Sometimes the term underpopulation is applied to a specific economic system. It does not refer to carrying capacity, and is not a term in opposition to overpopulation, which deals with the total possible population that can be sustained by available food, water, sanitation and other infrastructure. "Underpopulation" is usually defined as a state in which a country's population has declined too much to support its current economic system. Thus the term has nothing to do with the biological aspects of carrying capacity, but is an economic term employed to imply that the transfer payment schemes of some developed countries might fail once the population declines to a certain point. An example would be if retirees were supported through a social security system which does not invest savings, and then a large emigration movement occurred. In this case, the younger generation may not be able to support the older generation.
The effects of a declining population can be adverse for an economy which has borrowed extensively for repayment by younger generations. Economically declining populations are thought to lead to deflation, which has a number of effects. However,
But for many industrial economies, the opposite might be true as those economies often thrive on mortgaging the future by way of debt and retirement transfer payments that originally assumed rising tax revenues from a continually expanding population base (i.e. there would be fewer taxpayers in a declining population). However, standard of living does not necessarily correlate with quality of life, which may increase as the population declines due to presumably reduced pollution and consumption of natural resources, and the decline of social pressures and over-utilization of resources that can be linked to overpopulation. There may also be reduced pressure on infrastructure, education, and other services as well.
The period immediately after the Black Death, for instance, was one of great prosperity, as people had inheritances from many different family members. However, that situation was not comparable, as it did not have a continually declining population, but rather a sudden shock, followed by population increase. Predictions of the net economic (and other) effects from a slow and continuous population decline (e.g. due to low fertility rates) are mainly theoretical since such a phenomenon is a relatively new and unprecedented one.
A declining population due to low fertility rates will also be accompanied by population ageing which can contribute problems for a society. This can adversely affect the quality of life for the young as an increased social and economic pressure in the sense that they have to increase per-capita output in order to support an infrastructure with costly, intensive care for the oldest among their population. The focus shifts away from the planning of future families and therefore further degrades the rate of procreation. The decade-long economic malaise of
The economies of both
In a country with a declining population, the growth of GDP per capita is higher than the growth of GDP. For example,
A declining population (regardless of the cause) can also create a labor shortage, which can have a number of positive and negative effects. While some labor-intensive sectors of the economy may be hurt if the shortage is severe enough, others may adequately compensate by increased outsourcing and/or automation. Initially, the labor participation rates (which are low in many countries) can also be increased to temporarily reduce or delay the shortage. On the positive side, such a shortage increases the demand for labor, which can potentially result in a reduced unemployment rate as well as higher wages. Conversely, a high population means labor is in plentiful supply, which usually means wages will be lower. This is seen in countries like
Analysing data for 40 countries, Lee et al. show that fertility well above replacement and population growth would typically be most beneficial for government budgets. However, fertility near replacement and population stability would be most beneficial for standards of living when the analysis includes the effects of age structure on families as well as governments. And fertility moderately below replacement and population decline would maximize standards of living when the cost of providing capital for a growing labour force is taken into account.
A smaller national population can also have geo-strategic effects, but the correlation between population and power is a tenuous one. Technology and resources often play more significant roles.