this problem is real, and exists in the here and now, and not set to arrive in 2025 of some other more or less exotic date in the future. I am putting things this way as I imagine much of the above will come as some sort of surprise to many people.

So Ukraine is not a bottomless pit, and the question is why?

Well to help us I found (using Google) a rather interesting paper which was presented at a recent Conference of the European Population Society. The title and authors of the paper are:

Demographic development of Russia and Ukraine: fifteen years of independence
by Sergei Pirozhkov and Gaiane Safarova

Now even though this paper is a comparison between Russia and Ukraine, it presents some very useful charts and graphs which will enable us to see almost at a glance the extent of the problem. What can be seen very rapidly from the first chart is that the total population of Ukraine is declining much more rapidly than that of Russia. In fact between 1989 and 2004 while the population of Russia decreased by about 2 per cent, for Ukraine the decrease over the same period was about 7.5 per cent. In absolute numbers terms Ukraine's population went from 51.7 million in 1989 to just over 46 million in 2006. In case this number means anything to you, Ukraine's population is currently declining at a rate of 0.675% a year, which is fast, very fast.

Now there are a number of reasons for this dramatic decline in Ukranian population, and one of these is fertility, which is currently in the 1.1 to 1.2 Tfr range, and as we can see, Ukraine's fertility actually dropped below that of Russia after 1997.

Now if we come to life expectancy we will find that a slighly different picture emerges, in that life expectancy (for both males and females) despite being very low (especially in the case of males) is actually slightly higher for Ukraine:

In fact, while Ukraine has one of the lowest fertility levels in Europe, it also has one of the highest death rates. In 2000, for example, the death rate reached 15.3 per 1,000 as compared with a 10.6 per 1,000 average rate for the countries of the European Union. Between 1991-2000 an increase in the death rate was recorded in practically all age groups (with the exception of the 1-14 age group), but this increase was especially pronounced among working age males. The death rate for the working-age group grew by a factor of eight in the years between 1991 and 2000, and the portion of the overall death rate which came from the working age group reached almost twenty-five percen.

In all but the oldest-old age groups the death rate for men significantly exceeds the death rate for women (and in some cases by a multiple of two or three), but the difference is especially noticeable in the 30-45 groups - ie in ages which still fall within the boundaries of the reproductive age.

High on the list of reasons for the high death rate among the working-age population are those factors which fall within the category known as "unnatural causes", by which we mean accidents, homicides and suicides. The main unnatural cause reflected in the death rate is suicide, and the rate of suicide has been growing constantly.

Other factors behind this high mortality are HIV/Aids and Tuberculosis. The incidence of tuberculosis more than doubled in the 1990s, and the death rate from TB more than doubled. About nine thousand people die from tuberculosis annually, more than 80 percent of these of working age (15 to 59).

At the same time according to opinions at UN AIDS and the WHO, Ukraine has the "most dramatic" epidemic of HIV/AIDS among all the countries of the former USSR. (Some background information on HIV aids in the Ukraine can be found on this WHO page).

The third factor influencing population dynamics is obviously migration, and again the comparison between Russia and Ukraine is revealing here:

Unsurprisingly what we can see is that while Russia has been a net migration receiver, in the case of Ukraine it has been nearly all a question of loss. Even more revealing is the net flow balance of migrants between Russia and Ukraine:

As can be seen, the balance has steadily trended towards zero. This does NOT mean that no migrants move from Ukraine to Russia, but simply that Russia can no longer count on receiving migrants from Ukraine as a net source of labour, since for every one person that enters another one comes out.

Obviously such diversity at the level of key demographic indicators leads directly to divergence in terms of the comparative population age structures. Ukraine therefore has a lower proportions of children than Russia (in 2003 the proportion of those in the 0-14 age group for Russia was 20.9%, while for Ukraine it was only 15.8%) and a higher proportion of elderly people(the over 65s in Russia constituted only 18.6% of the total population in 2003, while for Ukraine they constituted 21.3%).

If we return to fertility for a moment it is clear that the worst is far from over in Ukraine, and it is far from over in part for the reasons explained in this paper whose abstract I reproduce below:

The path to lowest-low fertility in Ukraine

Author: Brienna Perelli-Harris

The phenomenon of lowest-low fertility, defined as total fertility below 1.3, is now emerging throughout Europe and is attributed by many to postponement of the initiation of childbearing. Here an investigation of the case of Ukraine, where total fertility - 1.1 in 2001 - is one of the world's lowest, shows that there is more than one pathway to lowest-low fertility. Although Ukraine has undergone immense political and economic transformations in the past decade, it has maintained a young age at first birth and nearly universal childbearing. Analyses of official national statistics and the Ukrainian Reproductive Health Survey show that fertility declined to very low levels without a transition to a later pattern of childbearing. Findings from focus-group interviews are used to suggest explanations of the early fertility pattern. These include the persistence of traditional norms for childbearing and the roles of men and women, concerns about medical complications and infertility at a later age, and the link between early fertility and early marriage.

That is to say - and for those of you who are familiar with the birth postponement process and the importance of the tempo-quantum distinction - the Ukraine still has a very low mean age at first birth by European standards (around 23) and thus very probably has many more years of postponement (and few recorder live births) in front of her. In other words Ukraine still has a long way to go in the current demographic transition, and as a result a real improvement in the birth rate may not be expected till average firth birth ages have settled at a new, and much higher, level.

So the future for Ukraine certainly looks none too promising, and fraught with difficulty, from a demographic point of view. As such I don't think anyone should be counting any too strongly on Ukraine as a major source for their labour force needs in the years to come.

Finally I would just draw attention to a number of articles - both online and from the English language Ukraine press - which have been drawing attention to the demographic threat which is posed by the migration phenomenon. Back in 2003 Global Voices blogger Veronica Khokhlova wrote general review article on the background situation and her feelings as a Ukrainian about this. The Ukraine Observer also ran a piece - by editor-in-chief Glen Willard - under the evocative title Ukraine is Dying, while in the same publication Volodymyr Senchenko has another useful piece on the newer patterns of labour migrationwhich have been emerging in Ukraine (as did Business Week here). As Senchenko points out, we don't really have too much detailed and reliable information about the true number of zarobitchany (or out-migrants):

There are no accurate statistical data about labor migration in Ukraine, the number of our workers abroad, their incomes and how much money they send to their families. Lots of studies have been carried out in this field over the past several years but they are often contradictory.


Dr. A. Haidutsky of the National Bank of Ukraine has recently published results of his complex analysis of both official information and unofficial facts about the issue in an article in Dzerkalo Tyzhdnya (The Mirror of the Week), one of Ukraine's most reputable weeklies. As an economist, I can confirm that his study presents a very objective picture of labor migration and can be used by the government and international community.

According to Haidutsky, there are 4.93 million Ukrainian migrants abroad - not three million or seven million, as some experts suggest. This figure almost coincides with that published by the Organization for Economic Cooperation and Development in its recent report (4.8 mln).

Poland is Europe's second largest source of labor migrants after Ukraine. One million Poles have benefited from the membership of their country in the European Union, traveling all over the continent to find a better and well-paid job.

