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Lessons For Old Europe From Japan's Shrinking Population

What can you teach Europe?
What can you teach Europe?
Sonja Gillert

In Japanese schools, parents come and talk about the upside of starting a family. The number of places in day care centers is being expanded; on the walls, posters show male celebrities touting the advantages of being a dad. In view of demographic change, the Asian archipelago nation is trying all it can to get the message through: Have more kids.

Japan has been the first modern nation faced with an ageing, shrinking population -- and with the negative effects this has had on the economy. The country’s population is currently 127 million, but the Japanese National Institute of Population and Social Security Research says the number will have shrunk by 40 million in 2060.

Taking into consideration the current average number of deaths and average fertility rates, the prognosis for 2110 is a population of 43 million. A forward-looking country is losing its population.

Demographic change is also affecting Germany. The Berlin Institute for Population and Development forecasts that the German population will have shrunk from its present 81.8 million to 71.5 million by 2050.

Mistakes to avoid

Reiner Klingholz, the director of the Berlin Institute, and Gabriele Vogt, a professor of Japanese politics and society at the University of Hamburg’s Asia-Africa Institute, analyze in a discussion paper entitled Demografisches Neuland ("New Demographic Ground") how Japan is dealing with its shrinking population -- and what insights Germany could draw from it.

"Germany can learn what mistakes not to make," Klingholz states. The research paper, which was presented last week, also gives some reason for hope: It shows that Germany, at least by comparison with Japan, isn’t at all badly prepared for the demographic change.

Klingholz praises Germany for having started to take action earlier than Japan -- citing Germany's pension reforms, raised labor force participation rate (also for women), increased immigration, and education system reforms as positive measures.

"It could be better, but in relation to others, our position has improved," the researcher says. Theoretically Germany, being Europe’s “oldest” country, should be the worst off economically speaking -- but it is in fact quite the opposite.

That Japan should be facing a shrinking population first is mainly due to the strong baby boom that took place there earlier than in other countries. The Berlin-Institute research, tracing population figures, shows that between 1947 and 1949, some 8 million Japanese were born.

That accounts for the economic boom that lasted until 1990. By 2011, however, there were only about a million babies born. In the early 1990s, the number of 15 to 24-year-old consumers decreased sharply, as did the group of money-earning adults aged 15 to 64: from 87 million in 1995 to 79 million today.

"The problem is that more people are reaching retirement age and won’t be economically productive anymore. In conjunction with falling birthrates and low immigration levels to Japan, it means that social systems can no longer be nearly as well financed," says Klingholz.

Immigration helps

The need for skilled workers is high in Japan. According to the study, for a long time the country was able to overcome this through innovation and the use of robots. "But it's not enough in the long haul, particularly in the health care sector," Klingholz says. He recommends that the Japanese open their country up to more immigration -- to encourage new ideas and raise productivity.

Once again, the Berlin study shows that in this regard, Germany is more advanced. Whereas in Japan only 1.7% of the total population is foreign, and naturalizations remain rare, in Germany 19% of the population has an immigration background. Among those, 7.7% are not German; the rest are either naturalized or obtained German citizenship because they were born in Germany.

Europe has a totally different relation to immigration, Klingholz explains, compared to Japan where it is seen as culturally undesirable. "Immigration to Japan has been made so difficult and is thus so unattractive that even the quotas they’ve set for health care workers from the Philippines, Vietnam and Indonesia aren’t being met."

The government of Prime Minister Shinzo Abe is dealing with Japan’s economic problems by introducing economic stimulus programs. This means that the country’s debt, which is about 230% of the island's GDP, keeps growing -- and is in fact higher than Greece’s.

Japan has only been able to avoid bankruptcy so far because it borrows money at low interest rates from its citizens. But demographic change poses a threat to that system. While exports are boosted by the stimulus packages, the cost of imports on which Japan has been relying even more heavily since the Fukushima nuclear disaster is becoming more expensive.

But Germany can learn from Japan in one specific area, Klingholz maintains: "The Japanese are better at using the potential of older people." In Japan, 28% of men aged over 64 still work, as compared to 7% in Germany. According to the Berlin study, one reason for that could be that by comparison, pensions in Japan are relatively low.

However, keeping older folks in the work force is not entirely unproblematic: while it does take some of the strain off social systems, it also means that younger people with new ideas may not be getting a chance -- and indeed the innovative power of Japan’s economy, for which the island is famous worlwide, is waning.

The study ultimately projects some fairly bleak future scenarios for Japan. "Either the country remains ethnically homogeneous and only opens up because the forecast population shrinkage causes its economy to collapse," Klingholz says, "or Japan gives up the homogeneity and opens up to the world."

He adds that the country is not prepared for that -- it would be like pulling the rug from under the feet of its citizens, he says. So Germany, as a pioneer in the field, is being asked to develop concepts that take future demographic changes into account.

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