Saturday, August 26, 2017

Demographic decline:  the case of Mauritius


While explaining systems thinking, experts often give the example of someone in a traditional bathroom with a hot-water and a cold-water tap connected to the shower.  First the water is too cold, he turns the hot water tap and increases the flow of hot water.  The water remains cold.  Unaware of the delay in-built in the system, he turns the hot water tap further and suddenly the water is too hot.  He panics and opens cold-water tap to the maximum …

We seem to be confronted with a similar scenario with population control but with potentially more dire consequences.  In the 1960s the fearsome spectre of a world with too many people alarmed governments.  As a result, billions of dollars were spent across the world to prevent a looming human population explosion.  In Mauritius too, a very effective ‘family planning’ program was implemented.

A different ‘demographic time bomb’

Unaware of or neglecting the delay inherent in the system, the authorities intensified population control efforts in the 1980s and 90s with the result that by the turn of the century, some demographers were sounding a different alarm:  throughout Europe, Russia and parts of Asia, especially Japan, birth rates were falling below replacement level.  On a global level, it is estimated that the overall population will increase from the current 7.5 billion to around 9 billion in 2050 and then go into steep decline.  The factors contributing to demographic decline include increasing female literacy and school enrolment, higher divorce rates, later marriage, contraceptive use and abortion.

The situation in Mauritius follows the global trend.  However, because of the small size of the country, the consequences may be felt much sooner.  The number live births in the Republic of Mauritius has declined from 26,294 in 1980 to 12,738 in 2015 as shown in Figure 1 below:


Figure 1 – Live births in the Republic of Mauritius*

Interestingly, the live births in 2015 were lower than the number of live births in the first decade of the last century in the Island of Mauritius alone, as shown in Figure 2 below:


Figure 2 – Live births in the Island of Mauritius*


If this trend continues, the number of live births could fall to 10,000 or less in 2020.  We need to factor in those emigrating to developed countries in search of better opportunities.  We should also expect some of these developed countries to offer interesting incentives to lure certain categories of immigrants from less developed economies like Mauritius in order to deal with their own demographic problem.   This would only exacerbate our problem.


This situation is not without consequences.  In the next 3 to 5 years, the country will require only about half the number of primary schools it currently has.  The nine-year schooling reform will temporarily mitigate the impact of this declining birth rate on the secondary schools.  In the next 15 to 20 years, there would be a shortage of workers which may result in significant wage inflation.  The country is already experiencing shortage in sectors like manufacturing and construction.  

In the long term, this declining birth rate coupled with longer life expectancy will result in an ageing population.  This will bring about increase in the dependency ratio with respect to pension commitments – with a higher burden on the shrinking working population.   Higher savings for pensions may reduce capital investment and contribute to lower rates of economic growth.  This may in turn result in lower tax revenues to finance pension commitments.

Some available options

Many of the options for mitigating the impact of the declining birth rates and ageing population are not likely to be politically popular.  These include: making people work longer and encouraging selective immigration to deal with the shortage of workers, increasing tax rates to deal with falling tax revenues, and implementing means-tested pensions to reduce tax commitments.  More popular measures would include income tax rebates for those having more children, subsidised child care facilities, longer maternity / paternity leaves (e.g., 6-9 additional months on half pay), and other similar measures.  In the process, we would hopefully get better at systems thinking and learn among other things how to patiently deal with systemic delays.

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