Declining populations
Many may look at the statistics presented above and – with some justification – shrug their shoulders. In the context of the cost of living and climate crises population decline may appear to be a benefit to society rather than to pose an existential threat. If there were fewer people in this country and the world as a whole, then there would be less demand for basic goods such as food, water and housing. Moreover, fewer people would be using fossil fuels, reducing carbon emissions and helping to curb global warming. However, to think this way is optimistic at best. What people ignore about population decline is the demographic changes it brings and its resulting effects on the economy. East Asian countries are good examples of how detrimental a low birth rate and thus an ageing population can be for an economy. Japan’s population has been declining since 2009, and in 2024 fell by a record level of 908,574. 6 Japan’s population is also one of the oldest in the world with 29.3% 7 of Japanese people being over 65 in 2022. This demographic change has taken its toll on the Japanese labour and housing markets. In the Japanese labour market, employers are struggling to find workers: there were125 jobs for every 100 job seekers in Japan at the end of 2015. 8 . If trends continue, experts estimate that Japan might have to raise its retirement age from 65 to 77 9 to maintain its worker to retiree ratio. If the labour force continues to shrink as it is, Japan’s productive capacity will shrink along with it, causing further deflation and economic decline. Japan’s economy has not grown significantly since the 1990s, with the period known as the ‘lost decades’. While this stagnation happened for a multitude of reasons, Japan’s aging population certainly hindered its recovery and, without a major change in Japan’s economy, will continue to hinder its growth in years to come. Deflation, partly caused by the declining population, means that consumers are reluctant to spend as any assets just lose their value. Japan’s housing market has also suffered immensely owing to the declining population and demographic change. This can be seen most clearly in rural towns in Japan, where, according to Japanese government data, as many as four million (mainly countryside) homes have been abandoned over the past two decades. This is in stark contrast to Japanese cities, to where young people have migrated for better opportunities, such as in Tokyo which receives investment from around the world due to a strong housing market in the 2020s. Future problems loom for the Japanese government as well on how to deal with rising demand for healthcare and how to pay for state pensions. Japan already has one of the highest debts to GDP ratios in the world at around 236% 10 and growing pressure on the Japanese government to pay for a greater number of pensions causing fiscal deficits could exacerbate this problem. Fewer working age people to pay taxes while increased government spending on pensions will cause major fiscal issues for aging countries like Japan if something is not done soon. These problems won’t be unique to Japan if current trends continue in Europe and North America. One of the only reasons most western countries have seen population growth and thus economic growth is immigration (I will come onto this later), which will be unsustainable if Africa and less developed regions of South America and Asia see the same demographic trends continue.
6 BBC NEWS at https://www.bbc.co.uk/news/articles/c74dnzr4jdvo . 7 AL JAZEERA at https://www.aljazeera.com/economy/2024/9/16/japans-elderly-population-rises-to-record- 36-25- million#:~:text=Japan's%20elderly%20population%20rises%20to,million%20%7C%20Economy%20News%20 %7C%20Al%20Jazeera . 8 WIKIPEDIA at https://en.wikipedia.org/wiki/Aging_of_Japan#Economic . 9 Ibid. 10 TRADING ECONOMICS at https://tradingeconomics.com/japan/government-debt-to-gdp .
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