How Shifts To Smaller Family Sizes Contributed To The Asian Miracle

July 3, 2006

Economists credit declining fertility, from the mid-1960s to the early 1990s, as a major contributor to sustained economic growth among the Asian Tigers—the economically vibrant nations of South Korea, Taiwan, Thailand, Singapore, Indonesia, Malaysia and the former Hong Kong Territory. Research indicates that shifts to smaller family sizes and slower rates of population growth played a key role in the creation of an educated workforce, the accumulation of household and government savings, the rise in wages, and the impressive growth of investments in manufacturing technology.

Asian Family Planning Programs Began Early

By 1965, each of the countries that would become Asian Tigers 20 years later had established family planning programs. U.S. technical assistance and training proved instrumental in improving family planning services in several East Asian countries, especially in South Korea, Taiwan, Thailand and Indonesia. Fertility declined as a combined result of investments in family planning services, an increase in the level of girls’ education, an increased rate of entry of women into the work force and delayed marriage.

By 1995 couples in six out of eight of the Asian Tigers were having fewer children on average than U.S. couples. Today fertility in South Korea, Taiwan, Singapore, Hong Kong and Thailand is below two children per couple (the U.S. average is 2.1). In Indonesia (2.2 children per couple) and Malaysia (2.6 children per couple) fertility has fallen rapidly with increased access to modern contraception. Where the two-child family average persists, and where migration is not a factor, countries will ultimately reach a stable population.

Fertility Decline Created Economic Opportunities

A shift to smaller families produced three important demographic changes: slowed growth in the number of school-age children, a lower ratio of dependents to working-age adults and a reduced rate of labor force growth. These alone were not enough to create the educated workforce, high wages and savings rates, and the capital-intensive industries that now characterize the Asian Tigers. But when linked to an enterprising business sector, wise public investment and an equitable education system, demographic change soon fostered economic opportunity.

Growth In The Number Of School-Age Children Slowed

As fertility declined and incomes grew among the Asian Tigers, household and government educational investments per child rose sharply. By maintaining educational expenditures at about the same percentage of the national budget between 1970 and 1989, real government expenditures per primary school student in South Korea more than quadrupled. Had the share of South Korean school-age children grown at the rate of that of Kenya, which experienced rapid population growth, the South Korean government would have had to spend 5.6 percent of its budget to achieve universal schooling for all ages rather than the 2.6 percent it actually spent.

Household And Government Savings Increased

With fewer children, households placed more of their earnings in savings, and governments reduced public expenditures. In 1960, there were between 1.3 and 1.4 working-age adults for each child in South Korea, Taiwan, Singapore and Hong Kong. Because families chose to have fewer children, by 1995 there were between 3.0 and 3.7 working-age adults for each child, dramatically reducing the dependency burden and allowing families to save more of their incomes. In Thailand, Indonesia and Malaysia fertility decline began about a decade later. During the same 35-year period, the ratio rose from between 1.1 and 1.4 to between 1.7 and 2.4 workingage adults per child in these countries.

Figure 1: The Asian Tigers: Fertility Decline and Income Growth 1960 – 2005

Source: Fertility from United Nations Population Division (2005); gross national income per capita, atlas method (current US$) from the World Bank’s World Development Indicators (2004 and 2006).

Labor Force Growth Declined

As growth in the labor force slowed down, both wages and capital investment rose. By the 1980s, rates of labor force growth among the Asian Tigers slowed well below those of other regions. Wages rose sharply as continued economic development created demand for labor. Aware that India and China would edge them out of industries requiring only low-skill, low-wage labor, East Asian policymakers encouraged entrepreneurs to move into capital-intensive industries and advanced technology.

More Tigers In The Making?

Other economic miracles are possible. In 1950, East Asia’s health, literacy, fertility and economic profiles were similar to much of present-day sub-Saharan Africa, the poorest region of the world. The Asian Tigers took only a generation to make the changes that transformed their societies. More recently, Ireland, Chile and Vietnam have taken advantage of their favorable age structures. The next tigers are likely to emerge among developing countries whose governments are open to competitive markets, dedicated to universal education and intent on increasing voluntary access to family planning.

Why Fertility Decline Matters To The United States

The Asian Tigers have emerged as an important part of the U.S. export market. South Korea and Taiwan were among the top-10 importers of U.S. products in 2005. Five out of the seven Asian Tigers ranked in the top 20. By the close of 2005, purchases by the Asian Tigers comprised more than 12 percent of all U.S. annual export earnings.

The East Asian experience demonstrates how important a smaller average family size can be to economic development. Several economists have credited about one-third of the Asian Tigers’ impressive economic growth from the mid-1960s to the mid-1990s to demographic change alone. Yet investments in family planning services do much more. Access to quality contraception and related reproductive health services reduces maternal illness and mortality, and increases the likelihood that each child born is wanted and healthy. Thus voluntary family planning amounts to a sound investment in the social, health and economic futures of nations.

Asian Development Bank (ADB). 1997. Emerging Asia: Changes and Challenges. Manila: ADB.

Amy Ong Tsui. 1996. Family Planning Programs in Asia: Approaching a Half-century of Effort. Asia Population Research Reports, No. 8. Honolulu: East-West Center Program on Population.

Birdsall, N., A.C. Kelley, and S.W. Sinding (eds). 2001. “Population Matters: Demographic Change, Economic Growth and Poverty in the Developing World.” London: Oxford University Press.

U.S. Census Bureau & U.S. Bureau of Economic Analysis. March 2006. “FT900: U.S. International Trade in Goods and Services.” Washington, DC: U.S. Dept. of Commerce. World Bank. 1993. The East Asian Miracle. Oxford: Oxford University Press.



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