KAS Young Voices: Fresh Insights from
Asia

December 2023

Fertility Decline and Socioeconomic
Transformations
Exploring China, India, and Indonesia
Nazia
This research paper aims to study the impact of fertility rates on various socio-economic indicators
including poverty level, labor force composition, education level and spending, and innovation in China,
India, and Indonesia. The fertility rate, the average number of children a woman has during her
reproductive years, is an important demographic factor that can significantly influence a nation's
development trajectory. This study seeks to highlight the relationship between fertility rates and key
socio-economic indicators by analyzing data from these three large and diverse countries, China, India,
and Indonesia. Additionally, this paper will look at how societies can maintain their fertility rate to asustainable level.

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Fertility Decline and Socioeconomic Transformations

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Introduction
In the populous nations of China, India, and Indonesia, a subtle transformation shift is taking place. The
declining number of children per family is reshaping society and the economy in profound ways. This
paper explores how having fewer children is connected to socioeconomic factors, for example, it canmean fewer people live in poverty, the kinds of jobs people do can change, families might spend moreon education as they will have only 1 or 2 children, and countries may come up with more inventions andideas. While China has witnessed a steep decline in the fertility rate following its “One-Child” policy, it
contributed to economic growth and a drastic dip in poverty. However, China now faces an aging
population which poses different challenges. Meanwhile, India and Indonesia, though they haveapproached the situation differently, are also seeing their fertility rates fall. This is bringing newopportunities as well as challenges. Opportunities include better chances for children to go to school anda larger working-age population, which helps the economy to grow. However, persistent falls in thefertility rate pose challenges for future demographic dilemmas. A case in point is the current decline thatis happening in Japan’s society. In order to avoid repeating the same mistake there is a need to maintainthe fertility rate at a sustainable level and need to implement an appropriate set of policies for asustainable society.

Declining Fertility Rates in China, India, and Indonesia
The relation between fertility rate and socio-economic factors has been a focal point of contemporary
scholarly discourse, particularly within the context of our swiftly evolving global society. The World HealthOrganization defines the fertility rate as “the average number of children a hypothetical cohort of women
would have at the end of their reproductive period if they were subject during their whole lives to thefertility rates of a given period and if they were not subject to mortality”. It is expressed as "children per
woman”. A total fertility of 2.1 is considered as the replacement rate at which the population will remainsustained (United Nations, 2007). Some countries want a low fertility rate to have a stable economy withlow poverty. One such country is China, which has been facing a drastic decline in its fertility rate sincethe 1970s. It worsened after the Chinese government implemented the “One Child” policy from 1980 to
2016. According to the data published by Statista, China’s fertility rate was already around 4 when the“One-Child” policy was implemented. It reached a below-replacement rate in the 1990s (O'Neill, 2022). In
another data published by Statista, China’s fertility rate as of 2021 is 1.16, which is much below the
replacement rate (Textor, 2023).
Although China has been facing this issue for decades, countries such as India and Indonesia just recently
experienced fertility rates below replacement. India is now the most populous country in the world witha rapidly growing economy. Like China, India also started facing a declining fertility rate in the 1970s. Its
fertility rate reached below the replacement rate recently in 2020. As of 2021, India’s fertility rate is 2.03
(O'Neill, 2023). One of the key reasons behind India’s declining fertility rate in the 1970s was theintroduction of a family planning program by the Indian government in 1970 to control the birth rate.
Since the government policies were not as strictly implemented as China’s “One-Child” policy, India wasslower to reach a replacement rate.
Indonesia is also facing similar trends to India. Indonesia has the fourth largest population in the world
but its fertility rate is also declining. Indonesia’s population also started declining in the 1970s with theintroduction of government policies for population control (FCBI, 2013). According to Statista’s

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publication for Indonesia’s fertility rate, its fertility rate in the 1960s was above 5, pretty close to India,
however, it dropped to 2.2 in 2022 (O'Neill, 2022).
The following section will unpack the impact of declining fertility rates on key economic indicators in
China, India, and Indonesia. The concluding section analyzes the importance of sustainable fertility levels
to sustain economic growth.

