Facebook Blogging

Edward Hugh has a lively and enjoyable Facebook community where he publishes frequent breaking news economics links and short updates. If you would like to receive these updates on a regular basis and join the debate please invite Edward as a friend by clicking the Facebook link at the top of the right sidebar.

Thursday, August 9, 2007

Latvian Fertility

Well, while we are looking at the economic straights which Latvia is now in, it may also be useful to see how we got to where we are. Basically the Latvian economy is growing very rapidly, in all probability too rapidly even in the best of cases. But Latvia does not have the best of cases. If there were a plentiful and adequate supply of fresh labour, growth rates near the present one might not be unthinkable (remember China's GDP is currently growing at around the 11% annual rate, and India may well soon overtake this - over say a 5 to 10 year window). So why not Latvia? Well you have to look at the fertility and migration situation, that is why not.

Latvian Abroad had a post over the weekend which gave some details of the numbers of Latvians in the UK and Ireland (which must surely be the principal destinations since 2005), while Latvijas Statistika offered us some useful information on Latvian fertility earlier in the week.

But before we get into some of the more recent details, I've compared a simple chart showing live births in Latvia since the late 1980s (and in the process, documented the natural population decline by making a comparison with deaths, as can be seen the crossover point is around 1992).

And before going any further I think it important to point out that, from an economic point of view, it is live births and not the Total Fertility Rate statistic which matters, since these births are what regulate the actual flow of new people into the working age groups. As can be see there was a very dramatic decline after 1987 (ie 20 years ago). The decline steadied after 1999, and the number of births has risen slightly, but it is important to point out here (and even forgetting for the moment about the impact of migration) that the number of births will surely soon start to fall again.

This is principally for two reasons:

In the first place there is the fact that the median age of first birth for Latvian mothers at around 25.5 is still comparatively low by West European standards (in Western Europe the numbers normally are approaching the 30 mark). Let's have a look at a chart from Latvijas Statistika:

So we can see that mean ages at first birth have been steadily rising. This process is known as birth postponement, and produces what is known as a "birth dearth" as women delay having children. This process also produces artificially low readings on period based fertility indicators (like the standard Total Fertility Rate), but this, as I say, is largely irrelevant from an economic point of view, since what we are interested in is how many people will be arriving in the labour market in the years ahead. And as I say, since postponement has only run approximately half its probable course, we should expect more from the "birth dearth effect".

But there is a second reason why births are likely to go down with time rather than up, and this is known as the population momentum effect. If we look at the number of children born in 1999 (just under 20,000), then even assuming that Latvia achieved that magical 2.1 perfect reproduction fertility number, they would only produce 20,000 children, not the old level of 40,000 or so. And we can be pretty sure that these 20,000 children born in 1999 won't do this even under the best of circumstances (which, of course, we aren't) since even being optimistic they are only likely to have completed cohort fertility of somewhere in the 1.5 - 1.7 region if other countries examples are anything to go by. So these 20,000 children will produce say 16,000 or 17,000 children.

And there is worse to come, since these children will start to reproduce, on average, in 2030, and not 2025. So the smaller number of births will be spaced out over even longer periods of time, etc , etc.

Well of course, all of this is so far into the future that it is not exactly the burning topic of the present crisis. On the other hand do not forget about it altogether, since that is what people did back in 1990, and look where we are now. If countries like Latvia are ever to be put on a stable footing this fertility issue needs to be addressed, and seriously, and pronto.

In the meantime the only alternative is inward migration, and if the Latvian government is serious about trying to avoid a hard landing then it had better get serious about migration, and how to facilitate it.

Incidentally, in the light of everything said above, this extract from Latvijas Statistikas is the next best thing to "gobbledygook":

As girls born in the eighties of the 20th century have reached the fertile age, the number of women at this age does not reduce further more. At the beginning of the 2007, as well as in 2000, in Latvia there were 590 thousand women aged 15-49 or 48% of the total number of the women (in comparison: in 1997 - 45%). Women aged 20-29 has the highest birth rates. The share of women in this group in the total number of the women at fertile age has increased from 27.2% in 2000 to 28.7% at the beginning of the 2007. The increase of the number of young woman, as well as the growth of the number of the marriages, promise the increase of the births also in the future.

