One can’t move the male parent. One has to find one that commits. That’s the mismatch issue.
Harvard economist and 2023 Nobel Laureate Claudia Goldin wasn’t speaking about modern relationships in the abstract; she was diagnosing why birth rates are collapsing across the developed world.
In an email conversation with Invezz, she reveals an uncomfortable truth: falling fertility isn’t about cultural decline. It’s about economic systems built for families that no longer exist.
From Tokyo’s empty nurseries to Seoul’s vanishing children, the world faces a delayed demographic shock most governments are unprepared to handle.
The crisis already on the ground
In 2024, Japan recorded its sharpest population drop ever: 908,574 people in a single year, with 45 of the country’s 47 prefectures losing residents.
The working-age population (ages 15-64) dropped to 59.6%, remaining below 60% since 2018.
Construction sites faced 4.6 job openings for every applicant, a labor shortage so severe that it’s slowing infrastructure projects nationwide.
Then came the nursery school closures. In the first half of 2025 alone, 22 childcare centres shut down, a 70% jump from the previous year.
The reason wasn’t a lack of demand for childcare. There was a lack of children. With just 686,061 births in 2024, Japan’s fertility rate hit 1.15 children per woman.
Demographers project the workforce could shrink by 11 million people by 2040.
Illustration: Devesh Kumar
South Korea’s numbers are even more extreme. The country’s fertility rate dropped to 0.75 in 2024, the lowest in the world.
In Seoul, it fell to 0.64. The Bank of Korea now projects the economy could begin shrinking by 2047.
The government has spent heavily on pro-natal incentives, reaching KRW 42.9 trillion (approximately $32 billion) by 2021, with minimal impact on fertility rates. None of it has reversed the trend.
China’s demographic reversal is happening even faster. After decades of the one-child policy, fertility has collapsed to 1.2 children per woman.
The property market is under strain as demand softens in a country with fewer young families.
This isn’t isolated to Asia. Italy’s fertility rate sits at 1.27. Spain’s at 1.32. Poland’s at 1.33. Even the United States has dropped to 1.6, below the replacement rate of 2.1.
It’s not theoretical anymore. It’s here.
Why people aren’t having kids, and culture isn’t the answer
The easy explanation is to blame cultural shifts: individualism, materialism, and young people prioritising careers.
But that ignores the economic reality millions face.
Housing costs have exploded faster than wages. In many major cities, homeownership is delayed into people’s 30s or 40s, if it happens at all.
Childcare is expensive. Healthcare is expensive. The cost of raising a child to adulthood in a developed economy can exceed $300,000.
Work intensity has also escalated. Japan and South Korea are infamous for brutal working hours, but the pattern is broader.
Parental leave, where it exists, is often minimal or unpaid. Remote work expanded during the pandemic, but many employers are pulling back.
And then there is the care burden. Despite women’s rising education levels and workforce participation, childcare and eldercare still fall disproportionately on mothers.
Goldin explains this isn’t about women’s choices in isolation; it’s about the lack of committed, equal partners in parenting.
“Jobs have characteristics that are easy to predict. One can move to the job with fewer hours, closer to home,” Goldin said.
That is what we know women have done to combine work and family.
Women adapt by taking jobs with shorter commutes or flexible hours. Men, on average, don’t. That structural mismatch makes having children increasingly incompatible with economic stability.
This is why fertility decline isn’t a moral failure. It’s a predictable response to economic systems built for single-earner households in an era when both partners must work.
The real hit comes later, and that’s what scares economists
The biggest economic consequences of today’s falling birth rates won’t arrive for another two decades.
Wolfgang Lutz, founding director of the Wittgenstein Centre for Demography, has been trying to explain this lag to policymakers.
“For the coming two decades, current fertility rates will not have many consequences since this will only affect the number of children and does not impact the number of adults yet,” Lutz told Invezz.
Fewer children being born today means fewer kids in schools. That actually reduces short-term costs. Governments spend less on education and childcare infrastructure.
But in 20 years, those missing children become missing workers. The labor supply contracts. GDP growth slows. Tax revenues decline. Social safety nets face a double squeeze: fewer workers paying in, more retirees drawing out.
Lutz sees a window of opportunity most governments are ignoring.
This window could also be used to increase the quality of education in terms of spending more on each child when there are fewer of them.
Smaller cohorts mean more resources per student. Better skills. Higher productivity. The problem is that most countries aren’t making those investments.
