Demography Rebalances Asia

Demography Rebalances Asia

Timothy Taylor 31/12/2018 5
Demographic shifts are about more than economics. Think about an array of social institutions: schools, parks, libraries, building and housing codes, public transportation, health care, the size of the volunteer sector. All of these, and many others, take on differing importance and shape when an economy has a relatively high number of children, or working-age people, or retirees. Deloitte has published the third edition of Voice of Asia (September 2017), with a focus on "Demographics fuelling Asia’s shifting balance of power." Here are some thoughts from the report.

This figure shows the working-age share of the total population for Japan, China, and India. In Japan, this percentage rose and peaked during its period of rapid economic growth in the 1960s and 1970s. For China, the percentage rose in recent decades, and is now forecast to drop sharply. For India, the percentage is still rising.



The report notes: "India will account for more than half of the increase in Asia’s workforce in the coming decade. The consequences for businesses are vast: An Indian summer is coming, and it will last half a century. And while India’s rise might have the largest impact on the world, it isn’t the only economy set to surge, with Indonesia and the Philippines on track to enjoy similar trends. Both of these nations have a relatively young population, mainly because they still have birth rates in excess of the global average. This makes demographics a tailwind rather than a headwind for their growth across at least the next 20 years."

Or to put it another way, the median age in Japan is 47 years; in China, 37 years; in India, 27 years. These are dramatic differences. In the table, you can see where other Asian countries stand in terms of being older or younger.


The potential implications of these patterns are substantial. For example, "China will get old before it

fully succeeds in getting rich." The political implications of that fact, given that the Chinese Communist Party has essentially been using economic growth as a justification for maintaining its hold on power, could be severe. If China, which by some measures is now the largest economy in the world, follows Japan's pattern of aging and economic stagnation, it will have a powerful effect on the growth rate of the global economy. 

Of course, there is no guarantee that the growth of India's working-age population will power economic growth. But there's a powerful opportunity for it to do so, if India can continue with economic and social reforms (for some discussion, see here and here).

The global face of aging is going to shift dramatically in the next few decades. The report notes: "There are already more over-65s in Asia than there are people in the United States. The number of over-65s in Asia will exceed one billion just after the middle of this century. In fact, by 2042—in just a quarter of a century—there will be more over-65s in Asia than the populations of the Eurozone and North America combined. Yes, you read that right: More people aged over 65 in Asia than the total combined populations of North America and the Eurozone, and in just 25 years from now."

Here's a figure to emphasize the point. Europe and North America are aging. What's happening in Asia in the next few decades will be such a powerful demographic that it seems to require a stronger word than "aging." 



Two underlying patterns that will affect these workforce trends are migration and female labor-force participation. Countries like China or Japan, with low labor force growth, will face some economic pressures to allow greater in-migration. Japan, with relatively low female labor-force participation, will face pressures for that figure to rise. India has extremely low female labor-force participation, but if India wishes to take full advantage of its working-age demographic boom, this will need to change. Here are some female labor-force participation rates across Asia. 


It is of course not literally true that "demography is destiny," as an old saying has it, but it can matter a great deal for the growth rate and sectoral patterns of economies. With China's working-age share of its population topping out and India's on the rise, we are at the hinge of a demographic transition that will reshape relative economic (and probably also political) power across Asia. 

A version of this article first appeared on Conversable Economist 

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  • Matthew Spencer

    Nothing is more difficult for national policymakers than turning around dismal demography.

  • Adam Hilton

    The Balkanization of China’s demography threatens serious consequences for both economic growth and regional stability.

  • Ryan Askin

    Asia is witnessing the aging of competing provinces at different speeds and trend rates........

  • Lewis Bishop

    China’s application of its one-child policy was never uniform.

  • Isaac Valchar

    Quite a heavy burden !!

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Timothy Taylor

Global Economy Expert

Timothy Taylor is an American economist. He is managing editor of the Journal of Economic Perspectives, a quarterly academic journal produced at Macalester College and published by the American Economic Association. Taylor received his Bachelor of Arts degree from Haverford College and a master's degree in economics from Stanford University. At Stanford, he was winner of the award for excellent teaching in a large class (more than 30 students) given by the Associated Students of Stanford University. At Minnesota, he was named a Distinguished Lecturer by the Department of Economics and voted Teacher of the Year by the master's degree students at the Hubert H. Humphrey Institute of Public Affairs. Taylor has been a guest speaker for groups of teachers of high school economics, visiting diplomats from eastern Europe, talk-radio shows, and community groups. From 1989 to 1997, Professor Taylor wrote an economics opinion column for the San Jose Mercury-News. He has published multiple lectures on economics through The Teaching Company. With Rudolph Penner and Isabel Sawhill, he is co-author of Updating America's Social Contract (2000), whose first chapter provided an early radical centrist perspective, "An Agenda for the Radical Middle". Taylor is also the author of The Instant Economist: Everything You Need to Know About How the Economy Works, published by the Penguin Group in 2012. The fourth edition of Taylor's Principles of Economics textbook was published by Textbook Media in 2017.

   

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