Ukrainians are coming to Poland to replace them. Hundreds of thousands of Ukrainian migrants live and work in Italy (500,000), Greece (350,000) and Portugal (260,000). They say they are treated with kindness and enjoy relatively good working conditions in those countries, particularly in Portugal. We knew very little about this faraway state until recently. Today thousands of Ukrainians learn Portuguese and master professions that are in popular demand in Europe's westernmost country.


Following a point made by Aslak in Comments about the slightly improving birth level in Ukraine, I went over to Statistics Ukraine and knocked out a couple of Excel charts to give us an idea what is happening. The first of these makes comparisons over the January to May 5 month period, since this is the data for 2007 so far and it enables direct year on year comparison. As we can see there is a slight increase in the number of live births, and there are slight changes in the number of deaths, but the really striking thing is how the population is systematically declining even before we get round to the effect of migration.

Below I present a rough and ready chart showing the evolution of births and deaths since 1989. As can be seen the lines cross at the start of the 1990s, and since that time the rate of annual decrease has been substantial.

The bar chart below also indicates the rate of decline. This has leveled out slightly in recent years, but this breathing space is unlikely to be maintained for long, since as noted Ukraine's economy is growing, and so poor as they are they are getting better off. As a result of this they are surely spending more money on health, and life expectancy is surely increasing. This has two consequences. In the short run there are fewer deaths, and the dependency ratio rises.

On the other hand, and for reasons I have been explaining, the actual number of live births is unlikely to rise substantially, since after 2010 the momentum effect of having had fewer live births after the late 1990s will start to lock in (since there will be considerably fewer potential mothers, and the postponement effect will undoubtedly operate to bring Ukraine into line with Western European norms). So, simply put I am not optimistic on the birth front, and this situation will more than likely only worsen, at least over the next couple of decades.

Here (below) are a couple more "rough 'n ready" charts, this time on employment and unemployment. The first shows the quarterly evolution of the numbers of employed and unemployed in Ukraine since Q1 2005. There is nothing especially spectacular to note here, except that the total numbers of employed persons does not rise enormously, going from 20,270,000 in Q1 2005 to 20,537,000 in Q1 2007. Thus despite the fact that the Ukrainian economy is growing steadily, employment is not rising to anything like the same extent. In part this should (hopefully) reflect some sectoral shifts, and some increase in productivity (those people coming out of, and entering Russia, perhaps. It would really be nice to have a comparative skills balance sheet on this). But in part this reflects labour market tightening inside Ukraine itself. Wage levels - at least from the official data - seem to be rather volatile, but the trend is undeniably up, and seems to be running at an annual rate of increase of around 20% this year. Menatime the number of those who are unemployed heads steadily down.

The second chart shows the change in the numbers of unemployed by month for 2007. I have used the numbers registering with the employment agency as unemployed for this chart as there are, as in the case of most Eastern European countries, difficulties in getting through to the true meaning of the unemployment statistics. Still, it is a measure, and does give some indication of the tightening. Total numbers of registered unemployed have fallen from 790,000 to 640,000 in six months.

Now I want to close this post by stressing some points. Basically there is a danger here of interpreting what Claus and I are saying about the whole labour market situation across Eastern Europe in a very crude fashion, and we are trying not to do this. The rate of labour market tightening (and hence inflation) across all of Europe's economies depends in part on available labour. This affects both those in the EU (like Ireland, the Uk, and Spain) as well as those who are outside (like Russia, Croatia, Ukraine etc). The extent to which this tightening (and hence the wage inflation and the exhaustion of reserve pools) occurs will depend on two things. The rate of economic growth, and the rate of sectoral transition to higher value activities. Both of these are semi-independent variables which cannot be predicted from simply looking at population numbers and fertility. But they are only semi-independent, since lower population levels and ongoing low fertility (ie over 20 years or more) have an impact on the relative price of labour. This impact both slows growth, and encourages a transition to more capital intesive activity (as labour becomes more expensive). It should miss no-one's attention that just this sort of discussion is already taking place inside China, as people begin to worry that the cheap labour intensive product era may be coming to an end as labour market tightening begins to have an effect even there (and here).

So what Claus and I can hope to do in these posts is only very rough and ready back of the envelope stuff. But the problem is, even in these simple terms, evident. We are also paying particular attention to this issue, since we think it is an accessible one for most non-economists. ie for those of you who have difficulty reaching a decision about whether or not economies like Germany and Japan are becoming export dependent for reasons which are associated with population ageing. Or whether prolonged low fertility puts Italy's public finances at risk. I don't think you even need to have studied Econ 101 to get to grips with the fact that economies need labour to run on. Indeed I suspect that it is precisely because this problem is so comparatively simple that many of the more sophisticated economists out there have simply overlooked it. I mean nothing could be THAT obvious, now could it?

So what we have tried to do in these posts about Uzbekistan and Ukraine is navigate back up the river, to the "fish-stock" sources, to see if we can learn anything about what is happening, and to see if the suppositions of those who imagine labour supply will be abundant and plentiful over the next 5 to 10 years is a realistic one. Unfortunately, what we have found doesn't convince us of this at all. Of course, people will continue to leave Ukraine in search of higher paid work elsewhere.And Ukraine itself will not collapse or implode (at least over the time horizon we are thinking about it won't). Those people who leave will send money home, and those back home will spend that money (building houses perhaps), and the Ukrainian economy will grow pushing up wages and prices in the process, and ultimately, all of this will feed through to the UK, Ireland, Portugal, and elsewhere.


Latvian abroad said...

It indeed seems that a lot of European countries are out there for Ukrainian labour. Including Baltics. The number of guest workers in Latvia has doubled in one year and Ukraine is the biggest contributor. (Strangely, Moldova is the second biggest and Russia is far behind.) And there is also an unknown number of illegal Ukrainian construction workers helping with the Latvian construction boom. "Cheap and good quality work, if one doesn't mind possible problems with Employment Service", that's what I have heard on Latvian message boards more than once.

On the reasons behind Ukrainian depopulation, HIV/AIDS is not a major factor. Ukraine may have one of biggest infection rates in the region, but this is compared to the region which has many countries with very low numbers of HIV infection. According to the WHO, Ukraine reported 2188 AIDS deaths in 2005. Divided by population, that would be about 80% of AIDS death rate in United States in the same year. And we are not exactly talking of "US HIV epidemic".

If Ukraine has maintained a young age at first birth and nearly universal childbearing and has 1.1 TFR, it must have nearly everyone having exactly one child. That's quite surprising and quite different from the rest of Eastern Europe. (In Latvia, with its low-low TFR, I know a lot of friends with no children and a lot with 2-3 children.)

Aslak said...

Ukraine remains a significant source of labor in the short run, but as you say, it's bound to run out eventually.
Regarding the birth rate in Ukraine, it seems to be improving. According to the State Statistics of Ukraine the crude birth rate has rebounded to 9.8 from 7 in the 90's. I've noticed this tendency in a number of countries, e.g. the Baltic countries. Of course this doesn't mean that they've dodged the demographic bullet, far from it, but there are signs that the demographic situation is moving from critical to just very bad.

