Demographic Decline & Dependency
Kurt Brouwer April 6th, 2009
Sources: IMF, UN and Financial Times
The International Monetary Fund tracks demographic trends around the world. One troubling trend is the rapid aging of populations in many countries. This Financial Times piece with numerous charts such as the one above points out that [emphasis added below]:
…[sidebar] Japan is suffering the effects of 30 years of consistently declining birth rates. That and remarkable longevity have made Japan the oldest country in the world. It was already saddled with a large fiscal burden before the crisis hit. Since then the position has worsened, with national debt now forecast to be well over double GDP in 2012…
As you can see, Japan is leading the pack in terms of the number of elderly folks (65+) compared to younger people. Given the demographic trend in Japan, which had fewer births than deaths last year, that is unlikely to change.
The main body of the article looks at other aspects of this trend, which is the number of working people compared to the number of those who are already drawing retirement benefits:
…According to the United Nations , the number of working-age adults for each person aged over 65 in advanced economies will decrease in the next 10 years by as much as they have in the previous 30 years. The number of workers per pension claimant will fall from 4.3 to 3.4 in the next decade alone.
Some countries are already much further down this road. It will take another 20 years of greying for Europe to become as elderly as Japan’s population is today. The rest of east Asia is in a race to get rich before its people get too old to work. South Korea is currently well placed, with six citizens of working age for every pensioner. Yet thanks to a collapse in its birth rate, it will be one of the greyest countries on earth by 2050…
If you follow the lines on the chart above, all of the countries shown are projected to age over time. However, some countries — such as Japan and Spain — are projected to age at a very rapid rate. The U.S. rate has been level for some time. It is projected to go up as well, but not nearly as rapidly as Japan, China or Spain.
It is important to point out though that a big part of our economic growth over the past 200 + years has been due to our climate of welcoming people from other countries as well as our ability to keep our population growing — the old fashioned way.
Also, it’s important to remember that population growth and economic vitality are two sides of the same coin. Those who predict enormous economic growth and increasing geopolitical power for a given country should consider the implications of these statistics because, in many ways, demographic trends create their own destiny.
Hat tip: Tigerhawk
As Boomers Retire, Is A New Baby Boom Starting?
- Economy , Geopolitics , Personal Finance , Retirement
- Comments(6)
Did you enjoy this article?
Kurt,
This also has incredible consequences in terms of our future current account deficit (CAD). Here is an article whose relevance should be immediately clear (although I disagreed with one of his final points with my comment.)
http://www.forbes.com/2009/03/24/demography-lou-dobbs-opinions-contributors-destiny.html
Agreed that we are a nation of immigrants. My grandparents came here from the Netherlands and never looked back.
The ironic thing about the trade deficit (a component of the current account deficit) is that it is shrinking now, as it generally does in a recession. The personal savings rate is also going up.
Kind of like whipped cream on dirt, but there you have it. Many commentators have been bemoaning our soaring trade deficit and our shrinking savings rate for years. Now, they should be happy right?
This is an idiotic argument. In point of fact, falling populations will only impact those nations whose economic model is BASED on growing populations. This is a salesman’s argument. Of course a salesman wants more people to sell to!!! The rest of us want a good quality of life for ourselves and our grandchildren, and a civilization worth fighting for. An open borders policy to welcome hordes of non-Europeans into our country is a counsel of despair by people who only care for growth at any price. No wonder we’re not having children…who would want to hand off to their children the ghastly multicultural future being prepared for us by our overlords? Where’s the incentive to have children???
Get rid of the fractional reserve banking system, and this wild lunge for growth will disappear and the rest of us will be able to live normal lives.
The Columbia Funds commentary at the end of 2008 included a short article on the social and economic consequences of the worlds demographic situation, which is worth a quick read. They suggest that the U.S. has excellent prospects when compared to the rest of the developed world, though (not surprisingly) its share of world economic output and population will decrease as developing nations continue to grow.
http://www.columbiafunds.com/NewsAndCommentary/Commentary/DisplayEconomicCommentary?ContentGuid={ba54e14d-52c2-4b27-a66a-b2f35a25f5ff}
I think it’s a safe bet that there will be difficult decades ahead as we shoulder the cost of an aging population, whether at home with our own citizenry or abroad due to security and humanitarian obligations.
Joe–Thanks for the comment and the link to the Columbia piece. There is no question that an aging population poses unique challenges. However, there is no question that the USA is in very good ‘demographic’ shape compared to countries such as Spain or Japan.
This…
Have you been blogging long? KEIZAI SOCIETY: US – JAPAN Business Forum ” Blog Archive ” Japan … is a great blog, you have a great writing style too. Found this post last Saturday and i’ve been reading your blog since. I’ve subscribed to your RS…