5 ms·

Feels like the article misses the obvious while actually stating it. The reason for Japan's declining birth rate: "Although Japanese couples consistently say i

by RyanZAG 14y ago

Feels like the article misses the obvious while actually stating it. The reason for Japan's declining birth rate: "Although Japanese couples consistently say in surveys that they would like to have more than two children, they don’t. Part of the problem is Japan’s prolonged economic malaise. Years of stagnant (or declining) incomes have made Japanese men less attractive as potential partners. And economic uncertainty has led couples to delay getting married and having children. The shortage of public day care centers, especially in cities, has made the cost and burden of parenthood so high that today’s couples either have fewer babies or none at all. (Japan’s birthrate is just 1.39 children per woman.)" What happens when the population shrinks as a result of this? All of these problems magically right themselves. Shortage of public day care centers? Solved with lower population. Stagnant or declining incomes? Solved with a lower population, as each person can command a greater share of the economy (in aggregate) from simple supply/demand of labor. This is just a pendulum swinging back into equilibrium that will eventually be felt across the globe - and while worse for Japan's Gross GDP, it will improve Japan's GDP per Capita, the only truly important 'country level' measure for actual citizens.

meric 14y ago
That works, but only as long as the proportion of non-productive population does not increase too fast.
halviti 14y ago
You're only focusing on one side of the argument. Less young people means a small amount of young people paying for lots of older people, which is a large financial burden on the people able to work. (as well as many other factors) Also, GDP per capita is only used to measure money. There are many other factors that people might find important like happiness rankings, which to me happiness can be much more important than money. http://en.wikipedia.org/wiki/Gross_national_happiness http://en.wikipedia.org/wiki/Gross_national_happiness
philwelch 14y ago
GDP per capita doesn't go up when population goes down, because there are fewer people working to produce goods and services. There's no economy genie producing wealth that has to be divided among the population.
- dasil003 14y ago
  It does if everything is made in highly automated factories and you have a lot of unemployed.
- RyanZAG 14y ago
  A large portion of country wealth is often tied up in land and infrastructure. Wealth generally creates more wealth (through interest and similar), so the same wealth spread across a smaller number of people will push GDP per capita upwards. Higher incomes are also closely associated with better education. If you keep the number of universities and schools constant while decreasing the population, you give a larger percentage of the population access to better education. If a family has two children, the wealth of the family must be divided between both children and each child has less individual wealth. As you need wealth to start a business, a higher base wealth across the population means more chance of new successful businesses being started by these children. If a family has no children, the estate will move into public control, effectively increasing GDP per capita for the surviving population. A reason for a low birthrate in Japan is lack of financial security. This means that people who have low wealth are self-selecting out of reproduction, effectively moving their wealth into public ownership when they pass away and moving the average up as the proportion of low wealth to high wealth families is shifted. So yes, practically, GDP per capita will go up in Japan as the population shrinks. The global economy is more complex than just 'producing shiny widgets', or China would be far more well off than it is. Capitalism in action. EDIT: As pointed out by others correctly, increased welfare burdens from too large a proportion of retired citizens will have an effect. This can swing two ways: increased taxes, or reduced welfare payments. If reduced welfare payments is chosen, it will cancel out the problem. Japan