Edward Hugh said...

Hi aslak,

I've taken your point about the small rise in fertility on board, so I have knocked out a couple of charts which I am now updating the post with. The point at the end of the day is that the changes are slight, in proportion to the absolute change in the number of live births since before 1990. So it is a small change for the better in an otherwise disastrous situation.

Edward Hugh said...

Also Aslak,

You need to be very careful with crude birth rate numbers, since these are even more problematic than Tfrs.

Looking through the evolution in the varous age groups offered on the statistics Ukraine site, it would appear that the 15 to 24 age group (which as per the explanation in the post is the key one at present for Ukraine fertility at the present time has been increasing steadily since 1990 (it peaked in 2005, and is the only one which has) while the 25-44 group (which is the other relevant one for crude birth data) has (along with all the rest of the groups) been falling. My off the top of my head feeling is that this would skew the data upwards somewhat.

But for sustainability and labour market evolution purposes the key indicator is going to be live births - and with a roughly 20 year lag - which is the sort of rule of thumb approach that Claus and are are using right now to try and get a measure of things. It's no good looking at where you might be in 30 or 50 years if you can't get past next year, or the one after. Etc.

Aslak said...

Your points are all well taken. However, I think there is reason to be hopeful about the recent increase in birth rates in Ukraine ( and elsewhere in Europe. See this story from Germany for instance: Hopefully it's not just a World Cup blib)
Humans are enormously resourceful and adaptive creatures. Now that demography is finally becoming a major issue in much of Europe, societies will tend to try to address this and there has been a slate of pro-family policies enacted in various European countries recently.
Now, I do realise that natalism has a somewhat mixed record. It seems to have failed spectacularly in East Asia for instance. However, I think Europe has a better chance of succeeding simply because Europe is less rigid than East Asia when it comes to family structure, gender roles etc. Moreover, the Nordic countries and France have arguably succeeded in maintaining a reasonably high fertility rate. The Franco-Scandinavian model(s) should be easily adoptable in other countries despite their cost. Of course, it is already too late to avoid aging in the short to medium term. In the long term, however, I remain fairly optimistic.
On a related note, I love your blog, but I do think you tend to fall into the trap of demographic determinism from time to time (or at least it is easy to get that impression.) Demography may be the most important problem in many European countries. But it is by no means insurmountable.

Aslak said...

All of the URL didn't get included in the post, so here's a shortened version:

Antal Dániel said...

I just wonder who works in Ukraine? If I understand these posts correctly, native people leave to the West and there seem to be guest workers from the East - but who are they and why aren't they included in the population figures of Ukraine? The whole discussion is very interesting as Ukraine is Hungary's biggest neighbor. In fact, it is the biggest neighbor of the EU!

Edward Hugh said...

Hi Daniel,

"I just wonder who works in Ukraine? If I understand these posts correctly, native people leave to the West and there seem to be guest workers from the East - but who are they and why aren't they included in the population figures of Ukraine?"

A very good point Daniel. Would that any of us knew this. We are just without data. Obviously some, if you look at the charts in the post, come from Russia, but since others leave Ukraine to go to Russia this doesn't explain much.

"Ukraine is Hungary's biggest neighbor. In fact, it is the biggest neighbor of the EU!"

Exactly Daniel. This is why I am looking at this one. No-one is going to get very concerned if poor little Latvia runs out of people for their labour market, and everyone has accepted that Russia, like the US, needs from one to two million people a year just to keep afloat, but what about the Ukraine? If the Ukraine runs short, this really does start to raise the question, and quite soon, about where all the people are going to come from to occupy our labour markets, assuming we want growth that is.

And if we don't want growth, well that is just fine, but how do we manage to sustain the pension systems? I am not preaching gloom and doom, I am simply looking for sustainability. And the difficult thing here is that the closer you look into things, the more cock and bull stories people seem to believe.

I'm sorry Aslak, I am really not having a go at you, but link you just served up is a good example. The Federal statistical agency in Germany had to specifically decry this one in its latest data release:

WIESBADEN – As reported by the Federal Statistical Office on the basis of provisional results, the number of live births in the first quarter of 2007 (149,300 children) rose just slightly (+0.4%) on the same quarter of 2006 (148,700). The number of boys born was 76,700, that of girls 72,600. The high rates of increase as reported by some media were hence not achieved.

These numbers needless to say are enormously down on the volume of children being born even as recently as the mid 1990s.

Here's the Fed Stats release for 2006:

In 2006, 673,000 live births were registered, that was 13,000 or 1.9% less than in 2005. The number of births has been declining since 1991, with the exception of 1996 and 1997. The number of deaths had fallen continuously from 1994 to 2001, before it increased in 2002, 2003 and 2005. In 2006, there were 822,000 deaths, which was a decrease by 8,000 or 1% on the previous year. This means that in 2006, there was an excess of deaths over births of about 149,000. In the previous year, the deficit of births was by about 5,000 persons smaller. On 31 December 2006, Germany had about 82,315,000 inhabitants. That was 123,000 or 0.1% less than at the end of 2005 (82,438,000).

To give you some idea in 1990 - and remember that Germany was already on aggregate below replacement fertility already at that point, 904,930 children were born, so the 630,000 odd last year is about a 30% drop in roughly a decade and a half. At this rate by 2020 Germany would be having about 450,000 childen annually, that would be a drop of 50% in 30 years, or one current generation. Now this isn't bad if you think that German is overpopulated, people need more space, Germans consume too much energy etc. But you do need to start to think about where is the money is going to come from to keep all those older people in pensions. Where it won't be coming from is from the honest sweat of Ukranian migrants, since quite simply there won't be sufficient Ukranians left to come. What is it they say already in Serbia, will the last one out turn the lights off :).

I am preparing a brief post for Afoe on this one, since the whole issue of the German baby boom is just another example of press spin, just like the the idea that we'll all get workers from Poland, sorry Ukraine.

I am not into gloom and doom. There are things to be done, and I am sure we can do some of them, but the first thing is to get the population at large fully in the picture with a reasonable idea of what is happening. That would be the first good step forward. People might then also be prepared more to accept the adaptation to their living standards which might well be involved if we have to move into low or negative growth mode.

The inflationary implications of all these coming labour shortages are very evident to me as an economist.

But the first thing, and this is what Claus and I are really into, is to try and get a reasonably accurate idea of the extent of the problems, since it is now obvious to us at least that the recent World Bank report substantially underestimates the problems, at least as far as Eastern Europe go.

And of course Eastern Europe is just one of the issues. Claus and I are only devoting a lot of time to this at the present time, since the problem might well become quite a pressing one in economic terms if there were to be a correction as a result, and so in this sense forewarned is forearmed.

Aslak said...

Evidently the German story was a poor example, thank you for correcting that. That'll teach me not to use Google News instead of proper statistics when I want to make a point.

And I do believe my larger point still stands. Namely, that while fertility rates in much of Europe are still low they are no longer falling. They have either plateaued or have reversed the trend and are slowly increasing.

