The number of child-care facilities needs to be increased, regional child-rearing support systems need to be established and working arrangements reformed to achieve a better balance between work and family. Increasing child allowance to parents is an area which also requires immediate attention.
But even if Japan were to succeed in raising the birth rate tomorrow, it would be 20 years before any impact on Japan’s economic growth were noticed.
One policy option that has received high priority is lifting the employment rate for women. However, lifting the female employment rate is only a medium-term solution to the declining population problem. When the female employment rate has increased to the point where the so-called M-curve (so named because the shape of the curve plotting female participation against age looks like the letter M) disappears, Japan will still need to find alternative means to offset the negative impacts of a declining population. Another option is to lift the employment rate among the aged, but even this is a medium-term solution.
The remaining option is to allow more foreign workers to find employment in Japan, offsetting the negative economic impact of the declining population. There has not been enough discussion of this option in Japan.
Among the various policies on foreign workers, there seems to be a consensus for moving toward accepting more highly skilled foreign professionals. In fields where creativity is critical, the meeting of people with different social and cultural backgrounds stimulates the creation of new ideas, leading to innovation. Prime Minister Shinzo Abe is aware of this important dynamic. It was with it in mind that The Japan Revitalization Strategy (or Japan is Back document), announced in June 2013, initiated a revision of the existing point-based preferential immigration treatment system for highly skilled foreign professionals.
Policies focussing on unskilled workers, however, are more controversial. There are certainly merits in receiving more unskilled workers. Even if unskilled, workers engaging in domestic economic activity produce additional output and contribute to economic growth (of course, if the worker sends a part of his wage home, the contribution to the Japanese GNI will be different from the contribution to GDP). As long as they pay taxes and social security premiums, workers also contribute to the sustainability of the fiscal and social security systems.
On the other hand, accepting unskilled workers would nudge Japan’s comparative advantage from capital, knowledge, and technology-intensive goods towards more labour-intensive ones. This would intensify competition with emerging and developing economies, and may make Japan’s problems worse.
There are other, more political problems with accepting unskilled workers, too.
As in other countries, there will be fears that foreign workers will take jobs that might otherwise have gone to Japanese citizens. This is a risk for both skilled and unskilled Japanese workers. Many advanced economies have introduced ‘labour market testing’, which requires that an increase in the intake of foreign workers does not affect the employment of domestic workers, in response to such concerns. However, Japan’s declining population implies a shortage of labour so there should be increasingly less competition for work. Furthermore, accepting more unskilled foreign workers should free up domestic workers who have benefited from Japan’s advanced education system to engage in more high-value added activities, resulting in an overall positive economic impact from migration.
There are also concerns that increased social tension between foreigners living in Japan and Japanese citizens may result, at least in some cases, in a decrease in public peace and order. It has also been pointed out that local governments would have to increase spending on housing and education for foreign workers and their families if the number of foreign workers increases.
But deciding not to accept more foreign workers on the basis of an uncertain increase in crime ignores the potential positive impact of having a more multicultural society. The social and economic impacts of an increase in the number of foreign workers in Japan should be addressed by separate sets of policies. As for the required increase in social spending by local governments on foreign workers, it could be offset by the additional tax revenue that economic growth brings to the region.
Discussion about these issues is necessary, but action must be swift. Neighbouring countries, such as South Korea, have reformed immigration policy and become more open to receiving foreign workers. Starting with the Act on Foreign Workers Employment in 2003, South Korea has introduced legislation to smooth the way for more foreign workers, and to support the children of international couples.
Japan is behind the pack. Even if reforms are implemented, they may not be enough to attract foreign workers, who may be more inclined to migrate to countries which have been more proactive.
Perhaps the best thing would be for Japan to allow its own youth — who have far more of a stake in these matters than the traditionally powerful older generations — to shape Japan’s immigration policy. The choice that faces them is stark: let Japan’s economic power wane as its population ages, or open Japan up to immigration so that it can re-emerge as a dynamic economy.
Jun Saito is Senior Research Fellow at the Japan Center for Economic Research (JCER).
This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘A Japan that can say ‘yes’‘.
Thank you for the insightful article. Expanded immigration is the obvious solution to Japan’s demographic woes but – as you mention – there are a host of issues with its implementation. One issue that you touched on but didn’t explore in depth strikes me as an important one: the culture / language barrier. I recall a scheme of a few years ago aimed at allowing a number of Filipino aged care nurses to immigrate to Japan for training and possible employment. The scheme faltered at the language barrier, and most participants had to return home. It’s not difficult to foresee this kind of hurdle posing a monumental obstacle for both unskilled and highly skilled potential immigrants.