His key insight is about human capital.
“A key factor in all of this is going to be the education, human capital, and skills of the workforce,” Lutz said.
Many studies have shown that better skills and the associated higher productivity can to some extent, compensate for the smaller number of workers.
In other words, fewer workers aren’t necessarily a catastrophe if those workers are highly skilled and equipped to leverage new technologies. But that requires strategic investment now.
Why paying people to have babies doesn’t work
Invezz spoke with Ronald Lee, emeritus professor of demography at UC Berkeley, who has watched governments try to boost fertility for decades. His assessment is blunt.
Governments have been ineffective in their attempts to raise fertility at any level. At best, their policy interventions cause a short blip followed by a dip.
South Korea’s spending spree is the most dramatic example. Despite aggressive incentives, fertility kept falling.
France has the most generous family policy in Europe, and its fertility rate of 1.9 is the highest on the continent. But even that is well below replacement level and declining.
Cash bonuses create a brief uptick as couples time births to capture payments, then fertility falls back. Military exemptions, housing subsidies, and even luxury car giveaways have failed to reverse the trend.
Lee makes an important distinction about what’s actually at stake.
“Low fertility is not a big problem for per capita economic well-being until it drops below around 1.4 births per woman,” he explained.
But if the focus is instead on GDP growth rates, yes, those will drop roughly one-for-one as the growth rate of the working-age population drops.
Individuals may not feel poorer. But the overall economy grows more slowly, or not at all. That matters for government revenues and debt sustainability.
This is why the political response is often misaligned. Leaders chase GDP growth through higher birth rates, but raising fertility is effectively impossible. Adaptation is more realistic.
What actually works: Adaptation over reversal
If governments can’t reverse fertility decline, what can they do? The answer lies in building economies that function with fewer people.
Better childcare infrastructure is essential as an economic necessity for dual-earner households.
Countries with universal, affordable childcare don’t have higher fertility, but they do have higher female workforce participation. That matters when labor is scarce.
Work reform means flexible schedules, genuine remote work options, and parental leave for both parents. Japan is experimenting with four-day work weeks. Some European countries mandate paternal leave to equalize care burdens.
Immigration is the most direct offset to labor shortages. Japan’s foreign worker population hit 3.5 million in 2025, a record high.
But immigration is politically contentious almost everywhere, and even high immigration only partially offsets natural population decline.
Productivity and automation offer another path. Japan is investing heavily in robotics for eldercare, agriculture, and construction.
AI and automation can’t replace all human work, but they can extend the productivity of a smaller workforce.
Investment in education and skills is Lutz’s central recommendation. Fewer workers with higher skills can maintain economic output.
This requires rethinking education systems and continuous upskilling throughout careers.
Care economy investment is unavoidable. Ageing populations need eldercare, healthcare, and social services.
Countries that invest early in care infrastructure will fare better than those that wait until the crisis is acute.
Illustration: Devesh Kumar
The window is closing
Population decline is not an overnight catastrophe. It’s a slow-motion structural shift that gives societies time to adapt. But that time is finite.
The children not born in 2025 and 2026 are the workers who won’t be available in 2045. They are the taxpayers who won’t be funding pensions, the consumers who won’t be driving demand.
The demographic math is already locked in for the next two decades.
Countries that treat this as a distant problem will face the sharpest economic pain. The labor shortages will hit harder. The fiscal squeeze will be tighter. The care crisis will be deeper.
But countries that use the next 20 years strategically have options. Invest in education now, and the smaller workforce of 2045 can be more productive.
Reform work structures now, and dual-earner families can better manage the transition. Build immigration pathways now, and labor shortages can be partially offset.
The question isn’t whether populations will shrink. In much of the world, that’s already locked in.
South Korea, Japan, Italy, Spain, and dozens of other countries will have smaller populations in 2050 than they do today.
The question is whether governments will use the window they have, roughly two decades, to build economies that can function with fewer people, or waste that time pretending the decline can be reversed with cash bonuses and patriotic appeals.
Claudia Goldin identified the core problem: a mismatch between economic structures and modern family realities. Ronald Lee documented the failure of pronatalist policies. Wolfgang Lutz mapped the timeline and the opportunity.
The research is detailed. The data is clear. The warning signs are already visible in empty nurseries and unfilled job openings.
What’s missing is the political will to act on what we already know.
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