Perhaps the best example of this is Estonia where TFR has increased from 1.28 in 1998 to 1.55 in 2006 and with increase in births continuing through June of this year. (This might of course have some important consequences for the Low-Fertility Trap Hypothesis) Latvia has also had an increase from 1.13 in 1997 to 1.35 in 2006. Now, these TFR's are of course still much too low but it's the trend that interests me.

In the short to medium term (20-30 years perhaps) no TFR in the world will help the coming demographic crunch of course, and I think we share the same concerns in that respect. I do believe we will inevitably see more non-Western immigration. Claus's recent post about Poland looking for labor in India is an interesting case in point.

The labor shortage will of course increase wages (at least in the short run) and decrease return on capital, so Europe should be less attractive for investors and more attractive for immigrants. It will be interesting to see whether this, besides the effect it will have on economic growth, will manage to reduce the trends of the last few decades towards greater inequality as even relatively low-skilled labor will be in short supply.

Scott said...

The problem of suicide rates in Ukraine and Russia is going to be particularly difficult to solve for the leaders of both countries. My belief is that a significant factor driving the suicide rates is that these people lived a significant proportion of their lives in the Soviet system, being indoctrinated with the USSR leadership's world view. When the USSR collapsed and it became apparent to many citizens of the former USSR that everything they had been taught was a fraud and that they had been participating in a particularly corrupt society these citizens suffered a serious psychological blow. As a result, people do away with themselves either because they see nothing to live for because the old system is gone; or they experience severe guilt for participating in the corruption. I don't have any specific links to backup my thoughts, but I'd be interested in anyone's thoughts on this theory

Scott said...

I think that Ukrainian immigrants into the EU are very likely to stay in the EU permanently, particularly given the positive reception they are receiving that was documented in the post. I think it is fairly plain that Ukrainians could be assimilated into Europe much more easily than guest workers from Africa, Turkey, and points further east, given the ethnic similarity between Ukrainians and citizens of the EU generally.

The speed of the population decline is astonishing, particularly compared to Russia, which has been the poster boy for population problems in the former Eastern bloc countries.

The key for Ukraine's leadership is to get stable and transparent political and financial systems in place that would provide incentive for foreign investment in the country, which would reduce the incentive for Ukrainians to migrate.

Edward Hugh said...

Hi again everyone.

Just to say I have updated the post again, and have tried (implicitly) to address some of Aslak's worries that we are too "gloom and doomy". What we are saying is simply that we feel there are real and present effects from some of these migration and fertility processes, and these are becoming evident, and until the public discourse starts to accept this, and the attitude of market participants becomes more realistic, then short term risks - in the economic sense - will abound. I think that that is about as explicit as I want to be at this stage.

Anonymous said...

Question: can you recommend a quantitative methods demography text for the mathematically-enabled amateur (in English)?

If Europe intends to recruit workers from India, Africa, or elsewhere, they're going to have to deal with the fact that America's traditional source of migrant labor, Mexico, has experienced a rather severe decline in fertility since 1980.

In fact, there's no way Mexico and its neighbors in Central America will be able to continue to provide the 1.5 million new migrants needed yearly in the US. The US will be looking elsewhere, which will make it difficult for Europe to attract qualified Indians, Africans Chinese, etc...

Edward Hugh said...

Hi anonymous,

"can you recommend a quantitative methods demography text for the mathematically-enabled amateur"

Well, I used this one:

Demography: Measuring and Modeling Population Processes [ILLUSTRATED] (Paperback) by Samuel H. Preston (Author), Patrick Heuveline (Author), Michel Guillot (Author).

I think it worth pointing out at this point that I myself am not a demographer, but an economist, so in that sense I too am an amateur. I simply decided that macroeconomics as I understood it made no sense if you didn't build systematic demographic parameters into the models, and that I needed to understand more.

Demography does get hellishly complicated once you move beyond the basics though. Try the distinction between stable and stationary populations, and try googling around the name "Keyfitz" and "population momentum". That should get you through to the heart of some of the issues.

"In fact, there's no way Mexico and its neighbors in Central America will be able to continue to provide the 1.5 million new migrants needed yearly in the US."

Yep, well I think this is just the point. Basically, aside from Africa the stocks can dry up very quickly.

I mean, looking at what we are seeing, within a decade or so I guess. You need to look at the rates of growth and demand for labour in the emerging economies, this is really the whole point behind this post. Sounth India is now receiving lots of migrants from Bangladesh, while Central India still is able to attract people from the north.

But with fertility steadily dropping everywhere, and with "catch up" growth accelerating all over the place......

"The US will be looking elsewhere, which will make it difficult for Europe to attract qualified Indians, Africans Chinese, etc..."

The thing is developed econonomies need both qualified and unqualified, whether these be the US or Europe or elsewhere.

If you look at the US flows there are the H1Bs, but then there are also a very large number of "irregulars".

If the irregular group stopped suddenly, the wages of unskilled workers would start to rise steadily, and then Bernanke would have a very hard time of it fighting both inflation and recessions, as and when they arise.

With skilled workers the problem will be even worse globally at some point, since it is harder to increase capacity for these in the short term.

So yes, basically the US, Europe and parts of Asia are going to be competing fiercely for qualified labour, and this will in all probability push the price right up.

Basically it is nice to be the scarce resource in an auction.

Anonymous said...

Thanks EH: The US political class hasn't come to terms with the fact that we need lots of skilled and unskilled labor.

My friends in construction tell me that irregular help of the type found at the Home Depot parking lot has become very pricey; at least $10 per hour (plus breakfast and lunch), which is well above the minimum wage.

As an investor in tech companies, I can also tell you that skilled labor is in very short supply. Ditto for the healthcare sector, where grandiose political plans are crashing against the shores of personnel shortages. For example, Massachusetts enacted a universal health care plan which brought 500,000 uninsured individuals into the system. Problem: they can't find primary care physicians because there aren't any enough.

And yet, these issues haven't prompted changes in Washington. I believe the US could adjust its visa policies such that large numbers of skilled Europeans could be coaxed across the pond. And yet, it's easier for the Dutch engineer or the British biologist to get to Canada or Australia.

Anonymous said...

anon: The US can and does attract significant numbers of skilled workers from Western Europe already. But given that Western Europe is at a similar level of economic development to the US, there isn't the same economic incentive to move you see with Latin America. Given the demographics, European governments might be expected to do all they could to encourage these workers to stay, and the supply of 'surplus' labour is limited to non-existent. The US might be able to squeeze more out here, but not much more. The biggest draw seems to be that the US's more unequal distribution of income means high-earning workers can earn even higher salaries in the US, but on the other hand this has the effect that middle- and low-earning workers would tend to feel worse off in the US than in France or Germany, once you factor in social benefits like healthcare.

In any case, this is something of a zero-sum game. The 'brain drain' has long been a topic of conversation across Europe, the problem being not so much the size of the flows as the net effect: with a few possible exceptions such as the UK or Switzerland, European countries are running a substantial 'skilled migration deficit' with respect to the US, with few Americans arriving to replace the Europeans who are leaving, and it's one most of them simply cannot afford. The impact on the academic world has been particularly massive, but it's happening across the highly-skilled spectrum. Migration is only going to help 'smooth out' the world's demographic imbalances if people migrate from higher-fertility countries to lower-fertility ones. But the fact that there is a strong westward current all the way across a zone stretching from Siberia to California (and I don't mean via the Pacific) is actually working to reinforce the imbalances there.