My understanding with the Filipino aged care issue was not necessarily one of language but one of compulsory pension payments. As I understand it, after 3 years working in Japan you can’t apply for early withdrawal of your pension, you must wait until retirement (something that causes many people not to work beyond three years, for example, the JET Programme).
Some less generous souls might suggest that getting foreign labour to contribute to a pension system and then not renewing their visas after 4 years would be an ideal way to increase the coffers of a stretched aged care system . . . Effectively every person who can’t get their pension back has just given the government a give of around AUD$9-11,000.
The fact is that it is very well known that Japan’s attitude to immigration is “You are welcome to visit, but please don’t stay.” When you are effectively told that you are not wanted, why would you *want* to stay?
Thank you for your comment on my article on immigration policy in Japan. While I admit that one of the greatest barriers is the difference in the culture and language, I do not want to emphasize this aspect so much. This is because it would give people a misperception that it is insurmountable. The fact is that, in the case of the Filipinos that have entered Japan under the EPA arrangement, almost 40 percent of those who sat for the national exam has managed to pass it and became qualified to get a permanent job. The number is even higher for the Indonesians at about 50 percent. You might argue that there are many who had to change the job after gettig one. I’m afraid I don’t have a good information at hand for that aspect. But the problem in high turnover in the long-term care workers is not a problem for the foreigners alone. It has been acknowledged as a problem for the Japanese workers as well. It is a part of a wider problem in the Japanese economy; the mispricing of remuneration for such workers in the social security system.
I have yet to see explained just why a falling population is a problem. A falling population combined with static economic growth means rising GDP per capita. True, the supply of young workers will fall, but they can be replaced with robots (which is happening anyway, including in the West). Tax revenue from income tax falls, but until a hundred years ago there was no income tax at all – new sources of government revenue are always there, given a little imagination (bank fee transactions can be taxed, for example). This article is rather typical in assuming a problem rather than demonstrating it.
Thank you for reminiding me of the need to explain what the problem is about the shrinking population. It may be difficult to grasp it if you don’t live in a country whose population is now 120 million, but expected to shirink to 80 million in 50 years time, and further down to 40 million in 100 years time. To explain the problem in full, it may need another article or even a conference. But let me mention two of the important problems of shrinking population in brief.
One of them is the shrinking of the domestic market. The domestic market would not be large enough to support the variety of goods and services that currently is available. Also it may not be large enough to support a large number of firms (inter alia non-tradables sector). That is what you would see today in the rural areas in Japan; Tokyos in the near future.
The other problem is the unsustainability of Japanese public finance and social security system. You need to grow at a moderaste rate in nominal terms to create a favorable environment for consolidating the situation (at least stabilizing the debt to GDP ratio). Under a situation where downward pressure on potential growth rate is brought about by the shrinking population at a magnitude of 0.5 percent annually, it is not an easy task.
I have lived outside of Japan for over 20 years as a Japanese citizen and all I can say multicultural society will not work for Japan. So it is better for Japan to increase the birthrate. For it to be achieved, there should be more childcare facilities as well as create a work environment and society for women to have more children. I often see news about western Europe’s many muslim migrants who do not assimilate into the western society and more crimes committed by migrant population than native population. So Japan may be desperate to increase the population but it is better not to accept too many migrants and Japan already has enough migrants so just keep it below 2 per cent of the total population. I myself live in a multicultural society but it is not working here because foreign born population of this western country where I have been living is way too big. If Japan wants to avoid too many crimes and wants to keep it as a safe country it is better not to accept too many migrants and try to make a society where women can work and have kids at the same time.
I agree that raising the birth rate should be given the highest priority. In fact, the Government thinks so as well: The Government published a report arguing that total fertility rate should be raised from 1.43 in 2013 to 2.07 by 2030 so that the total population will stabilize at around 100 million in 50 years time.
The problem is that the measures needed to raise the birth is still to be determined, and those which have is taking time to implement (e.g. the waiting list for child care ficilities has still not been eliminated). While we are taking time in raising the birth rate, the total population is shirinking, and is shrinking very fast.
Consequently, we need to think about accepting more immiglants as a measure to complement, not to substitute, having higher birth rate. I do not deny that there are social problems that accompany having larger immigations. That, however, should be addressed by, among other things, enhancing educational programs and strengthening anti-crime measures. It should not be addressed by limiting immigration which potentially has positive impact on the society and the economy. This is a policy assignment problem that we should think carefully about.
