Battling a Declining Population
Japan Calls Women, Seniors to the Rescue
Japan's population is on the decline, with potentially disastrous consequences for the economy. Tokyo has responded with a population policy for the first time in 70 years that will put women and seniors in the spotlight.
Japan Calls Women, Seniors to the RescueBy Yi-Shan Chen, Sydney Peng
From CommonWealth Magazine (vol. 552 )
Japanese Prime Minister Shinzo Abe has been running a high-hurdles race since assuming his post in 2012, overcoming one challenge after another. On April 1, he cleared his latest hurdle when Japan took the controversial step of raising consumption taxes to counter sizable fiscal deficits. That was followed by the good news that Japan's unemployment rate had fallen to a 16-year low and wages had hit a historical high.
But Abe and his administration still have plenty of structural hurdles to overcome if those gains are to be sustained.
On June 24, Abe and his Cabinet approved two major economic policy directives to sustain the growth momentum: the "Basic Policies for Economic and Fiscal Management and Reform" for 2014 and the updated "Japan Revitalization Strategy."
Aside from proposals to lower corporate income tax rates and strengthen the role of Japan's National Strategic Special Economic Zones, what grabbed the most attention from the media was the admission that "the government needs to undertake reforms" in order to "change the momentum in around 2020 away from a rapidly declining and extremely aging population."
The government established a target of "maintaining a population of about 100 million in 50 years with a stable demographic structure." That was in response to forecasts that Japan's population would decrease to 87 million from 127 million at present if the country's birth rate remained unchanged.
"As I know it is the first time for Japan to set a population target," says Kazumasa Iwata, president of the Japan Center for Economic Research, describing it as a historic moment.
It was also the first time population policy was defined as an economic policy and incorporated into Japan's revitalization strategy, and the Cabinet pledged to "set up a headquarters to push forward with an integrated policy designed to achieve" population goals.
Over the past 20 years, Japan has emerged as the world's most aged country, and it became the first country in Asia to see its population decline. Those problems were compounded by the bursting of the country's economic bubble in the early 1990s and the breakdown of its economic transformation, providing a warning to the rest of the world of how an aging country with a low birth rate and declining population can suffer generational and social decline and lose economic vitality.
Aware of the population crisis, Abe followed up on his first two "arrows" to pump life into Japan's economy by forming a "Choosing the Future" Committee under the prime-minister-led Council on Economic and Fiscal Policy to study how population issues will affect the country's future. That committee was the main mover behind the new population policy.
The Japanese government is worried because a 31 percent drop in population to 87 million in 2060 will pose huge structural threats to Japan's domestic demand, workforce and local politics.
Abe's Hometown Set to Disappear
Of Japan's 1,799 "municipalities," or administrative districts (including wards in bigger cities, smaller cities, towns, and villages), nearly 30 percent will have disappeared within 25 years.
"When over 25 percent of these municipalities disappear, think about how many politicians will be out of a job," says Yu-hua Chen, a National Taiwan University associate professor who heads the Population Studies section of the school's Population and Gender Studies Center.
Among the municipalities expected to become extinct is Abe's native Nagato in Yamaguchi Prefecture, home to his politically powerful clan that has spawned prime ministers for over half a century.
To stave off these structural threats and hit the goal of keeping Japan's population over 100 million, Japan's fertility rate will have to increase from 1.40 births per woman at present to 2.07 births per woman by 2030 – far higher than the OECD average of 1.7 (2010).
Even if that fertility rate goal is seen by many as wishful thinking, and the plan was otherwise short on details, it was still seen as an important step forward.
"This is a crucial part of Abe's growth strategy," says Tsuyoshi Nojima, a reporter with Aera, a weekly magazine published by the Asahi Shimbun.
