Author: Peter Drysdale, East Asia Forum

The remarkable ageing of the populations in most advanced economies is no more evident or precipitate than in Japan. Earlier, Japan’s and other countries’ anti-natal policies encouraged a lowering of birth rates in an attempt to boost the chances of economic advancement.

In a decade or two, the impact of China’s one-child policy, and the subsequent low Chinese fertility rate, will also lead to a rapid decline in its population and acceleration of the ageing of its population. China may get old before it’s rich, as the popular aphorism now suggests, but most agree that while a reversal of the one-child policy may alleviate the decline in its fertility rate witnessed over the past several decades, that is hardly likely to entirely take the pressure off China’s coming demographic crunch.

Policy inducements and fiats that limit the size of families alone are not the only cause of the trend to lower fertility rates in many parts of the world, especially in economies that have made the transition to higher levels of income. The causes are rather a complicated interaction between the impact of economic growth and its social consequences on procreative social behaviour, the development and diffusion of contraceptive technologies as well as, in varying degree, the impact of anti-natal policies.

In a comprehensive review of demographic change in Asia, distinguished Australian demographer Peter McDonald notes that, sixty years ago, both Japan and India already had policies in place to lower the level of fertility. McDonald cites an influential book of that time by Coale and Hoover which argued that economic development in Asian countries was constrained by high levels of fertility because available capital at both the national and the household level needed to be devoted in large measure to the care and nurture of the 40 per cent of the population under 15 years of age. Fewer children, Coale argued, would make it possible for more productive investment of capital in factories, equipment as well as in the skills and education of people — the essential enablers of economic development. As a larger proportion of the population moved into the workforce and the ‘dependency ratio’ (or the proportion of those not in the workforce) fell, the economy would enjoy a boost to growth through this ‘demographic dividend’.

As McDonald points out, two senior American demographers who were strong proponents of this strategy, Warren Thompson and Frank Lorimer, worked with McArthur’s Occupation administration in early post-war Japan. ‘Thompson had argued since the 1920s that rapid population growth in Asian countries was an obstacle to development and a potential source of insecurity and’, says McDonald, ‘within the McArthur administration, he advocated for lower fertility in Japan. Lorimer was part of the same group of demographers as Coale at the Office of Population Research at Princeton University. Between 1944 and 1958, the argument against rapid population growth and in favour of lower fertility was made in a remarkable collection of books on specific countries or regions in two series stimulated by the Office of Population Research’.

This striking example of the power of the ideas of those long dead has intersected with economic and social forces in determining trends in fertility in the intervening decades on top of the remarkable increase in longevity to shape current demographic circumstances and predicaments. The latter, too of course, was a product of the impact of rising incomes on health and the accessibility of improved medical technologies.

The ageing of Japan’s population has been unprecedented both in its level and its speed. The proportion of people aged 65 years old and over is now more than one-quarter of the total population of Japan — proportionally, the largest in the world. This will grow to one-third of the total population in 2035. The population over 75 is also getting larger: the proportion of the population over 75 is likely to reach 20 per cent by 2035. Japan’s population has aged twice as fast as Germany’s and more than four times faster than France’s. When I first went to Japan in 1964 the typical face was that of a young person; today the typical face is that of a middle aged or elderly person.

In this week’s lead essay, top Japanese labour economist Atsushi Seike details the enormous pressure that ageing is putting upon the Japanese economy and society. ‘Total spending on social security was almost 110 trillion yen (approximately US$924 billion) in the 2012 fiscal year — 22.8 per cent of GDP’. Japan depends on a smaller and smaller workforce to carry this and other social burdens. Productivity will have to increase more rapidly if Japanese people are to continue to enjoy the same living standards.

What can be done to alleviate the problem of fewer young working age people to carry Japan’s social and economic burden?

Seike suggests a number of measures: increasing the fertility rate (though the impact will be lagged a couple of decades); increasing the participation of older people in the active workforce (though the structure of pensions and mandatory retirement encourage them to stay out of the workforce); and expanding childcare and other benefits to young people with the aim of lifting female participation in the workforce. Lifting migration (a difficult sell in Japan) might be another.

As Seike concludes, Japan’s incredibly high debt-to-GDP ratio means that social security system reform is vital. Without it Japan will not be able to sustain the social security system that has enabled it to attain the highest longevity in the world for future generations.

And without a reversal of fertility trends or immigration, Japan’s population will dwindle to extinction, it’s estimated, before the 31st century.

Peter Drysdale is Editor of the East Asia Forum.