will hopefully choose this route out of self preservation. If increased taxes is chosen, it will effectively tunnel income into the housing sector (old age homes, etc) and medical sector (medicine, life support, etc). The housing sector increase will be offset by a smaller housing demand from lower population. The medical sector is the big issue: if this wealth can be tunneled into Japanese medicine and health care, then it will simply be a transfer from taxpayers to Japanese in the medical sector. This would probably cause all kinds of distortions and should be avoided. However, it's not guaranteed to be a bad thing, I think anyway. You'll just have more Japanese going to medical school.
tomjen3 14y ago
Shortage of daycare centers may sort it self out before the economy gets completely screwed up, but soon after the declining production (due to less workers) will mean less taxincome for the government, which always means that school, daycare, the elderly and hospitals will be cut. Workers might have been able to command a much higher salary a century or two ago, but in global world there is only so high the salary of an individual can go before the entire thing comes crashing down into a gigantic economic disaster. Regarding gigantic economical disasters, consider what will happen when the current generations retire. Unless the government has put enough aside to pay for the retirement of all these people (very doubtful), then it must get whatever it can from the citizens who are working -- and with a very small amount of people working, that means that each worker will have to pay a lot more in taxes, which is not likely to lead to either economic prosperity or reelection of the politicians (even though their hands will be completely tied down).
maratd 14y ago
This is wrong on a profound level. GDP is Gross Domestic Product. In other words, all the goods and services produced. The price level and quantity are deeply tied to demand and for most goods/services, demand is tied to the population. More people means more goods/services sold at a higher quantity and price. Economic growth is largely population growth. The Japanese economic stagnation is largely caused by their population stagnation and will certainly not be fixed by it.
- yummyfajitas 14y ago
  More people means more goods/services sold at a higher quantity and price. Can you explain why more people causes price to go up? Quantity will certainly go up, but only in proportion to population, thus having no net effect on GDP per capita.
  - maratd 14y ago
    > Can you explain why more people causes price to go up? Sure. As you know, price is the intersection of supply and demand. An increase in a population is, in economic terms, an increase in demand. This will cause the price level to increase. Over time, supply will increase to match the new demand level, but to what extent and more importantly, the time frame involved, will be dependent on the good/service in question. The supply for some goods and especially most services, isn't easily increased. There is a finite number of lawyers, doctors, etc. to provide services and it take time to train more. Regulations get in the way, licensing, etc. And, of course, there are pressures on the raw materials used to manufacture goods.
    - yummyfajitas 14y ago
      So you are postulating a world where more people compete for a fixed set of goods and services? Sounds like a Malthusian nightmare. Of course, in this world price goes up but quantity remains flat (in gross terms, not per capita). Real GDP per capita drops even if inflation drives up nominal GDP per capita.
greenyoda 14y ago
Another reason why shrinking population won't magically solve Japan's problems is that they'll have smaller and smaller numbers of working-age people supporting larger and larger numbers of retirees, leaving the younger people even less money to spend on themselves and their children. This is the same problem that's looming for the Social Security system in the U.S., and probably in most developed countries, as average lifespans increase. (A much smaller percentage of people actually lived to retirement age when the Social Security system was first created.) But this problem will hit Japan first due to their low birth rate.