And it's a necessary one because without it, his economic revitalization plan, dubbed "Abenomics," and the third arrow of that plan, expanding domestic demand and investment, will be hard-pressed to help the Japanese economy truly turn itself around. In Nojima's view, Japan needs to attract more foreign investment in order for the plan to work, but one of the unwritten rules of foreign investment is to not put money in a place where the labor force is shrinking.
This is one of the reasons why a population policy is so timely. Japan's workforce fell below 80 million people last year for the first time in history and is expected to shrink further to 67 million workers in 2030. The Japan Center for Economic Research estimates that because of the inevitable decline in population, the country's potential economic growth rate will fall to zero.
Front-page News: Manpower Shortages
That reality hit home soon after Abenomics got off to a successful start. Japan discovered that the decline in the country's population could create a big problem: even limited economic growth could lead to manpower shortages.
Since the beginning of the year, labor shortages have become front-page news, and the situation is expected to become more serious once work on the infrastructure for the 2020 Olympic Games in Tokyo gets going.
Japan's new population policy is intended to address the looming shortfall not only by limiting the population decline and maintaining the country's market scale, but also by getting more women and senior citizens into the workforce.
Putting more seniors to work may also help resolve one of the hot topics of conversation in Japan: how the country will cope with supporting a huge wave of post-World War II baby boomers when they turn 75 around 2025.
The country's health and long-term care systems launched reforms in June in anticipation of the potential crisis, and the directives approved on June 24 also took a more open approach on how to put the experience and capabilities of the elderly to better use.
No More Retirement Age
Ten years ago, Japan pushed the official retirement age back to 65. The "Choosing the Future" Committee went a step further, creating a new term – "new productive-age population" – that redefined the working age as 20 to 70, from the previous 15 to 64. The new guideline makes it highly likely that Japan will phase in "gradual retirement" in the future, encouraging senior citizens to work reduced hours until they are 70.
"Maybe it's a good idea not to have a retirement age," says 66-year-old Hiroko Akiyama, a professor with the University of Tokyo's Institute of Gerontology.
In 2009, the university set up an "Aging Society Research Group" in Toyoshikidai community in the city of Kashiwa, about a 40-minute drive from downtown Tokyo, in cooperation with city authorities. Its mission is to study jobs and environments suitable for older residents.
The university, the Kashiwa municipal government and the Urban Renaissance Agency later joined up to create an organization called "Office Seven." Over the past year it has organized seven job fairs catering to older Japanese that attracted more than 800 people over the age of 60. A total of 156 of them, ranging in age up to 80 years old, found employment working at farms, after-class nursery schools, long-term care facilities and indoor plant factories in the Kashiwa area.
Akiyama discovered that many senior citizens were willing to work part-time. A Mr. Yagi, for example, who worked for a major Japanese corporation overseas for more than 20 years, worked with the University of Tokyo to create a course outline for an after-school English class, teaching grade-schoolers how to live abroad and do business in English.
Many of the seniors engaged in the program showed an interest in gardening and agriculture. The University of Tokyo and a developer collaborated on a project to convert an empty house into a greenhouse, with a twist. The plants were stacked on a six-level rack that enabled the older workers to access the plants in a wheelchair or tend to them without having to bend over or squat.
"If the life expectancy is 90 years old, 60 to 65 years old is middle-life," Akiyama says. "Why can't we have a second life?"
Kashiwa sprouted up in the 1960s and '70s as a model new city in the Tokyo suburbs, and about 40 percent of its residents are now senior citizens, similar to many "new" cities of that era, Akiyama says.
Can a Male-dominated Society Change?
Aside from raising or scrapping the retirement age, Abe's new approach hopes to increase the labor force participation rate of women in the 30-49 age bracket from 71 percent at present to 85 percent within 15 years and ultimately to 90 percent.
But that could prove far more challenging than the issue of elderly employment, because the limited participation of women in Japan's workforce and the ceiling to promotion they face is closely tied to social customs and culture.
