Here is some interesting research, summarized in this month's NBER Digest:
In the long run, low rates of fertility are associated with diminished economic growth, according to a new study by NBER Research Associate David Bloom and his co-authors David Canning, Günther Fink, and Jocelyn Finlay. In The Cost of Low Fertility in Europe (NBER Working Paper No. 14820), they observe that in the short term, low fertility rates raise per capita income by lowering families’ costs of child-rearing and boosting the share of working-age people. But as that working-age population moves into retirement, the number of workers who replace them will shrink. So, whatever short-term boon European nations may have gained from low youth dependency will be overwhelmed eventually by the economic burdens of old-age dependency.
The summary describes a set of calculations to maximize the working-age share of the population. That is an interesting way to think about the issue -- the per-capita cost to the government of pay-as-you-go social insurance and other age-related transfers (like education) should be minimized that way. Here's an example:
In France, for example, where life expectancy is 80, the fertility rate that would maximize the working-age share of France’s population would be 2.1 if young people started working at age 20 and retired at age 60. With retirement at age 55, the working-age share-maximizing fertility rate would have to rise to 3.1. With retirement delayed until 70, that rate would drop to two.
Read the whole thing.
how about immigration?
This is interesting, but you didn't include the immigration part in the excerpt you posted -- perhaps b/c it's not very good? The authors take the politics of immigration for granted as an intractable problem. Yet, immigration is an obvious solution to some of the economic effects of low fertility. If you look at how difficult it has been for countries, in both western and especially in Eastern Europe, where fertility rates are lowest in the world, to boost fertility you easily see that raising the fertility rate is not necessarily easier than allowing in more immigrants. Bottom line: low fertility is only connected to lower economic growth IF a country also restricts immigration. If they don't do that, the problem likely goes away.
Small Immigration Effects
Quoting from the digest article linked in the post:
Another factor is immigration, which typically helps to boost the size of a nation’s working-age population. But its impact is usually quite small. Austria, for example, has Europe’s third-highest net migration relative to its overall population, but over the past 45 years the absence of migration barely would have changed its share of working-age people, this study finds. Even if it did, political resistance to immigration is high.
“In short, migration is highly unlikely to have a major effect on falling working-age shares in Western European countries over the next decades,” the authors write. “The size of the economic repercussions of declining working-age shares on economic development, however, will critically depend on individual behavior.”
So, according to the authors, the problem does not go away.
That's because they assume
That's because they assume there won't be much immigration. If you say that immigration is low today and assume it will always be low, then sure it won't "have a major effect" in the future. But that's just an assumption/prediction about the size of the immigrant population. If you instead assume/predict that as the population declines and the economic costs go up that people will change their views on immigration and let in substantially more immigrants, then the potential effect of immigration will also rise.
Higher productivity and lower employment
We've lost ten years of job growth in the US (so far, during the current recession). Most 2009 college grads (over 80%) are unemployed or severely underemployed (volunteer work/part-time, low-paid work with no benefits).
We're experiencing a reset of the economy (major contraction), and having a larger population of working aged people won't necessarily be a good thing -- they'll spend years unemployed/underemployed, and they'll rely on their parents/relatives and the government for food, housing, unemployment benefits, healthcare, etc.
I know many who've left the US to find work.
Immigration an obvious answer to the economic effects
The authors of this study seem to assume that increasing immigration is impossible, and hence that the focus in solving this problem should be on raising fertility or fiddling with retirement dates. It's not at all obvious that it's gong to be easier to raise fertility than to let in more immigrants; look at what countries, especially in Eastern Europe have already tried to to to raise fertility and none of that has worked for a number of reasons, including complex social norms (e.g. every woman should have one child only in Ukraine) and gendered labor market issues that affect when women enter and leave the workforce. As the "problem" of low fertility becomes more severe, i.e. when Ukraine's population shrinks by half in the not too distant future, ukrainians will likely rethink opposition to immigration, and hence the economic costs discussed in this article will disappear. the challenge (or problem) will be reconsidering/reworking national identities, etc, not diminished economic growth.