The real danger to the Asian Miracle: Old Age

We know the United States is aging. Not a day goes by that we don’t hear about the Baby Boomers and their march towards retirement and what it means for the American economy. We also nervously await what will happen when all of them are collecting Social Security and Medicare payments through a system that probably won’t be able to support them all.

But the Americans don’t have it nearly as bad as what will happen in Asia- specifically in Japan and China.

Japan has some of the longest life spans in the world, with its average female lifespan over 80. But they have coupled that statistic with one of the lowest birth rates. Japanese women, frankly, aren’t having enough kids. Combined with a nearly 0% immigration rate, and Japan has both a labor and a financial shortage looming. From the Inter Press Service News Agency:

Statistics estimate that Japan’s aging population will demand an increase of 1.5 million home caregivers by 2010, a requirement that cannot be met by its current population growth of 1.3 births per woman.

What are they going to do then? They’ll have to let in some foreign workers. In 2002, Japan signed a Free Trade Act with Singapore. They are close to formalizing similar agreements with Thailand and the Philippines.

Concessions were made — mainly Japan accepting a limited number of Filipino and Thai workers in exchange for scrapping tariffs on Japan’s machinery exports to those countries.

Things will be much worse in China. Imagine 400 million people needing caregivers, assisted living situations, hospitals, medicines and, simply, care? From China Daily:

China faces the problem of aging population more than any other country, with the number of people above 60 expected to cross 400 million by 2045, political advisors warned over the weekend.

China is “already the only country with an aging population of more than 100 million, and their number is growing even faster”, said Zheng Silin, deputy director of the Subcommittee of Population, Resources and Environment of the Chinese People’s Political Consultative Conference (CPPCC) National Committee.

By the end of 2005, there were 144 million people aged 60 and above, or 11 per cent of the total population. This figure is likely to triple in less than 40 years, a process that could take hundreds of years in many other countries.

Retirees in the countryside get little to no financial help from the government. It’s not much better in the cities.

Last year, 46 million senior citizens received pensions worth more than 500 billion yuan ($62.7 billion).

The one child policy has been devastating to the normal familial caregiving situation, especially in the rural areas.

Last year, the country launched a nationwide pension and subsidy scheme for families with one child or two daughters in rural areas because they are not as “lucky” as those with sons to rely on when they get old.

Each of the 1.8 million rural couples received 1,200 yuan ($152) last year. Farmers welcomed the policy because the money often was a relief in areas where people have little income, except for the crops they grow.

Each child now has to take care of, possibly, four aging parents (two each of his own parents plus two each of his spouse’s.) In the United States, conversely, multiple children are usually available to care for aging parents.

The Chinese retirement age is set low right now, specifically to allow room for the next generation to find employment. From the New York Times:

Under the current two-tiered system, the retirement age for blue-collar urban workers is 50 for women and 55 for men, while for higher-grade professionals and government workers it is 55 for women and 60 for men. Obviously, raising the retirement ages would ease a substantial amount of pressure on the pension system. But there are no plans to do so, and raising the retirement ages would present another set of problems for the government, experts here say.

Last year, for example, 4.13 million young Chinese graduated from universities, and fully 30 percent of them are still unemployed. Unemployment is high among those who are not university graduates, as well. Prolonging employment for older workers would make this predicament worse, possibly with volatile consequences.

How do you avoid social unrest among the young, but keep the aging adult population still engaged and working as long as possible to avoid the burden on the state? The outcome is not promising. From the New York Times:

€œI think that most people have not realized how tough the situation will become,€ said Li Shaoguang, director of the Institute of Social Security at the School of Public Administration at Renmin University of China, in Beijing. €œWe€™re already aware that the percentage of old people in our population is large and is growing fast, so in order to pool more people in the system to pay for current retirees, the government is trying to include more migrant workers in the system. This could alleviate pressures now, but it also means that you will have larger pressures to face when the migrant workers grow old.€

By some estimates, at least half a billion mostly rural Chinese are not covered by the state€™s fragmentary social security system at all.

I can barely think that high. Half a billion don’t have any protection at all? That is more than the population of the United States.

China, already struggling in its interior, has a long way to go before their “miracle” is really a miracle for all its citizens.