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Tag Archives: Japan

empty crib

By Lilli DeBode, guest blogger, senior at Kent Place School

Japan is facing a serious problem that many countries wish they had: a decreasing population. The population declined by 212,000 people in 2012, and the current fertility rate, (which is at 1.39 per woman) is continuing to drop each year. It has been predicted that by 2060, people aged 65 and older will make up 40% of the entire population. The reason? Japan’s younger generations are not really keen on the idea of relationships— specifically, intimate ones.

It may have started with the influx of “herbivore men” into the population. Herbivore men are men typically 20-30 years old who are not interested in having girlfriends or fitting into the masculine stereotypes. The sudden disappearance of the manly man, the kind of men women typically prefer in Japan, is a large component as to why women have stopped wanting to have children.  In a CNN article, a journalist interviewed a woman in Japan who said, “We like manly men. We are not interested in those boys — at all.” Another woman pronounced, “Herbivorous boys are fragile, do not have a stocky body — skinny.”

Another factor of the dropping population is the new economic freedom of women. Especially since a majority of men have lost their utility for their female partners, women are free to pursue other aspects of their lives. Having success in the workplace has taken precedence over settling down and having children. For many women, the world of dating and relationships has been virtually eliminated, leaving more time to climb the corporate ladder and thus, earn more. With their ample amount of money, Japanese women can now be completely self-sufficient, a luxury many women cannot afford in the rest of the world. Japanese women can pay for their nice apartments, all of their necessities, and still have money left over for shopping. With all of their economic success, these women find the thought of giving up their jobs and economic freedom to marry a man undesirable. Consequently, Japan’s population is about 16.5 million, but is dropping by one every 100 seconds.

What does this mean overall? In many first world countries, women still find themselves stuck at home raising kids when they want to be out in the workforce, pursuing their passions. On the complete opposite side of the spectrum, women are only working, and thus putting their population at risk of extinction.

So does this all mean that women should be forced into economic dependence on men just so that the human population doesn’t plummet into oblivion?

Of course not.

We are not going to struggle eternally with this tug-of-war between women’s economic freedom and healthy population growth. Some countries such as Iceland and Sweden have already found happy mediums; creating friendly environments for working mothers.

Nevertheless, the situation in Japan is certainly an interesting one to ponder since it is so incredibly unique. Will Japanese women sacrifice their cherished lifestyles to save their nation? According to research, we may find out in just several decades.

Sources and Resources: This article by CNN gives more in depth statistics about Japan’s decreasing population. ABC News’ article also provides additional information about the alarming birthrate. This op-ed in The Japan Times gives a very interesting look into the minds of the younger Japanese generation, and specifically, why they are so reluctant to get married and reproduce.

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Retailers slow down escalators for the elderly.

If people over 60 are your biggest spenders, then how do retailers respond? For starters, they slow down the escalators.

In Japan, with people over 60 doing 44 percent of the spending, and with those over 65, 23.3% of the entire population, merchants are becoming more elder-friendly. One major Tokyo-based supermarket has slowed its escalators to two-thirds their normal speed and made their shopping carts lighter. Seeing elders buy more diapers than young mothers, retailers also expect increasing demand for small size food packages and lunch delivery trucks. And several large chains have begun to offer discounts to people over 65 on the days that pension checks arrive.

Our bottom line: In countries like Japan with aging populations, the public and private sectors will have to adjust. As fiscal policy–spending, taxing, borrowing–increasingly targets the challenge of supporting more retirees, so too will businesses respond to a shifting demographic.

Sources and Resources: All of my facts about Japanese retailers are from this Bloomberg article while the population pyramids that follow are from the Economist’s “Graphic Detail” daily charts, a great source for fascinating information. In addition, here, in a series of 2010 Special Report articles, the Economist discusses the challenges Japan faces as its demography shifts. Finally, I thought it might be helpful to see the OECD (Organization for Economic Cooperation and development) “Elderly Population” graph to compare worldwide aging. You can see India at one end and Japan at the other.

Merchants are adjusting to an aging population in Japan.

Comparing Worldwide Aging

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In NYC and China, developers are building smaller apartments.

Soup and ready-made meals sales are soaring in Brazil. The reason is probably more singles. In the United Arab Emirates, if you are over 30 and female, there is a 60% chance you are unmarried. For Japan, 31.5% of all households are one-person.

Looking at Japan, we would see a contracting population but more households. The reason is a growing singles population that has a distinct economic impact. A person in an affluent nation who moves into a new apartment needs consumer durables (goods lasting 3 years or more) that include a refrigerator, furniture, a TV, maybe a washing machine. Single people tend to live in apartments rather than houses.

There are some universal causes of single living. People are getting married later, there is more divorce, we are living longer and marriage is no longer as attractive. In China and India, male baby selection results in too many bachelors looking for wives.

Where are we? While single person households are increasing around the world, we should be wary of generalizing. We can remember, though, that when more people live alone (please see graph below), it is a major demographic shift that affects demand for certain consumer goods and services.

This Economist article provides an excellent overview of the trend toward living alone around the world and was the source of my graph. It also led me to a Euromonitor report on Japan’s singles. For unmarried mothers specifically, this NY Times Magazine article was interesting because of its focus on 2 families and also provided a sound statistical base.

Econlife Living Solo: Part 1 is here.

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Obama/Biden and Romney/Ryan Issues

If you lined up everyone in the United States by age, the middle person would be close to 37.1 years old. In 1850, the median age was 19, for 2000 close to 35 and by 2050, we expect that middle individual will be 41. Accelerated by baby boomers who started passing 65 last year, our population is aging.