They don't really seem to understand how this process works, and promising an increase in births in the future on this basis is to offer one more time false hopes and more reasons for inaction. Latvia deserves better.

And also just for the record, here's the fertility chart based on TFRs:

As you will notice, the fertility rate registered has started to rise again slightly. Now take a look at the earlier chart on mean first birth ages, and note how the rate of increase slows in the second half of the period covered over the rate of increase in the first part, and here's your "improvement in fertility" (in large part). There really is no big mystery about this.

But completed cohort fertility in Latvia never was as low as 1.13, this number is just a statistical artifact. We simply do not know what the completed fertility rate for the women born in the years 1980-1985 will be, but as I say above, looking at societies in Western and Southern Europe (Germany, Italy etc) without a systematic child support system in place, I would say 1.5 to 1.7 TFR would be a fair (and reasonably optimistic) guess.

Also the map in below presents the mean ages of mothers at first birth in Europe around 2003, and shows the extent of postponement in the timing of parenthood. To put these data in perspective -- in 1975 the highest mean age at first birth registered in Europe was 25.7 (in Switzerland), and in the majority of countries the indicator was between 22 and 24 years. Most researchers interpret this as part of the general trend towards postponement of choices that are irreversible or hardly reversible, usually associated with the ideational and other changes linked to the so-called “second demographic transition”. Again in line with the predictions of the second demographic transition theory about the importance of individual autonomy and self-expression, the differences between individuals within a population in the timing of parenthood are also increasing. And also as you will note, the differences between Western and Eastern Europe in terms of birth timing is still striking.

(Please click over image for better viewing)


Vladlen Šenin said...

I see the point, but could you please explain more clearly how increase in first birth ages relates to *rise* in fertility rate. Shouldn't it result in fertility rate decrease?

P.S please delete previous comment

Edit: misused words (fall - rise)

Edward Hugh said...

Hello EVM,

Welcome. I guess you found your way here through the sidebar.

"I see the point, but could you please explain more clearly"

OK, I will try. Basically, there is a decline and then a recovery. As people put off having children less children are born during a period of time. This produces an artifically high drop in the Total Fertility Rate. But then the postponement process runs its course - say at the age of around 30 - and then a lot of people all have children at the same time, which produces the sensation of a mini baby boom. As a result the TFR spikes up again.

For this reason the Cohort Fertility Rate - based on the total number of children born to women during their entire reproductive lifetime - is a much more interesting indicator. The upper end is normally taken as 45, which means that in 2010 we will have the data for people born in 1965. That is the disadvantage with the CFR, it is not exactly "fresh" data, and makes it hard to plan policy for current changes, which is why we still normally use TFR.

So there is a fertility "recovery", but how far it goes is still in doubt.

But most of this is beside the point, since what really matters for a society is the shape of the pyramid - this has a lot more economic importance than most people imagine.

And the shape is not determined by TFR of CFR, but by the volume and rate of birth postponement, since this is what determines the size of each generation, and of course each generation then produces a subsequent generation, so you can get a kind of "meltdown" dynamic.

If you add to this the kind of acute economic crisis you now have in Latvia, and outmigration of lots of people in reproductive ages (who are already starting to come from reduced generations), then the problem can become quite serious.

Of course, with all the emotions being focused on the devaluation debate this sort of thing is hardly getting talked about.

Vladlen Šenin said...

Hello Edward,

Thanks for the answer.

I apologize that I didn't introduce myself, I thought you won't answer.

I have link to your blog on Alpha.Sources blog, when I decided to build an opinion on the devaluation probability (I decided to start from basics). I'm not an economist, I just like to know how everything works.

Back to the topic. I understand now. It's like if at one point (slow postponement process in this case) all women would decide to have babies (delay here), and we would see rapid jump at total fertility rate (equaled to the number of all women) and high starting point of cohort fertility rate. But after that we would see fall (slow increase in our case) of cohort fertility rate to 0 (assuming there were no women before) but again after all women get to age when they reach an age to be able to have children we would see instant jump in total fertility rate (probable decline in the case of Latvia).

"If you add to this the kind of acute economic crisis you now have in Latvia, and outmigration of lots of people in reproductive ages (who are already starting to come from reduced generations), then the problem can become quite serious."

