Beat the Press

Dean Baker's commentary on economic reporting


Wasting Public Funds on Destroying the Planet

It is remarkable that ostensibly intelligent people can be made to fear the possibility that Europe and Japan will be less crowded places in the years ahead. The Financial Times has an article that reports on a warning from “top fertility experts” over “Europe’s chaotic response to its demographic crisis.”

It is hard to find the evidence for the crisis in the story. The article reports that health care spending as share of GDP is projected to rise from a Europe-wide average of 6 percent at present to 8 percent by 2050. Since the U.S. currently spends 15 percent of its GDP on health care, it is difficult to get too concerned about this prospect.

The article gives the usual hype about the rise in dependency ratios – there will be fewer workers for every dependent. Those who have mastered arithmetic know that the projected increases in productivity swamp the impact of rising dependency ratios on living standards. For example, if productivity growth averages a very modest 1.5 percent annually, by 2050, before-tax wages will be nearly twice what they are today. This means that even if taxes increased by 15 percentage points over this period, workers would have far higher after-tax incomes in 2050 than they do today.

The best way to deal with Europe’s “demographic crisis” would be to teach arithmetic to the top fertility experts and the reporters who cover their press statements.


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