"(An) area that must be improved upon is the way of thinking that tends to be male-oriented in virtually all aspects," Abe advocated in a speech at The Economist Japan Summit 2014.
Past female Cabinet ministers, for example, have often been seen by Japanese society as simply tokens given positions of lesser importance. Abe sought to change that when he became prime minister, but it was only after he appointed women to the two most important jobs in his Liberal Democratic Party – Sanae Takaichi as the party's Policy Research Council chief and Seiko Noda as chairwoman of the party's General Council – that people knew he was serious.
Though Japan was the first westernized Asian country, the discriminatory system forged by its patriarchal culture has been highly unfavorable to female participation in the workforce. One example: Japan's tax system is relatively considerate to housewives. Wives with annual incomes below 1.03 million Japanese yen (about NT$300,000) are treated as full-time housewives for tax purposes and can be claimed as a dependent of the husband, enabling a couple to claim 1.14 million yen in deductions.
If the wife makes more than 1.03 million yen, however, she can no longer be claimed as a dependent, leaving the couple with only 760,000 yen in deductions. In effect, the tax system penalizes married women for working, an approach completely at odds with international trends.
The result is that Japanese women tend to leave the workforce when they get married or have children, a phenomenon the new population policy hopes to reverse.
Even more important, according to National Taiwan University's Chen, is that in today's society where women are better educated and both husband and wife need to work to cope with the financial demands of contemporary life, empirical evidence shows that the higher the percentage of women working, the higher the fertility rate. Abe's new population policy is, in effect, betting on that to happen.
Without Steady Work, Hard to Have Children
Prominent women's rights scholar Chizuko Ueno believes, however, that the source of the fertility rate problem isn't whether women work or not but the kind of work they're doing, since many work on an irregular basis.
"Labor regulation has collapsed in the past 20 years," she says in an interview with CommonWealth Magazine. "This is the real obstacle to increasing the fertility rate."
Ueno argues that if Japan's new population policy hopes to increase fertility and female participation in the workforce at the same time, it must improve the livelihoods of those without full-time jobs, described in Japan as "non-regular workers."
If a man does not have steady work, it is hard for him to find a spouse, Ueno says. Meanwhile, most women want to get married, but women without steady jobs are less likely to wed and have children because they hope to marry a husband with a high salary, who can serve as a refuge for them – a dream that is often hard to attain.
Those dual social barriers have led to a decline in Japan's marriage rate, especially when 40 percent of female workers in the 25-34 age bracket, when marriage is most likely, are non-regular workers.
It's also not surprising that 60 percent of men aged 30-34 with full-time jobs have spouses, compared with only 27.1 percent of men in the same age bracket who do not have a steady job, considering that full-time workers earn incomes 50 percent higher than the class of non-regular workers.
Ueno sees Abe's attempt to address Japan's aging population as somewhat misguided because it primarily targets people who are already married or already have children, rather than addressing the core problem behind the country's low fertility rate: "the low marriage rate caused by occupational instability."
"Deregulating (the labor market) is still persistent in the current administration. Although Abe said (he wants) to raise the fertility rate, in real politics, the direction is the opposite. There are no (indications) that the low fertility rate is turning around," Ueno says pessimistically.
Her concern is that changing work rules in a way to promote steadier employment might increase the labor costs of Japanese businesses, something the Japan Business Federation (Keidanren) and other business groups with close ties to the Abe administration are loathe to accept.
Because population growth involves personal freedom and choice and cannot be easily influenced by public policy, it is widely acknowledged to be the public policy area with the greatest uncertainty. Yet, desperately trying to emerge from its lost two decades and preserve its standard of living into the future, Japan has jumped into this monumental void, admirably confronting the problem and starting to take initial steps to solve it.
Though the Abe government's initiatives so far have been open to criticism, many other countries of the world with declining fertility rates will be watching anxiously to see how Japan ultimately deals with such an intractable problem.
Translated from the Chinese by Luke Sabatier