Germany passes Japan to have lowest birth rate

Analysts project that drastic slump will hurt growth in Europe's economic powerhouse
The Sunday Times, 31 May 2015

Berlin - Move over Japan. Germany now has the world's lowest birth rate, and its economy is poised to suffer as a result.

Germany recorded about 8.3 births per 1,000 citizens in the five years until 2013, less than Japan's 8.4, according to a study released on Friday by consultants BDO AG and the Hamburg Institute for International Economics.

In Europe, Portugal and Italy came in second and third, with an average of 9 and 9.3 children, respectively. They were followed by France and Britain, both averaging at 12.7 births per 1,000 inhabitants, BBC reported, citing the study.

While other Western nations are also experiencing declining birth rates, nowhere has the change been as drastic as in the country that carries the crown of Europe's economic powerhouse. The tally has shrunk by half in the past 50 years, according to the findings.

"This results in significantly negative consequences for Germany's economic attractiveness and performance in the global competitive landscape," Mr Henning Voepel, head of the Hamburg institute, said in a statement. The kinds of impact may include rising non-wage labour costs and an increased urgency to attract skilled workers from abroad, BDO said.

Chancellor Angela Merkel has singled out Germany's ageing population as one of the biggest challenges the country faces in the decades to come.

The number of people of working age for every pensioner may shrink to two by 2033 from four in January 2013, projections by Eurostat, which provides statistical information for European Union institutions, show.

"Without strong labour markets, Germany cannot maintain its economic edge in the long run," Mr Arno Probst, a BDO board member, told the BBC.

While no solution has been reached to deal with the crisis, Mr Probst suggested the country employ young immigrant workers and more women to avoid economic problems.

Germany has one of the highest migration rates in the world, but has also seen growing support for anti-immigration party Alternative fur Deutschland, the BBC said.

Last Friday's study underlines the challenges Western nations face in competing with rapidly growing emerging economies in Asia and other parts of the world.

Ranked according to their attractiveness to entrepreneurs, Switzerland came in top among 174 places, followed by Singapore and Hong Kong. Germany, Europe's biggest economy, ranked 11th, and the United States was 14th, according to the report.

The researchers looked at variables, including political stability, education, health, population trends, business and work freedom, regulatory quality and inflation, to arrive at their findings.

Bloomberg

Ticking demographic time bomb in Germany
Birth rate falls to lowest level in the world despite slew of welfare perks
By Jonathan Eyal, Europe Correspondent In London, The Straits Times, 4 Jun 2015

NEWS that Germany's birth rate has collapsed to the lowest level in the world and its workforce will start plunging at a faster rate than Japan's by the early 2020s has created a stir in Europe.

Accustomed to viewing Germany as the continent's superpower, European media pounced on the strategic implications of these developments. "Germany's dominance over as demographic crunch worsens," proclaimed a headline in London's Daily Telegraph.

But the German public, long accustomed to such gloomy projections, shrugged off the news. And most German politicians kept their silence, since they know they can do little to reverse their country's demographic calamity.

A study by the World Economy Institute, one of Germany's top academic establishments, has found that the average number of births for every 1,000 people now stands at only 8.2 in the country, slightly below Japan's 8.4 and well behind the 12.5 average in Europe's other big nations such as Britain and France.

If current trends are maintained, Germany's overall population will shrink from its present level of 81.3 million to 67 million in the second half of this century. "We want people to face up to the enormity of the problem," said Dr Andre Wolf, who co-authored the report.

The German government cannot be accused of ignoring the matter. Since 2000, the authorities in Berlin have issued an average of one policy paper a year on demographic issues, and thrown vast quantities of money at the problem. Young families are entitled to generous child supplements and separate parental benefit payments. They also continue to receive assistance with their children's education.

Financial consultants hired by the German government have estimated that up to half of all the country's welfare spending is related to boosting demographics. "But our family policies were largely unsuccessful in reversing declining birth rates," concluded Dr Wolf.

Some reasons for this failure may be purely technical. German welfare entitlement schemes are so complicated that many families are unaware of what they may be entitled to.

There is also considerable evidence to suggest that what families need most is not extra money, but help with childcare. France's emphasis on payments for infant daycare centres and schools, thereby letting young mothers raise a family and keep a professional career at the same time, has proven to be widely popular, as well as efficient in boosting birth rates.

But Germany, which hesitantly introduced a skeletal infant daycare scheme three years ago, remains hesitant to push it, largely because some right-wing politicians in the government continue to believe that the primary role of women is to raise a family.

Whatever the German government does, it is difficult to see how such appalling demographic trends can be overturned quickly: Academic research indicates that fertility rates are affected by longer-term cultural and social behavioural changes.

Germany has the highest percentage of women refusing to produce an offspring - a quarter of women born during the late 1960s and early 1970s have had no children at all.

And the traditional benefits of parenthood are no longer that evident either. Most German couples live together without marriage, and a third of all babies are born out of wedlock. Most adults also do not look after their elderly parents. That job is left to the state.

In short, parenthood is neither a glue to married life nor a cushion for old age.

The impact of such a demographic decline goes beyond the strain it puts on social, medical and welfare spending, and hits right at the heart of Europe's current strategic arrangements.

In the poorer, former communist eastern part of Germany, entire towns are now more or less deserted, as older people die and younger people migrate westwards. That reinforces Germany's political divide.

Immigration is touted as the answer to the declining birth rate. But there are already almost 10 million foreign-born nationals in Germany, around 12 per cent of the total population, and the political backlash against migrants is rising.

The only workable alternative left to the government is to eliminate its public borrowing and increase its Budget surplus in order to avoid a Japan-style trap of high debts and an ageing population. And, because Germany is the fundamental pillar of the euro single currency, Germany's austerity policies are now being exported throughout the continent.

Germany may indeed cease to dominate Europe. But not before Europe helps to pay for the costs of that decline.