Fertility Rates and their Impact on Important Socio-economic
Indicators
Poverty Level
Governments implement birth control policies to have a stable economy with a low level of poverty. The
World Bank (2022), considers people to be in extreme poverty when they have less than $2.15 per day.
About 80% of China’s population was in extreme poverty in 1980 but in 2019, this was reduced to lessthan 1% (Lugo et al., 2021). According to the World Bank report of 2022, China was successful in “lifting
800 million people out of poverty”.
One of the factors behind China’s success in poverty reduction is the implementation of the One-Child
policy (World Bank, 2022). The falling fertility rate led to a demographic dividend and also reduced thedependency ratio in China (World Bank, 2022). This means that there were more people in the labor force
compared to the dependent population, which is composed of children and the elderly. China reduced
its dependency ratio from about 70% in 1980 to about 37% in 2010 (Textor, 2023). However, China is
expected to have a high dependency ratio in the future due to a continuous low fertility rate which leads
to more elderly population and less young population.
On the other hand, India’s poverty level reduced from 63.11% in 1977 to 11.90% in 2021 (World Bank,
Poverty, and Inequality Platform). Because India reached a replacement rate recently in 2021, its poverty
level is still high compared to China. India’s dependency ratio in 2020 was 48.66, reduced from 53.35% in2015 (Rathore, 2023). India’s poverty level as well as its dependency ratio has been reducing gradually.
Although Indonesia’s dependency ratio is at 37% as of 2021, Indonesia with similar trends in fertility rate
has made impressive progress in reducing its poverty level. Indonesia reduced its poverty level from 74%
in 1984 to 2.15% in 2021 (World Bank, Poverty and Inequality Platform). One of the reasons that makes
Indonesia different from India is that Indonesia has a high labor force population of about 69.3% as ofFebruary 2023 (Indonesia Labour Force Participation Rate, 2005 – 2023). India’s working population is only
41.3% as of 2022 (India Labour Force Participation Rate, 1990 – 2023).
The data highlight a direct relationship between the fertility rate and the poverty level of a nation; thepoverty level declines as the fertility level is reduced. China’s implementation of the One-Child policy inthe 1970s led to a significant reduction in the fertility rate and contributed to a demographic dividend
and a drastic decrease in poverty. This policy resulted in a low dependency ratio and a large proportionof the population in the labor force which helped boost the economy and therefore reduced poverty. In
contrast, India and Indonesia, without any strict one-child policy experience a gradual decline in fertility
rate as well as poverty level. This highlights that the faster the fertility rate declines the lower the poverty
level, keeping in mind the importance of dependency ratio and workforce in the economy.

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Labor Force Composition
China’s workforce in the 1970s was below 60% and it peaked at around 80% in 1990 (China Labour Force
Participation Rate, 1990 – 2023). This increase in the workforce was a result of a slowing population growth.
China’s working-age population increased and the dependency ratio was reduced (Rush, 2011). However,
due to the persistent low fertility rate China’s population is getting old and its workforce was reduced toaround 60% in 2022 (China Labour Force Participation Rate, 1990 – 2023).
In contrast, India has a workforce of only 41.3% as of 2022, due to its high dependency ratio (India Labour
Force Participation Rate, 1990 – 2023). However, it has experienced a rise in workforce from about 200
million in 1970 to 470 million in 2021 (CEIC, 2021). Since the fertility rate of India reached its replacement
rate around 2020, its dependency ratio has also reduced by at least 5% (Rathore, 2023). On the other
hand, Indonesia has a higher labor force than both China and India. Indonesia’s workforce reached about
69.3% of the total population in 2023 (Indonesia Labour Force Participation Rate, 2005 – 2023). This is anincrease from approximately 77 million people in the workforce in 1990 to more than 137 million in 2022
(World Bank, 2022).
This trend shows that a low fertility rate has a positive impact on a country’s labor force at the beginning,
however, if fertility continues to fall it will result in labor shortage and a low workforce in the long run,such as in China. China experienced a notable surge in its workforce from the 1970s to the 1990s, driven
by a decline in population growth rates. However, the persistent low fertility rate in recent years has led
to an aging population and a decrease in the workforce percentage. In contrast, India’s workforce has
been constrained by a high dependency ratio, however, recent improvements in fertility rates may leadto future growth in the workforce. Meanwhile, Indonesia stands out with a substantial workforce. These
demographic trends emphasize the importance of population policies in influencing a country’s labor
force dynamics and underscore the need for strategic planning to address future workforce challenges.

