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Japan is well-known for the oldest country in the world. Normal people would be surprised by the fact that they live longer, but economists like us see challenges and problems to solve. Japan is an island country which is also known as the land of the rising Sun. It is abundant in natural resources and marine lives in the sea. In addition, the country is ranked to have one of the oldest populations in the world despite its disastrous climate that usually decreases the amount of population. One of the reasons for the longevity of lifespan of Japanese is surely the nutritious dietary that they consume over their lives. Japan is the country that shocked the world in a sense that they can develop a healthy aging society through a good diet.
On June 2018, I received a chance to attend Meiji University for summer exchange program as it is the partner with Chulalongkorn University. I went to Tokyo, the Metropolitan city, and I have seen a lot of elders living in the city. My professor, at his age of seventy, was teaching on this topic. Therefore, I started to question why Japanese life expectancy is very long? I can hardly see people who live longer than 100 years in Thailand, but it is quite common in Japan that people can still walk when they are over a hundred years old. Marmot and Smith (1989) concluded in their study that the longevity of the Japanese is resulted by good public welfare system and good dietary. This article will scrutinize deeper into population pattern in the aspect of public welfare issue that is considered to be a chronic problem.
What could be some of the reasons behind Japan low GDP growth rate over the past decade? I looked into the data of Social Security rates of taxation and is shown as high as approximately 30% tax collected from income. The average social security tax rates a decade ago was 25%. So my question is why do Government collect the higher tax?. Social Security is the main sources of revenue for the government to spend on social welfare, public program, and many other kinds of benefits that will improve the public. Over the past ten years, Government Spending relative to GDP is as high as 40% which carried a lot of burden for current taxpayers. With the demographic pattern of Japan, which they are progressing to Ageing Society in the future, the outcome would be much worse than we anticipated. To put it in a simpler term, it means that the Birth Rates is low and Fatality Rate is high, so less newcomer will replace the labor force in the future, and the current labor will shifts to the aging society in the near future.
Due to intergenerational population pattern and taxation, the future generations have to suffer high tax rates due to population decline over 50 years and continuing to decline (Population ages 15-64 (% of total)). This tax incident could be interpreted that the current working labors are required to support the elder by paying a higher tax, which means the current and future generation would be worse off, whereas the retired citizen enjoys their leisure with supports from the government. From what I learned while I was in Japan, I learned that the cost of living in Japan is very high even if my Japanese friend also confirmed it too. Therefore, not only the domestic working people there have to pay for themselves and their families, but they also forced to help the older strangers which the total population of people who are 65 years and above is way more than the entire labor market.
At this rate, it is expected in the next 50 year that the Japanese population will gradually continue to shrink even further because of the negative growth rate. So this came with the chronic problem I mentioned above that people are less likely to have a child because the cost of living is increasing and thus the tax rates being collected is very high. Therefore, I believed that people are having a less disposable income to spend which imposed a financial constraint on the affordability of having a child. If the policymaker and government don’t break this chain, then the trend of negative birth rate would continue to progress and the country will burden more severely. Furthermore, Japan is running a huge amount of Public Debt that the tax revenue collecting from the citizen is not enough to serve every elder in the country, so the government is running a deficit current spending for a long time.
On the contrary of the bright side of the prosperity of Japan, another fatal consequence is more deaths resulted from suicide are rising rapidly because of overworking to earn more salary, which deals huge amount stress level. In order to resurrect the fallen Samurai to become the great Shogun Emperor again, some crucial movements have to be done. There are several strategies to counter the aging society such as increasing population by financial incentives for having more children, reforming the pension funds ratio, or even extend the retirement age. Since the cost of living in Japan is high, to raise one child to become an adult, it requires a tremendous unit of financing. Therefore, if the government practice this policy of financial support as an in-kind transfer payment of educational support, it would be beneficial and have a direct impact to the goal of increasing population as well as developing a certain skill labor that will replace the current labor market. On the other hand, the government can just extend the retirement age in order to expand the ceiling to 70 years to increase the labor force participation, but the drawback of this policy reformation would be that elders could be less competitive due to physical deterioration.
To sum up, Japan is doing great to keep their population, but this is a time-bomb for the future generation and a challenge to the country to manage its human capital efficiently. The loop has to break at some point to shape the country to a new path of the better future, otherwise, this path would lead to the dark despair of the country and will drive the economy to collapse real soon.
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