I’ve written many times before that if you want to see into the future of America’s generational conflict, look to Europe where a massive social state is propped up by a shrinking workforce. However, the same demographic bomb is ticking in the East also, as Fred Hiatt details in “Japan shrinks”:
For a population to hold steady, every woman must give birth on average to 2.1 children. When the birthrate drops below 1.5 and stays there for any time, it's almost impossible to recover, given the momentum of demographics. Below 1.3 is considered "lowest-low." China is at 1.7 and dropping. Japan last year clocked in at 1.25.Unlike the United States, Japan does not depend on immigration to keep the population growth steadily positive. The danger of an unbalanced worker-to-retiree ratio is that incentives disappear to earn an extra dollar (or yen) when it is swallowed up by government taxes. As they say in the article: “there will be some adjustment.”
As a result, Japan's population, now about 128 million, is expected to fall to about 100 million by mid-century. Big deal, you might say. Wasn't Japan happy enough 50 years ago, when it blew through the 100 million mark on the way up?
Yes, but it was a very different 100 million then. In 1965 there were 25 million children in Japan, 67 million people of working age and 6 million senior citizens. In 2050 there will be 11 million children, 54 million potential workers and 36 million people 65 and over. No one knows whether such a society can maintain a spirit of innovation, or how its capitalists will adapt to a shrinking market. There will potentially be a lot more dependents for every productive worker.