by RyanZAG 14y ago

meric 14y ago

That works, but only as long as the proportion of non-productive population does not increase too fast.

halviti 14y ago

You're only focusing on one side of the argument. Less young people means a small amount of young people paying for lots of older people, which is a large financial burden on the people able to work. (as well as many other factors) Also, GDP per capita is only used to measure money. There are many other factors that people might find important like happiness rankings, which to me happiness can be much more important than money. http://en.wikipedia.org/wiki/Gross_national_happiness http://en.wikipedia.org/wiki/Gross_national_happiness

philwelch 14y ago

GDP per capita doesn't go up when population goes down, because there are fewer people working to produce goods and services. There's no economy genie producing wealth that has to be divided among the population.

dasil003 14y ago
It does if everything is made in highly automated factories and you have a lot of unemployed.
RyanZAG 14y ago
A large portion of country wealth is often tied up in land and infrastructure. Wealth generally creates more wealth (through interest and similar), so the same wealth spread across a smaller number of people will push GDP per capita upwards. Higher incomes are also closely associated with better education. If you keep the number of universities and schools constant while decreasing the population, you give a larger percentage of the population access to better education. If a family has two children, the wealth of the family must be divided between both children and each child has less individual wealth. As you need wealth to start a business, a higher base wealth across the population means more chance of new successful businesses being started by these children. If a family has no children, the estate will move into public control, effectively increasing GDP per capita for the surviving population. A reason for a low birthrate in Japan is lack of financial security. This means that people who have low wealth are self-selecting out of reproduction, effectively moving their wealth into public ownership when they pass away and moving the average up as the proportion of low wealth to high wealth families is shifted. So yes, practically, GDP per capita will go up in Japan as the population shrinks. The global economy is more complex than just 'producing shiny widgets', or China would be far more well off than it is. Capitalism in action. EDIT: As pointed out by others correctly, increased welfare burdens from too large a proportion of retired citizens will have an effect. This can swing two ways: increased taxes, or reduced welfare payments. If reduced welfare payments is chosen, it will cancel out the problem. Japan will hopefully choose this route out of self preservation. If increased taxes is chosen, it will effectively tunnel income into the housing sector (old age homes, etc) and medical sector (medicine, life support, etc). The housing sector increase will be offset by a smaller housing demand from lower population. The medical sector is the big issue: if this wealth can be tunneled into Japanese medicine and health care, then it will simply be a transfer from taxpayers to Japanese in the medical sector. This would probably cause all kinds of distortions and should be avoided. However, it's not guaranteed to be a bad thing, I think anyway. You'll just have more Japanese going to medical school.

tomjen3 14y ago

Shortage of daycare centers may sort it self out before the economy gets completely screwed up, but soon after the declining production (due to less workers) will mean less taxincome for the government, which always means that school, daycare, the elderly and hospitals will be cut. Workers might have been able to command a much higher salary a century or two ago, but in global world there is only so high the salary of an individual can go before the entire thing comes crashing down into a gigantic economic disaster. Regarding gigantic economical disasters, consider what will happen when the current generations retire. Unless the government has put enough aside to pay for the retirement of all these people (very doubtful), then it must get whatever it can from the citizens who are working -- and with a very small amount of people working, that means that each worker will have to pay a lot more in taxes, which is not likely to lead to either economic prosperity or reelection of the politicians (even though their hands will be completely tied down).

maratd 14y ago

This is wrong on a profound level. GDP is Gross Domestic Product. In other words, all the goods and services produced. The price level and quantity are deeply tied to demand and for most goods/services, demand is tied to the population. More people means more goods/services sold at a higher quantity and price. Economic growth is largely population growth. The Japanese economic stagnation is largely caused by their population stagnation and will certainly not be fixed by it.

yummyfajitas 14y ago
More people means more goods/services sold at a higher quantity and price. Can you explain why more people causes price to go up? Quantity will certainly go up, but only in proportion to population, thus having no net effect on GDP per capita.
- maratd 14y ago
  > Can you explain why more people causes price to go up? Sure. As you know, price is the intersection of supply and demand. An increase in a population is, in economic terms, an increase in demand. This will cause the price level to increase. Over time, supply will increase to match the new demand level, but to what extent and more importantly, the time frame involved, will be dependent on the good/service in question. The supply for some goods and especially most services, isn't easily increased. There is a finite number of lawyers, doctors, etc. to provide services and it take time to train more. Regulations get in the way, licensing, etc. And, of course, there are pressures on the raw materials used to manufacture goods.
  - yummyfajitas 14y ago
    So you are postulating a world where more people compete for a fixed set of goods and services? Sounds like a Malthusian nightmare. Of course, in this world price goes up but quantity remains flat (in gross terms, not per capita). Real GDP per capita drops even if inflation drives up nominal GDP per capita.

greenyoda 14y ago

Another reason why shrinking population won't magically solve Japan's problems is that they'll have smaller and smaller numbers of working-age people supporting larger and larger numbers of retirees, leaving the younger people even less money to spend on themselves and their children. This is the same problem that's looming for the Social Security system in the U.S., and probably in most developed countries, as average lifespans increase. (A much smaller percentage of people actually lived to retirement age when the Social Security system was first created.) But this problem will hit Japan first due to their low birth rate.