Anonymous said...

If the average age of first childbirth in the Ukraine is 23, they're still below the average age England had in Victorian times, over a century ago.

Apparently they're also short of the rate of women who never give birth of Victorian England.

Anonymous said...

"and everyone has accepted that Russia, like the US, needs from one to two million people a year just to keep afloat"

-- this is rather odd, since Russia has a TFR of 1.38, and a life expectancy of 65 or so, both still falling.

While the US has a TFR of 2.09, and a life expectancy of 78, both currently rising.

Hence the number of children born in the US is at an all-time high, whereas the reverse is true in Russia.

Anonymous said...

Note that the per-capita GDP gap between Europe and the USA is already large, and steadily growing larger. Leaving aside mini-mes like Luxembourg, the richer European countries are equivalent to the poorer US states.

Eg., for the US as a whole it's about $40K.

For the UK, it's around $35K France, $33K, Germany $33K, Italy $28K, Spain similar.

Eurozone growth rates, leaving aside the East European catch-up countries growing rapidly from a low base, tend to be distinctly lower than in the US; 2% is cause for celebration in the core area of Germany-France-Italy. The UK does rather better but not as well as the US.

US long-term growth rates tend to be a little bit above 3% and this has been very consistent since the 1980's, with an upward trend if anything.

Given the more favorable US demographics (with a fairly stable age distribution and TFR's trending upward), this is unlikely to change.

As rising dependency ratios in Europe put pressure on the incomes of professional workers and entrepreneurs, the flow westward is likely to accelerate if anything, and the US will comfortably outbid the EU for higher-level immigrants.

Note about China: while Chinese demographics are unfavorable on a _Chinese_ scale, there are simply so many Chinese that an outflow that's miniscule in Chinese terms can be very considerable anywhere else.

Aslak said...

First, a minor point:
As far as I know, TFR in the US not trending upwards, it is in fact remarkably stable at just below replacement rate (In part because of high Hispanic TFR).

Second, I doubt that Western European immigration to the US will increase. No doubt the top US universities will continue to recruit many of the top academics. However, with the increasing shortage of skilled labor, unemployment rates will no doubt continue to fall, thus reducing the incentive to move elsewhere. There may be a bit of a pull factor towards the US but I believe the push factor will be largely absent. My guess is that overall immigration from Europe towards the US will fall, not increase. It will be interesting to see how it plays out though.

Edward Hugh said...

Hi Sterling,

Nice to have you back. We'd been missing your somewhat contrarian voice :).

I have a number of bits and pieces to post about, but I'll do it a bit by bit as time permits.

"-- this is rather odd, since Russia has a TFR of 1.38, and a life expectancy of 65 or so, both still falling."

Yep, but I think here you need to build in the economics of the situation. Russia is a resource rich country, which attracts at the present time a large inflow of funds (relative to Russia's per capita GDP) in the form of resource revenues, remittances, and speculative inflows based on the rising ruble and the various kinds of "carry trade".

Now all this money neds to be spent, and doing so involves employing people, and this is just what Rusia doesn't have in sufficient quantities, the working age population is now declining (you are right they don't have a large dependent population to pay for due to the low life expectancy), but then - especially the males - cannot work so long.

Also many of the population have either the wrong skills, or are in the wrong place, and are reluctant to move.

The number of one million migrants needed annually (which is sort of the low end of the estimates range) was given by the head of the World Bank delegation in Moscow.

The paper linked to in this post also gives some detailed information here.

The problem is set to accelerate after this year, if you look at the labour market entrant situation (remember fertility crashed in 1990, so we now find all those missing babies converted into "missing workers".

All these economies have now more money than ever flowing in, while they have people flowing out at a significant rate, and many ferwer young people reaching working age. This is why the issue may well turn critical. The first signs are economic overheating all over the place.

Edward Hugh said...

"Note about China: while Chinese demographics are unfavorable on a _Chinese_ scale, there are simply so many Chinese that an outflow that's miniscule in Chinese terms can be very considerable anywhere else."

Yep, but again you are thinking about the demographics and not about the economics too. Unskilled wages in China, while low by European and US standards are now comparatively high in the developed coastal cities in comparison with what is available in some other Asian countries. So China will also be a magnet for inflows. It isn't clear what the net balance will be, but you are probably right that the outflow will be better educated and more highly skilled than the inflow.

This article about external migrants arriving in Guangzhou is interesting in this regard. Obviously poorly educated Chinese are still arriving in labour markets around the world, and especially in the East of Russia, as this article about Prado Italy makes clear. You can find similar communities in a couple of Barcelona satellite towns, but my feeling is that this kind of migration from China will peter out, in particular since there is little point in traveling half way round the world if what you are going to receive in the end are Chinese wages.

But the community mentioned in Milan is quite different, and again something similar has happened in downtown Barcelona, where Chinese would-be businessmen have also become the key intermediaries in the clothing wholesale area, displacing the traditional locals. This whole phenomenon is addrssed in this Asian Times article about the "third wave" Chinese migrants:

A disorderly line of Chinese citizens jostle through check-in at the airport in the northern Thai city of Chiang Mai on their way to boarding a flight for Bangkok. hey're among the new wave of Chinese migrants who have over the past decade opened shops and eateries in Chiang Mai and other towns in northern Thailand - a creeping invasion that a growing number of local Thais are watching with unease.

Northern Thailand is only one of their destinations. Large numbers of Chinese are also moving into northern Myanmar, northern Laos, Cambodia and further abroad - including the Pacific islands, Australia, the United States, the Russian Far East and Japan. More recently, South Korea has become a popular destination for Chinese migrants - both legal and illegal - as it's easier to enter than tightly sealed Japan.

China's new migrants are a breed apart from their peripatetic forebears, who spoke regional dialects and exhibited little nationalism, identifying more with the localities in China from which they hailed. The recent arrivals not only speak the national Mandarin language, but also tend to identify with China as a whole.

This new wave of Chinese migrants to Southeast Asia and beyond - what some Sinologists are referring to as the "Third Wave" of outward Chinese migration - is unprecedented in Chinese history not only because the migrants originate from northern and central Chinese provinces, but also because travel has become easier due to better transportation links both inside and outside of China. That's resulting in potentially larger numbers than previous waves of Chinese migration throughout the globe.

"The new-wave Chinese are very different from those who migrated in the past," says Andrew Forbes, a Chiang Mai-based China expert who has spent more than 20 years studying China's relations with Southeast Asia. "They've grown up in a country which is far more unified than before. There's now a different sense of being Chinese: the new migrants are patriotic and loyal to the motherland."

Nyiri Pal, a Hungarian Sinologist and academic, agrees that unlike earlier Chinese settlers in Southeast Asia, the United States and Australia, these new migrants do not feel they have stopped being part of China. According to Nyiri, they see themselves not as local minorities, but as a "global majority" with an attachment to China that has nothing to do with territorial nationalism. Not only is China their ethnic and cultural base, but it remains the foundation of their economic success - a place where they continue to invest in and draw on, he says.

