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By Global Public Square staff
We were struck by some startling data this past week. Last year saw Japan's population fall by 244,000 people – the largest natural decline in that country's history. It's a trend that's getting worse. By 2060, Japan projects that its population will have fallen by a third; 40 percent of Japanese will be retirees. It sounds like a recipe for disaster. Imagine a United States where half the population is over the age of 65: Social Security would collapse, health care costs will explode.
So, we were surprised to see a headline in the latest edition of The New Scientist claiming "Japan's aging population could actually be good news."
How on earth is that possible? After all, China relaxed its "one-child" policy last month precisely so it could avoid the fate of Japan. And that fate, if you go by conventional wisdom, seems to be slowing growth, and leading to unsustainable debt. Why? Because our entire system is based on having enough young workers to pay for pensions and government services.
Well, according to The New Scientist, perhaps we've been looking at the wrong data. Consider growth – the number we tend to focus on the most. Look at the performance of a selection of rich countries in the last decade. According to HSBC, Japan’s economy expanded by just 0.8 percent a year, on average. France was faster; the United States and Britain grew at twice Japan's pace.
Now look at growth per capita – growth per person. This is a number that gets less attention. The table is inverted. The U.S. and France are near the bottom, but Japan is at the top. This is because individual incomes are actually rising while the population is declining. It would follow that people are actually better off. Not bad for a country everyone seems to have written off.
Let's look at some other indicators. According to the demographer Nicholas Eberstadt, Japan is the healthiest country in the world. Now given that the average lifespan in Japan is 83 years – the highest in the world – you'd expect health care costs to dominate. And remember, Japan has universal health care. Again, you’d be wrong. Japan spends only 8 percent of its GDP on health care – half the percent the United States spends.
Now look at education. Eberstadt points out that in the very near future, for every Japanese newborn, Japan will also have a centenarian – a man or woman who is a hundred years old. It sounds like a science fiction movie, but the low percentage of children also means fewer school students, less money spent on education. And remember, Japan has a strong schooling system, and is a world leader in research and development.
How does Tokyo manage this? Is it a welfare state? Again, the answer is no. According to the OECD, a group of 34 rich nations, the average Japanese worker faced a tax burden of about 31 percent – four percentage points lower than the group's average.
The New Scientist essay lists a few other hidden benefits for Japan. A declining population means that there is more space and arable land for every Japanese citizen. Remember, Japan is a tiny country that packs in 127 million people. Fewer people could well translate into a higher quality of life as well.
These are fascinating points to consider because many other countries may soon encounter some of Japan's problems. China could grow old before it becomes rich. Europe's rich nations have fertility rates that are too low to replenish the population. If it weren't for immigration, America's population would start leveling off as well – but remember, the United States gains more than a million immigrants legally every year. Japan and Europe, on the other hand, have stricter immigration laws and are less welcoming to immigrants.
Sill, we don't think dwindling population is actually all good at all, as the article suggests. Young people mean energy, risk-taking, hard work, and of course, tax revenues. Tokyo needs to reform its benefits system, raise its retirement age, and encourage immigration. But the essay does show that Japan has many hidden benefits in its demographic predicament. Maybe that's why there have been no revolts or revolutions as the country has gone through twenty years of stagnation. And, maybe, there are lessons for other countries in that as well.