Education Levels and Spending
The relationship between fertility rate and education has been an inverse relationship. A low fertility rate
indicates that people with higher education will increase. If families have one or two children, financialpressure on them is low and they can spend more on their child’s education.
China’s literacy rate in 1982 was about 66% and has reached 97.2% in 2020 (World Bank, 2020). In addition
to other economic and political policies, the low fertility rate or impact of the “One-Child” policy played asignificant role in increased education levels. Household spending on child education increased from 2%
in 1990 to 13% in 2001 (Zhang et al., December, 12).
On the other hand, India reached a literacy rate of 74% in 2018 which is about a 40% increase from 1971
when the literacy rate was only 34.45% (Ministry of Human Resource Development, 2003). Average
household expenditure on a child’s education has also been increasing since the independence of India
in 1947. It has increased from only 0.6% in 1950-51 to 2.6% in the year 2007-08 (Singh & Ram, 2020). Thisin 2017-18 further increased to 15% in urban and 18% in rural areas of India (Choudury & Kumar, 80).
India’s household spending has been increasing not only in urban but also in rural areas which indicatesthat households have started seeing investing in a child’s education as a significant expenditure and also
having fewer children means you can spend more on them.

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In contrast, Indonesia’s literacy rate was 67% in 1980 and reached 96% in 2020 (World Bank, 2023). Oneof the factors behind this high literacy rate is the introduction of six-year compulsory education that was
implemented by the government in 1984. In the 1970s, students in grades 3, 4, and 5 were forced to dropout and start working to support their families due to the high level of poverty (Heneveld, 1979, 145).
However, in 2020 the enrollment at high school was 84.23%, which is a huge improvement (Statisa, 2023).
Additionally, in the year 2020, the average household expenditure on a child’s education was 6% of theirannual income (Nurhayati-Wolff, 2023). This is relatively low compared to China and India because inIndonesia the government provides funds for children’s education from the age of 7 years to 15 years
which results in overall less household spending on education (Wicaksono, 2022, 7).
In conclusion, the inverse relationship between fertility rate and education is evident, as lower fertility
rates tend to coincide with higher education attainment. It can be particularly seen in China’s case, where
implementing the “One-Child” policy significantly contributed to a remarkable surge in literacy rates over
the years. Additionally, India has experienced substantial progress in education with a notable increasein literacy rate. This is happening not only in cities but in the countryside too. Conversely, in Indonesia,
the government's introduction of compulsory education and education funding played a pivotal role inachieving high literacy rates, which reduced the burden of education expenses on households. These
divergent results indicate a complex relationship between fertility rate and education, influenced byfactors such as, economic, political, and cultural.

Innovation Level and Productivity
The impact of fertility rates on a nation's productivity can be partially observed through the lens of Total
Factor Productivity (TFP), which measures how efficiently and innovatively an economy uses its inputs to
produce output (Saliola & Seker, 2011). TFP encompasses various elements including technologicaladvancements, skills of the workforce, and organizational efficiencies. A country's TFP is often seen as adirect reflection of its innovative capabilities and productivity growth.
China has witnessed a notable increase in TFP, particularly since the 1990s. Its TFP in 1970 was 0.85,
however, it experienced a decline and re-gained its increasing trend in the 1990s (Our World in Data,2019). This rise is attributed to the country’s economic reforms and investment in technology andeducation, aligning with its period of reduced fertility rates. By 2014, China's TFP had climbed to 1.02,
indicating a more efficient use of labor and capital than in previous decades (Our World in Data, 2019).
This suggests that the low fertility rate let China invest in education and technology more, contributing
to its status as an economic superpower.
India's TFP also shows a positive trend, especially post-1990. Initially, India’s TFP had dipped slightly;
however, it began to recover, reaching 1.02 in 2019 (Our World in Data, 2019). The upward movement ofIndia’s TFP can be linked to its liberalization policies, increased investment in technology sectors, andimprovements in educational standards, which coincided with a falling fertility rate.
As for Indonesia, the TFP in 1970 was 0.89 and it has seen a gradual increase since the 2000s, reaching
1.01 by 2019 (Our World in Data, 2019). Despite the slower economic growth in comparison to China andIndia, Indonesia's consistent investment in human capital and infrastructure has begun to reflect in its
productivity levels.

