The reason why the Social Security system is in the news is easy enough to understand. The population of the US is aging, and when that big bubble of elderly demographic slides over into retirement age there won’t be enough people working in the country to support the people who want to see a benefits check sitting in the mailbox every month.
So the debate in the US is about a benefits package that, for most people, doesn’t provide enough after-retirement money to live on. This means that most people have to make some other arrangement in order to maintain their standard of living after they stop going to work every day. Heartless as it sounds, even if SS fails it won’t be a terrible tragedy for the majority.
This is the big debate in the US. What about the increasing number of old people in other countries?
The European Union has a similar problem when it comes to ever more senior citizens demanding ever more care. Unlike the US, several Socialist programs in place mean that something which encourages spirited debate in America could very well destroy their economy. Universal medicine and a government guarantee of pension funds means that, eventually, the well is going to run dry. Unless they can get more workers on the job and paying taxes, they’re going to be in big trouble.
The solution that they seem to be gravitating towards is immigration. Let people from other countries and other cultures, younger and more vibrant people who want to work, come set up house inside of their borders. This is a problem since European societies have always had a problem assimilating outsiders, and it’s doubtful that they’ll be able to change this any time soon. Instead of having large groups of immigrants eager to become good German or French citizens, they could very well find that those large groups of immigrants are more eager to turn Europe into a mirror of the repressive societies that they left behind.
But that’s Europe, and I’m not saying anything that’s new to blog readers. Instead I’d like to discuss a country that’s in a similar position with no solution in sight. That country is Japan.
The Japanese claim to have the greatest life expectancy in the world. They also have one of the lowest birth rates. This means that in just a few decades there won’t be anough productive workers to support the greying population.
So Japan has some hard choices that they have to make. They could simply allow the percentage of seniors increase at the expense of productive workers. But if they do that, then they probably will see the average standard of living fall by about 50% and it will happen in a shockingly short period of time. Think less than ten years. It’s doubtful that their government or society can survive such a change.
One solution is to encourage women of child bearing age to crank out the rugrats. If they start right now their little bundles of joy will be just barely old enough to shoulder the burdens placed on them by the previous generations. Since Japan has been suffering through a recession for the past 10 years it’s doubtful that women will give up their jobs in order to raise the kids.
So howsabout immigration? Don’t make me laugh.
The EU is getting all the press, but I think that Japan’s situation will be very interesting. It might be callous to say this, but it should be very instructive to see what they try to do. Anything that shakes up Japan will certainly change the balance of power in the region, and that could mean a great deal of trouble down the road.
Or, get others to shoulder the burden. Invest, start businesses, and create infastructure in developing foreign markets.
Actually, the Japanese solution to its demographic problem is robots.
In principle any nation can support an increasing number of non-workers of all kinds if it rapidly increases the productivity of the remaining workers. Automation does just that.
Increased per capita productivity has already saved pensions system. If productivity per worker had remained fixed at 1930’s rates then American Social Security would have collapsed sometime in the late 1960 (IIRC).
Japan also doesn’t have much of public pension system but relies on a system of personal savings. This has created an immense pool of capital to fund Japan’s productivity enhancements (although a great deal of that was squandered in the 80’s). Ironically, though, Japans intense focus on capital investment is often credited for its low birth rate because public policy diverted money away from consumers and housing and towards building factories.
Japan is mostly betting that it can automate it way out of its demographic crunch. They may well succeed.
Actually, China’s problem is worse than Japan’s because the one child policy was even more draconian. Japan also has the advantage of being rich. China with an aging population expecting to be taken care of by sons without wives will be the one to watch with eyes covered.
Here are some links regarding the Chinese situation versus the US and Japanese.
Richard,
Your Nicholas Eberstadt links are most interesting – many thanks, mate.
May I credit you for the references in a seekerblog.com post on the subject?
Steve
I didn’t do nothin’, but sure I never turn down a credit.