How old we are makes a huge difference. Past a certain age, most of us are less creative, less productive and less healthy. In baseball, the average age of most MVPs has been just before age 30 and almost no one after 35. The “best” work from Nobel Prize winners tends to peak in their late 30s. For more typical occupations like office workers, managers,  salesmen and saleswomen, one study indicated that productivity slips during people’s mid-40s.

What does it mean, then, for our society if the average age is climbing? One result is that 13% all government spending ( a huge proportion) is going to Medicare. Created in 1965, Medicare is medical insurance for everyone over 65, for disabled Americans and for end-stage kidney failure treatment. A healthcare network ranging from physicians to hospital bed rental companies is paid with Medicare money. On the other end, workers pay for most of Medicare with 2.9% of their paychecks (split 1.45/1.45 with employers). Additional funds come from income taxes, the Medicare trust fund and enrollee premiums.

According to the Trustees of the Medicare trust fund, the system is heading toward disaster. Depleted by 2024, the Medicare trust fund (created with surplus Medicare money when it existed) will no longer supplement any funding shortfall. Meanwhile, with so many baby boomers, there will be an insufficient revenue stream from Medicare payroll taxes. A second rarely mentioned consideration is that Medicare recipients have a very good deal. Estimated at a 3 to 1 ratio, the amount people receive from the system vastly exceeds what they paid during a lifetime.

Predictably, the Medicare challenge takes us to very different responses. President Obama refers to the projected cost savings of the Affordable Care Act (2010). By contrast, the Romney-Ryan team looks to vouchers that let program participants “spend” on care as they wish. Since both policies can easily be criticized, again it comes down to the approach you prefer…more or less government?

This post used facts and ideas from the Trustees Report on Medicare, a superb Teaching Company lecture (#13, Modern Economic Issues) from economist Robert Whaples and some of my median age data came from the CIA factbook. In addition, I do recommend playing with this interactive graph of median age changes from 1950 to 2050 and this excellent interactive graphic that displays medical spending categories and “who pays.”

And finally, one interesting fact– Demographers expect Japan to have a median age close to 55 in 2050. What would it mean to have half your population above 50?!

Election Economics Topics:

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Tax Revenue

Talking about taxes, economists like to quote Louis XIV’s finance minister: “The art of taxation consists of so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing.”

We have been hearing a lot of “hissing” about France’s 75% tax hike proposal. News articles tell us that business executives are planning to leave France because of high taxes. And yes, looking at other countries, France’s taxes are high. The new 75% rate would move France to the top of a list of high income tax countries that currently is led by Sweden, Japan, the UK and Germany.

A progressive tax, the 75% rate reflects an approach through which those who earn more pay a higher rate than people who earn less. For France and most other countries, the top rate is marginal. It just applies to a slice of income at the top of what an individual earns.

In France, currently, if you earn €100,000, then…

  • The first €5963 of your paycheck has a 0% income tax.
  • The next layer of earnings between €5964 – €11,896 is taxed at 5.5%.
  • Then, for the slice that is between €11,897 – €26,420, 14%.
  • And, for earnings between €26,421 and €70,830, 30%.
  • Finally, everything above €70,830 has a 41% rate.

 

Now, the new law would mean that on the amount you earn above €1,000,000, you give back 75% to the government.

This table from the NY Times provides a specific example:

A French Millionaire’s Taxes: With and Without the 75% Proposed Rate

A family with 2 children

Current Tax Law

(In euros)

Proposed Tax Law

(in euros)

Gross Salary

2,224,694

2,224,694

Income Taxes

-837,242

-1,137,383

Employee Social Taxes

-289,210

-289,210

Take-home pay after taxes

1,098,242

798,101

Source: NY Times

The income tax is not France’s only tax. People also pay social taxes that relate primarily to healthcare, retirement and unemployment and a value added tax (sort of the equivalent of a sales tax) of 19.6%.

France’s tax approach represents considerable income redistribution from those who earn it to those who spend it for medical reasons, as old age pensions and when they are unemployed. Looking at income redistribution (below), you can see that France is among those countries with more equality.

Equality Among Selected Countries For Disposable Income: Ranking From First (most equal) to Fifth (least equal)

#1

The Most Equal

#2

Almost as Equal

#3

Less Equal

#4

Even Less Equal

#5

The Least Equal

Denmark

Iceland

Norway

Sweden

Switzerland

Belgium

Czech Republic

Estonia

Finland

France

Italy

Slovak Republic

Slovenia

Austria

Germany

Greece

Hungary

Japan

Korea

Luxembourg

Poland

Spain

Australia

Canada

Ireland

Netherlands

New Zealand

UK

Chile

Israel

Mexico

Portugal

Turkey

USA

Source: OECD

France’s President Hollande says his tax proposal is all about social justice. Disagreeing, others believe that the income redistribution he proposes will further diminish France’s stagnant economic growth, worsen its fiscal slide, and thereby harm social welfare.

Your opinion?

And finally, nearby states seem to delight when their neighbors raise taxes. Belgian business people are smiling as French inquiries about home purchases and business investment increase. (Similarly, when Illinois raised taxes, Wisconsin said, “Come here!”)

News stories about the 75% proposal and the facts I cite are here and here. You might also want to look at this OECD paper on income inequality. My information on French tax  rates came from here.

Please note this post was slightly edited after it first appeared.

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