There Are Bigger Things to Worry About Than a Shrinking and Ageing Population
Yesterday Japan announced that its population had shrunk by nearly a million in the last half decade (see the NY Times article here) . The Ministry of Internal Affairs and Communications revealed that the population declined to 127.1 million in 2015, a fall of 947,000 from the last census in 2010.
Japan’s population is set to decline further. Quoting the NY Times, “The latest United Nations estimates suggest that Japan’s population will fall to 83 million by the end of the century, down 40 percent from its peak.” It is a major goal of the Abe government to raise the fertility rate which currently stands at 1.4 but that looks unlikely to happen any time soon.
Singapore’s fertility rate has fallen even lower than Japan’s, to 1.25 children per female by 2014, even lower than Japan’s. Fertility rates below that necessary to maintain the population at current levels (slightly over 2 children per woman) are a feature of most of the East Asian economies including China’s whose fertility rate has fallen to 1.66 and whose working age population is starting to decline.
Why is this of concern? Japan’s economy has been stagnant for decades but with a shrinking workforce that can still translate into rising incomes and living standards. A shrinking population does not mean doomsday is around the corner. It can also mean less pressure on property prices and less crowded public transport. The main factor behind the relentless up escalator of HDB prices, apart from the fact that Singaporeans are given few investment alternatives for their CPF, has been the increase in land prices stemming from rapid population growth.
The main reason given for concern about declining populations is the fact that at some point the usual pyramid structure of the distribution will invert and there will be more retirees than workers. This could potentially mean higher taxes on the working age population or lower pensions and benefits for retirees.
The Government has used the spectre of a declining population to force Singaporeans to accept more foreign workers. In the Population White Paper which appeared in January 2013 (read my response,”The PAP’s White Paper on Population reveals that the government has all the benefits of surround sound and a wide screen picture at the cost of losing the plot“) the Government forecast that the ratio of the working-age population to those aged 65 and over would shrink from 5.9 in 2013 to 2.1 by 2030 if there was no further immigration and no improvement in the birth rate. This was the basis used to justify a rise in population to 6.9 million by 2030 though clearly that is just a brief stop for the Government’s planners on the journey to a 10 million population or higher.
But it is difficult to see why we should be so concerned about a decline in the working age population, which was arbitrarily defined some fifty years ago. Advances in medical science mean that people are living longer and the quality of those lives is improving all the time. In many advanced countries, particularly the US and the UK, people expect to and do work well past 65, into their 70s and even into their 80s. In Germany there is the example of a car manufacturer which made some minor adjustments to its production lines to accommodate older workers and successfully avoided a labour shortage.
At the same time all the experts tell us that labour is about to become largely redundant as a factor of production, as exponential improvements in machine intelligence and vision enable robots to take over many of the jobs done by humans. To take just one example, 10% of all jobs in the US involve driving and the workers doing these jobs could be replaced by driverless cars before 2030. At a recent American Association for the Advancement of Science meeting, Moshe Vardi, a Guggenheim and Rice University fellow, predicted that machines could put half the world’s population out of a job in the next 30 years.
In Singapore with no minimum wage and no real controls on immigration the risk is not of a shortage of workers but of a glut of workers from poor countries competing with machines for the few jobs that remain driving wages below subsistence level. There are plenty of historical examples to support this scenario. In the 1840s in the UK machines replaced cotton weavers. There were no safety nets. Their earnings declined to a small fraction of what they had been previously and most of them became either unemployed or workers in the new factories at much lower wages.
There is certainly no risk of the public finances becoming insolvent due to too few workers supporting too many retirees because provision for your old age is strictly your own affair with no help from the Government. CPF is entirely your own money. Even in medical care it is arguable whether there is indeed any subsidy from the Government. Medishield Life is running a comfortable and rising surplus.
As I have said before in many of the articles on my blog, the real reason for the PAP Government’s shock tactics about an ageing declining population and the need for immigrants may be because of losses due to poor investments by GIC (and Temasek) . The money may simply no longer be there. By stealth it may have been converted from a contributions-based system into one where retired Singaporeans are dependent on current workers to pay the CPF monies that should rightfully be theirs. That is the definition of a Ponzi scheme. If this is alarmist then why the Government’s ever-tightening restrictions postponing the date on which you can withdraw your CPF and its eagerness to expand the working age population.
A stagnant or declining population is much less of a threat to our living standards than the control the Government has over our savings and its refusal to provide transparency on the reserves. Yet lack of transparency does not seem to bother Singaporeans.