So the best politics, as I imagine, would be to try bring back migrated population back to Latvia, since that wouldn't damage the shape of natural pyramid, as for example bringing people from abroad, since it would take a lot of resources to control age of arriving people (like USA most likely do).

I appreciate your kindness and willingness to help.

Edward Hugh said...

Hello again evm,

"I'm not an economist, I just like to know how everything works."

Well, you set yourself a difficult objective.

Basically the devaluation issue is a side question. It is important enough now, and generates, of course, a lot of emotions. But the real issues, those which will actually determine the sustainability or otherwise of your country, are all to do with what we are talking about here, which, as you will notice from the deafening silence which surrounds our conversation, few people are even thinking about right now.

"So the best politics, as I imagine, would be to try bring back migrated population back to Latvia,"

Well, there is a lot to be done. And what you mention is one possibility, although this road presents a lot of difficulties. Indeed I fear a long drawn out crisis will lead even more to leave.

Anyway, when the immediate problems (to devalue or not to devalue etc) are behind us, and the emotional temperature has cooled a little, I fully intend to be raising all these issues much more forcefully, and looking, of course, towards solutions.

Anonymous said...


I understand the problem in Latvia, but what I don't get is your solution. You say:

"In the meantime the only alternative is inward migration, and if the Latvian government is serious about trying to avoid a hard landing then it had better get serious about migration, and how to facilitate it."

Your solution is a such a deja vu - we have already tried it once. Back at the end of 1940s, when USSR decided to capitalize on Latvia's intellectual and industrial capacity by building a lot factories, the USSR ran into the problem of not having enough people to work all the factories (hundreds of thousands of people had been deported to gulag camps in Siberia after the occupation, killed during the war or fled to the developed world). And so the russification policy was put into second gear and hundreds of thousands of immigrants arrived to smooth along the growth.

60 years later, here we are, except on top of economic problems we now also have social tensions between the majority Latvians and minority immigrants, who have no respect for the country they live in and the language we speak.

So how is immigration more than a temporary patch? Is perpetual population growth really the answer to this problem? "We have too few people so lets import some" doesn't really sound like a permanent solution to me. What happens in another 50 years, what happens in 2100? The population of the earth cannot keep on growing and growing up until infinity, so at one point there will come a time when we will have to face this same problem except "lets import some people" isn't going to be on the list of solutions.

What do we do then?

Edward Hugh said...

Hello Edmunds,

I understsand completely the issue you are raising. But I think we need to distinguish two different tihngs here.

a) The future of a small country like Latvia

b) the global issue of what happens to the modern growth era in the longer run (between now and 2030, lets say).

I think if we lose sight of this distinction, then we will not be able to help Latvia out of its current mess, and the country will simply die, as the economy contracts and young people leave.

Newly export dependent countries like Latvia with large external debts and ageing and declining populations will find positive GDP growth ever more difficult to attain in both the short and the longer run.

Personally I don't see how you are going to get out of the current mess without a sovereign default given all the mistakes that have been made. And this will just be the start of your problems.

The countries of central and eastern europe have a special difficulty in that they have gotten old before they have gotten rich, and the current crisis only makes this situation more dramatic. This is a result of the unique histories of these countries, and does not apply, for example to Turkey, Morocco, Brazil, India etc, where they will have problems with the ageing transition, but on nothing like the same scale as in the East of Europe.

China, with the legacy of 30 years of one child per family policy, is, of course, a big potential headache for everyone.

"So how is immigration more than a temporary patch? Is perpetual population growth really the answer to this problem? "We have too few people so lets import some" doesn't really sound like a permanent solution to me."

It isn't more than a temporary patch. I agree. But would you rather have a temporary patch now to help you get through to 2020 while we all look for more solutions, or are you simply going to be fatalist and say "well, we are all dead in the long run, so let's die now"?

The issue is a simple one, you won't get sustainable economic growth in the future unless you turn the short run population outlook round NOW. You are already in a lose-lose dynamic. Unless you react this only ends one way. Unfortunately.

So, let's leave the large scale global issue on one side for the time being and focus on Latvia and its specific problems, shall we?

Edward Hugh said...

In other words, what I am saying Edmunds is that I can see all the difficulties, and do not underestimate them even for one moment, but I think at this darkest of moments in its modern history Latvia, and its people, need a positive message. one of hope. That there can be a future.