So we are seeing a rather different phenomenon as manufacturing China now puts out the merchant and sales networks to get its products out into the market. This is very different from poor textile workers in Prado.

The Financial Times also drew attention to this phenomenon in the Philippines:

The new Chinese arrivals are drawn by a combination of weak law enforcement and huge fortunes to be made selling cheap Chinese goods to a swelling Filipino middle class. Feeding the growth of that middle class is the one in 10 of the country’s 86m people who are working abroad and their remittances, which reached $12.8bn (€9.25bn, £6.2bn) last year and have helped to drive consumer spending and economic growth.

According to Teresita Ang-See, an expert on Chinese in the Philippines, there are 80,000-100,000 illegal or overstaying Chinese nationals in the country, roughly a tenth of the million or so ethnic Chinese living in the Philippines. The latest influx has come in part because of Manila’s move in 2005 to liberalise entry procedures for Chinese tourists and investors, a move that helped triple the number of Chinese visitors to 133,000 last year.

The Chinese-language press in Manila is full of bitter exchanges between the new and old immigrants. “Although the new immigrants appear to be better educated, they are considered more uncivilised, uncouth and ill-mannered,” says Go Bon Juan, director for research at Kaisa (Unity), a group promoting links between the local Chinese and Filipinos. “Even young students in Chinese-language schools tend to dissociate themselves from classmates who are newcomers.”

Anonymous said...

"As far as I know, TFR in the US not trending upwards"

-- actually, yeah, it is. From approximately 3.5 in the early 60's it dropped below 2.1 in the 1970's, bottomed out at about 1.75 around 1980, and has since then risen consistently, slowly and irregularly. It reached 2 around 2000, and has since then risen to about 2.09 or 2.1

Note that until the 1970's, TFR's in the US tracked those in Europe closely. Since then, they've increasingly diverged.

>(In part because of high Hispanic TFR).

-- the lesser part. The main reason for the increase has been a slow, modest but steady rise in non-Hispanic white TFR's.

Currently, the ethnic TFR rank order is Hispanics, then non-Hispanic whites, then blacks (almost identical to those of non-Hispanic whites), then Asian-Americans.

However, all the other groups are declining -- Hispanics quite rapidly.

And the Hispanic/non-Hispanic distinction is both too broad and increasingly irrelevant. Eg., about 1/3 of American-born Hispanics are married to non-Hispanics.

As to being "too broad", Cuban-Americans are at 1.6 and Puerto Ricans at around 1.75. Mexican-Americans are somewhat higher, a bit higher in fact than Mexico, which is at 2.38 currently, because immigrants are disproportionately lower-class and rural/small-town in origin.

"No doubt the top US universities will continue to recruit many of the top academics."

-- well, there are currently over 400,000 European scientists and technical workers in the US, and few show any sign of leaving.

"However, with the increasing shortage of skilled labor, unemployment rates will no doubt continue to fall, thus reducing the incentive to move elsewhere."

-- probably not. Eurozone unemployment rates remain quite consistently high.

"There may be a bit of a pull factor towards the US but I believe the push factor will be largely absent."

-- increasing dependency ratios, ever-lower relative per-capita GDP, higher taxes.

Anonymous said...

"in particular since there is little point in traveling half way round the world if what you are going to receive in the end are Chinese wages."

-- but unskilled wages in Europe and the US are a large multiple of those in even the most prosperous parts of China, nor is this likely to change. The difference will narrow, but not much -- China's overall productivity is still too low for ordinary laborers' wages to rise much.

Anonymous said...

Note that while Eurozone unemployment remains stubbornly high, the contrast is particularly notable for young entry-level workers.

Unemployment in France and Germany is currently running in the 8-10% range, but among under-25's it's over twice that.

And new business formation is also consistently low, while turnover among firms at all levels is consistently low by American standards, or even British ones.

In other words, it's easier for the established to maintain their positions, but harder for the young and/or ambitious to force their way onto, or up, the ladder.

Hence emigration is particularly attractive for younger people. As dependency ratios increase, so will this attraction, probably.

Edward Hugh said...

"-- but unskilled wages in Europe and the US are a large multiple of those in even the most prosperous parts of China"

Yes, obviously, but I doubt any government in the core EU countries (ie old Europe) or the US is going to seriously offer substantial legal migration to unskilled Chinese workers on any significant basis anytime soon, and ten years from now I really do think it will be too late for any substantial outmigration from China. The net balance will then surely be inwards. Just look at their age structure and the shortage of entry level workers they are going to have.

ie Chinese workers are not going to be entering domestic service or textile factories, agriculture or construction in France, Germany, Scandinavia or the UK anytime soon. And these are the principle career entry paths for the unskilled in those countries right now.

The only real way into the EU for Chinese migrants is through irregular migration, like that in Prato, or perhaps via guest worker schemes in Poland or Ukraine, where wages would tend to be in the 200 euro a month range. So this would be the comparison. I imagine some parts of China are not far from being able to offer this.

Really I suspect that old Europe is still going to try for the time being to fill its unskilled needs from the East, with all the problems that this is bringing in its train. Southern Europe may well provide a point of access for migrants from Africa.

I also think Europe generally will open to systematic skill-based migration from Africa at some point in the not too distant future. Otherwise, I just don't see how we are going to meet the skill needs once Eastern Europe runs out.

In terms of the general US/Europe thing:

"Hence emigration is particularly attractive for younger people. As dependency ratios increase, so will this attraction, probably."

I think you are partly right, certainly we are seeing out-migration already involving this group from Germany and Italy. This is as theory would more or less predict.

But Europe is not at all homogeneous in this sense, and a lot of the migration is internal to Europe, with the UK, Ireland and Scandinavia being important poles of attraction. I mean, what you seem to fail to take into account is that while some countries are ageing rapidly, others are leveraging a combination of either near replacement fertility and migration to more or less hold their own (Spain would be the most recent arrival to this group, in this case using massive migration to compensate for the very low fertility. I guess - as I was suggesting to Mark Z in another thread - that Spain is now in pretty active competition with the US for Latino migration, and the volumes involved aren't that different. Spain is looking - in total - for about two thirds of the US Latino volume in recent years, ie about 600,000 per annum).

Also when talking about educated European out migrants you need to think about places like Australia and Canada. Cultural factors will also be important here.

And again there are the MNCs who have relocated to China,India etc , and will offer competitive salaries for the bright, young and educated.

I think what we are going to see is a global labour market for some groups, with salaries on a Purchasing Power Parity basis becoming much more equal. This is what market theory would more or less predict, especially as the influence of the nation state on capital and labour flows steadily diminishes.

Of course, since the environment is likely to be one of large shortages, this will surely mean that the skill premium goes up considerably, that everyone has to pay more for knowledge workers, that the central bankers will have to continuously watch for inflation pressure (especially since in the knowledge economy wages rather than capital costs are a much bigger share of the total) and growth generally will be slower.

Aslak said...