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In summary, TFP serves as a key indicator of how a country’s economic inputs are transformed into
outputs, and the data from China, India, and Indonesia suggest that lower fertility rates may correlatewith increased investments in technology and education, ultimately leading to greater efficiency andproductivity within their economies. However, this may not be a direct correlation and the relationshipbetween fertility rates and TFP is complex.
The analysis underscores the significant impact of low fertility rates and changing demographic trends
on poverty, labor force, education, and innovation in China, India, and Indonesia. China’s “One-Child”
policy led to a significant poverty reduction and improved education, however, China now faces
challenges from an aging population. India shows steady progress, particularly in education, with a recent
reduction in fertility rates. Indonesia, although has similar trends to India in its fertility rate, stands out
for rapid poverty reduction and high labor force participation. However, it is crucial to recognize thatpersistent low fertility rates pose risks, emphasizing the need for sustainable fertility policies for longterm societal well-being.

A Sustainable Fertility Rate
A sustainable fertility level is a crucial aspect of a nation’s demography and economy. It is significant
because it allows a population to replace itself from one generation to the next. A declining fertility rate
when it reaches below the replacement rate can pose significant shortcomings and challenges to a
country’s social and economic factors. In the long run, it can lead to demographic imbalance, labor
shortages, and increased pressure on the social welfare system. One of the key differences to notice hereis, that in the past rich and developed countries were experiencing low fertility rates such as Japan andsome European countries. However, in the present, countries like India and Indonesia have also started
experiencing the issue even before they can develop, these countries are getting old before they can getrich (The Economist, 2023). It has been highly difficult for countries to maintain their fertility rate at the
replacement level to stop it from reaching below the replacement rate.
One of the primary concerns associated with the declining fertility rate is the aging population. Whenbirth decreases, the number of elderly population rises and this leads to a high dependency ratio, wherea small working-age population will have to support a larger elderly population, through social welfare
systems and pension programs. Japan is an example through which every country should learn a lesson.
It is the third-largest economy and is one of the most highly developed countries. Japan’s fertility rate
declined to 1.3 in 2021 (World Bank, 2021). Japan’s baby-boom generation is now above 70 years oldwhich is leading to issues like an aging population, labor shortage, and high expenditure on healthcare(Schneider, 2020). Although the Japanese government has been introducing policies to increase birthrates, policies remain ineffective.
The aging population is now also a problem in developing countries like China, India, and Indonesia,
mainly due to persistent declining fertility rates. Although China was able to achieve a replacement rateand develop its country, China, just like Japan, is not able to maintain its fertility rate at the replacementlevel. China’s fertility rate declined to 1.2 in 2021 which is below the replacement rate and very near to
Japan’s rate of 1.3 in the same year (World Bank, 2022). With the shrinking young population andexpanding elderly population China is estimated to have about 30% of its population above 60 years by
2050 (Banister et al., 2010). On the other hand, India and Indonesia are still behind China in terms of
economy but are expected to have an aging population before they can reach high economic

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development (The Economist, 2023). For developing countries, prioritizing the implementation of policies
to prevent similar challenges of the aging population faced by developed nations should be of utmost
importance.