I think Japan needs to look at immigration as a short term or temp solution, I think it needs to be a subject for public debate, for me, I am currently undergoing training in a Polytech in New Zealand and have considered immigrating to Japan as one of my ambitious goals is to work in the Japanese IT Industry and if I like Japan , I’ll just retire there
Japan’s declining population is actually a much needed and I’m sure welcomed change. The stated reasons for being concerned about a declining population (including in answer to other commentators) are not supported by any evidence – indeed, the opposite is true.
What is perhaps most remarkable in articles such as these is the lack of any consideration that resources are finite and humans having large footprints, have managed to wipe out over 50per cent of known species in the last 40 years. And this despite the resources that have been ploughed into trying to protect other species – the simple reality is that there are so many humans now, that we leave little for other species or even each other given billions are starving.
Economies, depend on resources and healthy economies, on favourable population-to-resource ratios.
In the face of rapidly diminishing resources, it is bizarre to be concerned when the tiny island yet grossly overpopulated nation of Japan has a declining population. Japan should consider itself lucky – it may have a fighting chance.
What we also know is that population growth beyond economies of scale (which Japan has by far exceeded), actually leads to the devaluation of the people the economy supposedly serves and in doing so, delivers less disposable income floating around the economy and subsequently, a struggling economy. Hence why all economic recovery has been preceded historically by slower or even negative population growth – in the simplest terms, it increases the worth of the individual.
It may even be worth the author taking a moment to actually consider why people in Japan are preferring smaller families and that it was earlier prontalist policies that drove Japan to the overcrowded morass that it is now and the reluctance to have children? China followed a similar policy which lead to the once child policy but even now that the policy has been relaxed, the Chinese are wiser and not taking up the option of a 2nd child in droves – their great famine in which 30-40 million died would certainly provide an incentive to take overpopulation seriously.
And the solutions considered? Mass immigration or raising birth rates. Seriously?? Is there simply so little sanity within the human race that these ideas are put forth as rational or even possible responses? Perhaps the author should talk to some demographers to find out the numbers that would be needed to offset the population decline.
In addition, the author needs to also realise that property values falling is not a bad thing for an economy because it means people are spending less on rents and mortgages and as such, there is actually more incentive to make better more innovating products and have in essence a better economy.
The human race is largely screwed. We’ve grossly overpopulated the planet and only with a falling population do per-capita cuts in consumption reduce our overall impact.
And even now, we have people writing that have so little understanding or interest in the state of the planet they inhabit let alone a basic concept of our finite reality.
With a falling population, Japan is actually leading the way to a more progressive and sustainable world. Other countries should be following Japan’s example. Japan is also progressive in this respect by being the 2nd top contributor in foreign-aid which includes promoting family planning.
A better, more peaceful, sustainable world is one with fewer humans whether we like it or not. As it stands, only about 11 countries are free from conflict now over resources. Based on continued denial or lack of comprehension on population, it appears we’re going to continue to use extreme violence to solve our overpopulation problems rather than sensible family planning policies.
Of course some will say, but what about the green revolution – we are now feeding billions more, or Malthus was wrong etc. Sorry dodos, but we are not feeding billions sustainably, nowhere near it. Since the so-called green revolution, we’ve gone from around 400 million in abject poverty to over 800 million. Food and water resources are drying up and the sunlight stored in fossil fuels is a once off energy repository for us.
Any thinking that continues to insist we can take care of more humans is in denial of the evidence and indeed, missing the point.
Think of it this way, would you prefer to inherit a more or less overcrowded world than you inherited?
Thank you for your comment. Thank you also for providing me with an opportunity to express my views on the question that you have raised.
I will respond to your comments from three aspects.
First, if you are in Japan and concerned about the well being of the people that currentlay live in Japan and of the generations that follow, I think it is more than reasonable to consider ways to overcome the deline in the rural areas, deterioration of the growth prospects and the unsustainability of the social sustainability. It would be hard for me and for those who thinks about policies to let things be as it is.
Second, immigration is a way to allow people in an overpopulated and impoverished areas to enjoy higher income. It should be considered to be one of the means to alleviate problems of high population growth.
Third, from a long-term point of view, it is true that human beings had gone through a repetition of population growth followed by population slowdown due to diminishing returns. During the period, population saw no growth on average and neither did per capita income. Human being were caught in a “Malthusian trap”. However, it is also true that, after the industrial revolution, per capita income started to grow and so did population. What made the transition possible was “innovation”. Innovation made it possible to overcome the diminishing returns of a given technology. Sustaining innovation is by no means easy, but that is something we have to continuously pursue to achive.
My very simple question is, why would you want to increase the population in a country that is already overpopulated? You have to manage the population, the economy, the whole society to live within the means of the natural environment, or carrying capacity of the country.
I think Japan is doing a good job already, better to stay on the trajectory rather than to change course.