What I meant when I said that TFR is stable, and I suppose I should have been more precise, is that TFR has staid in the 2-2.1 range since the early 90's. I doubt we will see much movement out of that range.

(you need to click on the arrows twice to get TFR. Not that it's broken down by race, not by ethnicity.)

Also, Hispanic fertility rates are not declining overall, largely because the Mexican-American fertility rate is stuck around 3. Non-Hispanic White fertiliy rates are hovering in the 1.85-90 range

You are of course right that unemploymen in Europe is still high. But the whole point of this debate (I thought) is that because of the demographic shortage there will be a labor shortage. Unemployment rates will thus fall and are, in fact, falling right now.

Also, there is little indication that per capita gdp will actually fall. I think there's good reasons it may stagnate, particularly in a place like italy, which not only has a poor demographic situation and stagnating economy but also poor government. But as Edward points out, if there is out-migration from these countries, it is far easier for Europeans to move elsewhere in Europe.

Aslak said...

I'm sorry, the first link won't work.

Click from there on national trends in births, and so on.

Anonymous said...

"I doubt any government in the core EU countries (ie old Europe) or the US is going to seriously offer substantial legal migration to unskilled Chinese workers on any significant basis anytime soon"

-- there are very substantial numbers of recently-arrived Chinese in the US now, both legal and illegal. You find them even in out-of-the-way places; here in Santa Fe, for example, where there are probably a hundred or two in a city of 60,000.

Will Baird said...

I am waaaaaaaaaaaaaay late to this conversation, but let me give a few comments. First, based on traveling to Ukraine between 2002 and 2006 in four different trips, I would ay there's a nontrivial uptick in births in the last visit (Jun 06). First time I went, it was damned eerie wrt the lack of babies and kids in Kiev. Jun o6 it seemed like there were baby buggies EVERYWHERE. I asked my wife about it - she's a Ukrainian - and she said that there was a babyboom going on. One larger than they'd had since the SU fell. There were even articles in Ukrainian and Russian (and once in english) about it in the paper: they were having to whisk new moms out of the various hospitals because there was no room.

Second my wife read this and wanted to know the source of the stats. She said not to trust ANY Ukrainian gov stats whatsoever.

Given what I saw in three different areas of Ukraine - east, south, central - I have toa gree with her.

Katya said...

Hello, I'm new to this blog.

My question is-aside from publicly funded social security, why do we care that population is dwindling in Ukraine. Why is this a bad thing?
What evidence do we have that low fertility is hurting the country?

Edward Hugh said...

Hi Rouge et Blanc,

And welcome.

"What evidence do we have that low fertility is hurting the country?"

That is a very big question, and really to get an idea for yourself you'll have to read around the posts on this blog and elsewhere to form your own opinion. However...

My guess is that low fertility isn't hurting Ukraine yet. It really needs about 20 years to start to have an impact.

Initially my guess that the problem starts with labour supply shortages as low fertility economies hit growth capacity more rapidly than others. We have many posts on this issue right now since it is THE big problem among the EU 10 Accession countries. This one from Claus is a good start. Basically the shortage of labour - which is only made worse by large scale out-migration, produces rapid inflation as these economies hit their limits. This would be the biggest initial problem, as with inflation it is difficult to export. Thus we get large current account deficits. These work as long as the remittances come back to cover the deficit. But a lot of the money then goes into construction in the home country, but there are few construction workers available, and hence the inflation really becomes a bonfire. The Baltic states are a very good example of this, but I was writing something about this situation in Romania only last night.

The thing is this frenetic activity which is produced is also funded by money which enters the banking system from abroad to finance the mortgages. All this then become very vulnerable to a "correction" such as the one which is setting in on the backs of the sub-prime lending problem in the US. Effectively the fertility issue means that most of Eastern Europe has become "sub-prime" in the sense that the construction and other economic activity is unsustainable, since there is a huge population shortage in the longer term. So we are now at the start of a big correction here. It is begining NOW in Romania since the currency, the Leu, can float, and is thus open to attack. Consequently the speculators are attacking.

I am very sorry about all this. Really it is a big tragedy. But you asked me what the problem was, and I've told you what I see.

Longer term there are all sorts of issues about sustainability in health care and pensions systems as these populations both decline numerically, and age rapidly. But the most pressing one right now is the one I mention, labour shortage generated wage inflation, and if this produces an economic crack in the East the problem will only get worse since hundreds of thousands more will only be forced west to live and support their families. Sorry I cannot bring you better news.

Katya said...

Thanks edward for your comments.

You believe labor shortage is more of a problem in Ukraine, as opposed to Russia, because fewer immigrants are coming in than to Russia?

Is there evidence of inflation now?

Do you think this is a language issue-as all official jobs require both Ukrainian and Russian.
Otherwise, labor restrictions in terms of visas are less severe in Ukraine (for this reason you see more and more foreigners studying there, including in medicine).

Edward Hugh said...

Hello again Rouge et Blanc,

"You believe labor shortage is more of a problem in Ukraine, as opposed to Russia, because fewer immigrants are coming in than to Russia?"

Obviously. Yes. I would say that this is the position. The total numbers for the whole of Eastern Europe and the CIS etc simply don't add up. You can't resolve an aggregate absence of people by simply moving large numbers of people from one country to the next. At the end of the day the books don't balance.

And you can't get the kinds of rate of economic growth the Eastern countries are experiencing without people, since this growth is very labour intensive. This is what the data shows.

There are large numbers of unoccupied people - women in the 50 to 70 age group, but I honestly don't think simply bringing these people into the labour market is going to dynamise things in the way some theorists imagine.

The Russian situation has been getting a much higher profile, and it seems to me that places like Belarus, Moldova and Ukraine have been getting sucked dry.

But the remittances flow changes things, since internal demand in the sending countries starts to rise and growth takes off. But where are the people to come from, the workers?

I have a big post I just put up on Romania which might interest you, since the issues are very similar.

"s there evidence of inflation now?"

Yep, I'm afraid there is. It has been trending up, was at 5.2% in 2003, 9.0% in 2004, 13.5% in 2005, fell back to 9.1% in 2006, and is now projected by the IMF to be 12.9% this year.

Real wage inflation (ie after allowing for the CPI increse) was 13% last year (money increase was around 23%). So the pattern is clear, as, I think, are the underlying causes. There is no easy solution to all this, but what I do think would help would be for the debate about the problem to enter the real world. That always helps.

Katya said...

where are you getting your inflation numbers from?

At the State Statistics Committee of Ukraine, real wages are growing, but not as much as they were before.

Prices are rising, but mostly in the industrial sector.

I'm not doubting that there is inflation, but just want to know what you're looking at.

Also, do you think that perhaps the fertility declines are linked to crumbling infrastructure, that's only now beginning to pick up with more programs on education and health care?


Edward Hugh said...

Hi again rouge et blanc,

"where are you getting your inflation numbers from?"

Well this part is easy, from the IMF who are - since Ukraine are not (yet?) in the EU and hence Eurostat doesn't help - the best source of information.

