Japan’s wrenching choices

With Japan's aging population, low birth rate and opposition to immigration, the solvency of its welfare state may be in question, says columnist George Will.

Japan's demographics have been trending toward a collision between high government transfer payments to the elderly and a decreasing population that will not be able to sustain them:

Japanese women have the highest life expectancy in the world, at 85.5 years, and men are third, with 78.5 years.

The number of children per women of childbearing age in Japan is 1.32, well below the replacement rate of 2.1 – which keeps the population from shrinking.

The Japanese have opposed immigration for a number of reasons, including limited space and jobs.

Despite this, the Japanese will not dismantle their welfare state, says Will. So the alternative is to pursue increased revenue from rapid economic growth achieved by sacrificing equity, understood as job security and other entitlements, in the interest of efficiency.

Indications show that Japan is already beginning to do this:

Japan's "convoy" economy, in which many workers enjoy extraordinary job security and benefits, is changing; today almost one-third of all workers are "non-regular" and have little security and few benefits.

Japan's economy has been growing since 2002, in part by cutting public works spending – formerly one of the economy's locomotives – from 8 per cent of GDP to 4 per cent.

Centuries of commitment to social harmony is beginning to break down with the realisation that a growing economy must accept temporary losers.

Source: George F. Will, Japan's Wrenching Choices, Washington Post, September 7, 2006.

For text: http://www.washingtonpost.com/wp-dyn/content/article/2006/09/06/AR2006090601724.html

For more on International Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=26

FMF Policy Bulletin/ 19 September 2006