Tokyo—When we consider the relationship between a given population and economic growth, the most important thing is the drop in the ratio of working people to a population. We can understand this phenomenon as a change from a period of population bonus to a period of population onus.
The pyramid takes the shape of an equilateral triangle when a population is increasing. The base of the pyramid begins to narrow when the birthrate starts to fall. The base, which was once broad, begins to shift to the working-age population (15-64 years old) after a period of time. Economic growth moves into the plus range because the ratio of working people to the population rises. This is the phase known as population bonus. Japan entered a period of high economic growth in the late 1950s, which continued until the early 1970s. During this period, it was in the population-bonus phase and its economy grew by an average of about 10 percent per year.
The condition of population bonus does not continue indefinitely. When the center of the age distribution shifts from middle-aged people to elderly people and the ratio of working people to the population starts declining, the period of population onus, which has negative effects on economic growth, sets in.
Changes in the three production factors of manpower, capital and technology determine medium- to long-term economic growth. Population onus works to affect economic growth negatively through manpower and capital. Working people are saving people, and elderly people are people who break into their savings. The savings ratio falls quickly when the ratio of working people goes down in the population onus phase.
Japan entered the population onus phase around 1990, assuming that the working-age population is the labor force. Companies began to suffer from a manpower shortage around 2014. The household savings ratio also declined to 0.1 percent in 2014.
Almost all countries and regions in Asia were in the population-bonus phase until around 2010. But according to this writer’s calculation, Hong Kong, Singapore and Thailand entered the population-onus phase around 2010. China and South Korea followed around 2015. Subsequently, Vietnam and Malaysia are anticipated to move into the same phase in 2020 or thereabouts.
The Japanese government is working to contend with this phase using three strategies.
The first strategy is to arrest the birthrate decline. The government has set the arrest of the population fall at 100 million (currently 127 million) as its goal.
The second is to prevent the labor force from shrinking despite the decline in the working-age population. This is possible with the increases in the labor force participation ratios of women and elderly people. The government is working to build a gender-equal society and is urging women to start working. It is also requesting companies to retain senior employees who are willing to work until they are 65. As a result, the labor force grew by 430,000 people and the number of employees rose by 1,030,000 people, while the working-age population fell by 3,250,000 people during the period 2012-2015. A look at the breakdown of employees showed that the number of female employees increased by 1 million and the number of male workers aged 60 or over increased by 330,000.
The third strategy is to improve productivity. The Japanese government is advancing measures including the promotion of the so-called Fourth Industrial Revolution, the facilitation of innovations, the promotion of venture companies, the development of human resources and the practical use of foreign personnel.
Population onus will have negative effects on economic growth. Many Asian countries and regions will face this phase. Japan must lead these growth strategies to success, not only for its own citizens but also for the people in the rest of Asia.
Takao Komine is a professor at Hosei University.