Policy Implications
Government policies play a huge role in society as we have seen in the previous section of this paper.
Governments were successfully able to decrease their high fertility rate although, increasing the fertility
rate at a sustainable replacement level remains to be a complex policy task. Factors like parental leave,
flexible working hours, and financial support are very important in order to increase birth rates (United
Nations, 2017). These policies were successfully implemented in German society by the government, andGermany has successfully defeated the falling fertility rate and has been experiencing an increase every
year in its birth rates. In 2000, Germany’s fertility rate was at 1.38 which increased to 1.58 in 2021 (Statista,2023). Although it is a small increase this is still a huge one since increasing the fertility rate even slightly
is considered to be very difficult. Germany’s rise in birth rates is due to the implementation of familyfriendly policies as well as migration (Thomasson, 2021). In Germany, parents receive 250 Euro per month
per child as a “Child Benefit” from the government up to the age of 18 years old (Federal Ministry of
Education and Research). The child benefit will not be used in a child’s education because most of theschools are run by the state and are free of tuition (European Commission, 2023). Additionally, theGerman government provides parental allowance and parental leave (Federal Ministry of Education andResearch). These factors significantly aid parents and have played an essential role in encouraging
childbirth and increasing the fertility rate in Germany. China, India, and Indonesia could benefit fromadopting Germany’s strategy to manage fertility rates. However, to implement these policies a country’s
economic condition needs to be strong, and a large amount of the government’s budget needs to be
spent on education and welfare sectors.
China, after reversing its one-child policy in 2015 has taken measures to increase birth, such as tax
deductions, extended maternity leave, and housing subsidies (Master & Gibbs, 2023). These policies were
implemented in 2021, and according to the UN report published in 2015, China is already slow and late
to react to the declining fertility rate (United Nations, 2015).
For India, the maternity leave was increased to 26 weeks in 2017, which was initially only 12 weeks, and15 days of paternity leave is also given, however, these policies do not bind private sectors towards
maternity leave (The Economic Times, 2023). In the education sector of India, there are public schools,
however, parents prefer private schools even though they are expensive, due to the quality of education.
Therefore, the Indian government should encourage the private sector to provide an efficient amount ofmaternity leave in addition to that, India’s government should take measures to improve the quality ofeducation at public schools to lighten the burden of tuition on parents.
Indonesia’s law as of 2022 provides 13 weeks of total maternity leave, 1.5 months before delivery, and
1.5 months after the delivery (Clarisa, 2023). However, as for paternity leave, only 2 two days of paid
paternity leave is allowed (Clarisa, 2023). In order to encourage people to have children, the government
should support parents by increasing maternity leave as well as paternity leave.
China has taken measures towards increasing the fertility rate in 2021, to which we will only be able tosee the results after some time. However, for India and Indonesia, governments need to prioritize policies
such as parental allowance, child support, education, and maternity leave. By offering direct financial

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support, ensuring job security during parental leave, and promoting good quality affordable education,these countries could foster conditions that encourage childbirth without imposing undue stress onparents.

Conclusion
In conclusion, in the comparative study on the impact of fertility rates on socioeconomic indicators across
China, India, and Indonesia, it is evident that fertility dynamics have an implicit impact on poverty levels,
workforce composition, education expenditure, and innovation capacities. The study outlines China's
success in lowering poverty through stringent population control, albeit now contending with an aging
demographic. India's gradual fertility decline correlates with its steady educational progress and poverty
reduction. Indonesia, mirroring India's trends, showcases significant poverty alleviation and a robustlabor force. However, sustainable fertility rates emerge as pivotal for long-term economic vitality,
highlighting the need for policy frameworks that balance demographic growth with socio-economic
aspirations, through supportive measures like parental allowances, child benefits, and maternity andpaternity leave. As each country navigates its unique demographic challenges, the adaptation of familyfriendly policies, in conjunction with a deep understanding of local contexts, could steer them towards a
harmonious socio-economic future. This research underscores the complexity of demographictransitions and their far-reaching impacts, advocating for strategic policy interventions to ensuresustainable development and societal well-being.

About the Author
Nazia is a third-year International Affairs student at Temple University's Japan Campus. She comesfrom a multicultural background; she was born in Delhi, India, and was raised in Nagoya, Japan. Herdiverse upbringing inspired her curiosity about different societies and international affairs. She isinterested in Asia’s economic and societal developments, particularly in India, China, and Indonesia.

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