Mikko Myrskylä’s groundbreaking study, director of the Max Planck Institute for Demographic Research (MPIDR), reveals a strong connection between investment in education and economic sustainability. Economically, the educational investments covered the challenges brought on by declining birth rates and a shrinking workforce.
The Economic Threat of Low Fertility: A Demographic Shift
Low fertility rates tend to be an economically challenging issue in the long run. Having fewer births increases aging of the population, which negatively impacts the ratio of workers to retirees. The burden of this demographic shift places a lot of stress on the social security systems, which leads to slower economic growth.
Education Is the Antidote: A Strategy for Economic Health
Reassuringly, Myrskylä’s study proposes increased investment into education as the solution. The researchers simulated the economic impacts of low fertility and educational investment in Finland. The results, published in the journal Demography, show that increased spending on education does enhance productivity, thus counteracting the productivity loss associated with a reduced labor supply.
Greater Investments into Education Improve Economic Productivity: Key Findings and Analysis
As noted in the study, an educative investment strategy can preserve certain macroeconomic indicators, like the pension burden, even under gravely pessimistic fertility rate scenarios. This is possible while maintaining the total investment in education, as the total number of children born in each birth year diminishes. This scenario results in increased per capita investment in education.
Hypothetical Illustration: The Magnitude of Per Child Investment
Myrskylä explains, “For instance, in the higher-fertility scenario, if the number of children is 100, and we invest 100 euros over the lifetime of each child for education, the investment totals 10,000 euros. If the fertility rate drops to 80 children, the same 10,000 euro investment is made—resulting in 125 euros per child for lifetime investment.” The simulation conducted with actual Finnish data indicates that this enhanced investment per child would yield roughly one additional year of education per person in Finland.
The Ripple Effect: Benefits Beyond Economic Growth
Increased educational attainment is associated with a variety of positive effects both at a micro and macro level that go beyond economic productivity. Myrskylä articulates the societal positives in this manner: “A vast number of studies document across many dimensions of life that higher education is beneficial for individual well-being.” Greater education corresponds with longer working lives, better health, and greater subjective well-being and happiness.
Reassuring News: Maintaining Pension Sustainability
One of the greatest worries relating to low fertility is the potential burden on pension systems. The researchers’ results, however, offer encouraging news. Even with a decline in the working population, the ratio of pension spending to the total wage bill remains approximately the same as in a higher birth scenario because of the increased productivity and prolonged working years of more educated individuals.
The Fertility Challenge: Acknowledging Societal Shifts
The study appears to have more sympathy towards the difficulty of reversing the declining fertility trend using family policies alone. Myrskylä mentions the global climate change and economic-related uncertainty, as well as the decline in stable unions, as part of the reason. Family policies are important in promoting the welfare of parents and children, as their absence can lead to lower birth rates.
Widespread Applicability: Relevance to Findings from Other European Countries
The researchers assume that their findings also apply to other European countries. Consider Finland, which is facing a steep decline in fertility rates, a recently stagnant investment in education inflows, and an ever-increasing pool of elderly constituents. Myrskylä remains optimistic that increased education spending will be beneficial throughout Europe, except in areas of extreme oversaturation of education from their own economy.
Sustaining a Better Future Through Investment in Education
Myrskylä’s findings incisively illustrate how investing in education can alleviate economic pressures from declining birth rates. Keeping in mind the inevitable economic shifts caused by a demographic imbalance, investing in educational infrastructure will yield returns over time as the population ages. Countries are better prepared when there is human capital investment.