One thing before I go further, one of the big advantages of a serious EU accession process is that the quality of the domestic statistical sites goes up as countries reform in order to gain access. Romania would be a good recent example with the INSEE and the National Bank getting better all the time. Turkey is another very good example of this. Estonia, IMHO, has the best domestic national stats site on the planet, in terms of design, accessability and downloadability (choice of format etc) on the planet. These days I simply apply techniques learnt in assembling collections of MP3 songs to economic data, graph creation etc. Great fun.

Anyway, you need the IMF. This staff report has a good statistical appendix at the end. And this edition of selected issues Ukraine might interest you.

Try the whole Ukraine page.

Economics has now ceased to be a restricted elite activity and is open to all :).

The data I want to have a close look at is for remittances. I imagine there must be some such data on the bank of Ukraine site but I haven't had time to look yet. Basically the core of my argument is that as people go out, money comes in, this accelerates growth, creates a demand for construction, and then all the problems begin, since where the hell are the people?

In 1968 we used to sing "where have all the flowers gone", today it would be "where have all the people gone". You know, of course, that in Serbia they have a standing joke "would the last one out turn the lights off please". In Moldova this is already no joke.

Basically the simplistic "hooray" attitude to remittances is horribly naive. They are trendendously structurally distorting. The IMF have done a report on this in the Moldovan case (since they are the world champs here), but unfortunately they have not yet put this online yet. Naturally inflation is becoming a big issue there.

The IMF did have a brief review of the Moldovan remittances situation back in February 2006 and note this:

"Migration and remittances have important macroeconomic consequences, too. They drive growth through household consumption; reduce the labor supply and put pressure on wages; finance a large and widening trade deficit; put pressure on the exchange rate to appreciate; fuel inflationary pressures; contribute to higher tax revenues, particularly through higher value-added tax collection on rising imports; and threaten the sustainability of the pension system."

This is a much more balanced view than the one being advanced by the world bank at the moment on the remittances topic. You need to think macroeconomics here and not simply current account flows.

I mention Moldova so much since, of course, Ukraine is Moldava "a lo grande".

Incidentally, to accompany the elections I will be doing a post on the Ukraine economy for our sister blog Global Economy Matters over the weekend, and I will try and go through all of this in a bit more detail there, so maybe you can keep an eye out.

"Also, do you think that perhaps the fertility declines are linked to crumbling infrastructure, that's only now beginning to pick up with more programs on education and health care?"

No. I think the fertility declines form part of a global pattern - you need to look round all the posts on this blog to see that. Basically Eastern Europe did have a very large demographic shock at the end of the 1980s, and this knocked the fertility way down, but it will only eventually (in the best of cases, if there is no major economic stagnation with all the shortage of labour) couple to the Western European values (Spain, Germany and Italy are remember all stuck on fertility of around TFR 1.3. France and Sweden are somewhat higher, but they have had substantial pro natal policies in place since the 1940s, as they both became aware of this problem in the 1930s when population first went below replacement in those countries.

It is interesting how we are so inclined to want to be optimistic on the fertility front. Will's comment here is typical on this:

"First, based on traveling to Ukraine between 2002 and 2006 in four different trips, I would ay there's a nontrivial uptick in births in the last visit (Jun 06). First time I went, it was damned eerie wrt the lack of babies and kids in Kiev. Jun o6 it seemed like there were baby buggies EVERYWHERE. I asked my wife about it - she's a Ukrainian - and she said that there was a babyboom going on."

I don't doubt that there are local baby booms going on as small groups of people reach "now or never" reproductive age, and since many of these people may live in the same (new) neighbourhoods, it can "seem" that something is happening, and then when you come to look at the aggregate data you find it wasn't.

Latvian Abroad wrote me in the week about another uptick, this time in Latvia:

"Demographically, it feels as if I'm seeing substantially more children and pregnant women in Riga than a few years ago. Since the statistical birthrate is still low, I'm either wrong or the young people from countryside are moving to Riga at a rapid rate."

I think his explanation is a good one, the migration of young people of childbearing age into the cities from the countryside. I also had a post about this new "urban legend" about everyone suddenly having more children (in this case in Dusseldorf) here.

The news on the health front will come in the life expectancy area, and while this is good news, it is also expensive, which is just another reason why you need to generate the economic resources to pay for the health care required for a lot of old people.

No easy answers here I'm afraid.

OK, this has been a rather long comment I see. I hope it is useful. Good luck.


Edward Hugh said...

As mentioned in the last comment I now have a much more extensive version of this post, with a lot of systematic economic data on Global Economy Matters.

Katya said...

Is anyone aware of the fertility poster/advertisement in Ukraine that was posted on buses around 2004
"нехай кохаємося "

and would know where I could find a picture of this?

Alex said...

Kharkov is going to host Euro-2012 games. The city will accept ten thousand fans from Europe. And none of them knows, that during 2007 year 10423 tuberculosis infected persons have died in Ukraine. Many of them have forgotten, that illness. Germany, Finland, Austria, Italy do not inoculate their citizenzs against this lethal disease.

Unfortunately, funds became insufficient and the Kharkov authorities made an original decision. Keeping within the limits of Euro-2012 preparation Kharkov reduces the number of tubercular departments. So, by March, 15th 345 places of 545 available will be reduced in the first Kharkov’s antitubercular clinic №1. But do not worry, it is a temporary situation: liquidation of last two hundred places and complete liquidation of the whole clinic will occur till the end of this year.

Ministry of Health sounds alarmed, but the city authorities assure, that patients will be cared. By the state, probably. It lacks money for these purposes,but will surely find some place for five more hundreds carriers of socially dangerous disease. And I have no doubt, in the streets there will be no patients from the seventh department where in specially equipped chambers under reliable protection contained sick prisoners contained. It seems,they will continue their treatment in imprisonment places. Two hundreds reduced phthisiatricians will surely find another place to work. Probably. Forty of them have already found "alternative" job and, henceforth won’t be bothered with tuberculosis patients any more. And there are plenty of them:for January, 1st 4728 persons were registered, and approximately 1500 allocate bacteria and should be kept in a hospital.

Picturesque, isn’t it?

Alex said...

Anonymous said...

I'm a young ukrainian woman. I would like to share my thoughts on demography in Ukraine expressing my own subjective opinion on why fertility drops. I'm not having a child ONLY because no one guarantees me that there will be no another Stalin or morans like him (killed more than 10 mlns of ukrainians and world does not even know this Russian does not even want to accept that fact) whithin the current or future government.I simply cannot put at risk the future lives and wellbeing of my future children.

Anonymous said...

ukrainian woman continues: moreover, all these talks about economics underlying fertility as for me are highly not relevant. Ukrainians are historically and traditionally hard-workers especially women I'm not affraid of working hard to earn economical benefits for my children at any circumstances. The only thing that make difference is the degree of criminality in society. The axis of Evil cannot be productive - it's against any woman's essence...

Anonymous said...

There's absolutely nothing wrong with population decline. A lot bigger problem would be the increase of population as seen in Asia and Africa.
We've been all hypnotized by economic growth for too long.
My personal opinion is that every country in the world should strive to achieve population decline with civilized measures.
There's a lot more on this planet than just people and somehow we forgot about it completely...

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