Impact of Japan’s Declining Fertility

Daniel Tomm

 

 

The aging of the global population is progressing at an accelerated pace, largely due to developed nations dealing with the aging population. Japan’s declining fertility rate and increasing longevity have had an impact on many elements such as economic growth, savings rates and labor productivity all helping Japan grow during the demographic bonus. The consequences have had negative affects as fertility rate continues to decline and life expectancy continues to increase.  Declining fertility rates can be attributed to lower marriage rates and more women entering the workforce, on top of the rising cost of children in Japan. Its shrinking workforce population is attributed to the elder population maturing at a faster rate than the younger population coming of age to participate in the workforce.

 

Two basic strategies can be implemented to counter the declining workforce population. The first is to import labor from overseas. This is a very controversial topic in Japan, with much opposition and social unrest in regards to it. The second option is to use the labor that is currently not being put to use. This includes women and seniors; by increasing retirement age the workforce will not shrink as rapidly and also the elder population will not solely rely on social security. This will also decrease the dependency ratio, alleviating some of the burden otherwise felt on the workforce population. Maintaining workforce population is important if Japan wants to keep its economy steady. As Japan’s retired population continues to grow, they must begin to reach out to developing countries for use of human capital. Japan can do this through imports from the developing economies or through outsourcing of human capital. Japan will also need to refrain from direct competition in areas, where developing economies have acquired dominance. Such areas are labor-intensive activities seen in many manufacturing processes, because Japan’s high-cost and shrinking labor supply will need to be directed in more experienced areas. To sustain their economic security, they will have to rely on the outsourcing of jobs and the use of labor domestically such as women and retirees.

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