Could Migrants Rescue Aging Asia?
Image Credit: REUTERS/Issei Kato

Could Migrants Rescue Aging Asia?

 
 

Europe’s decision to accept millions of new migrants has highlighted the dilemma facing aging Asian nations as they struggle to address the economic burden of their growing elderly populations. Will Asian policymakers follow Europe’s lead?

In its latest economic forecasts, the European Commission put the case for immigration, predicting that the recent influx of migrants would boost the Eurozone’s gross domestic product by up to 0.3 percent by 2020, due to increased government spending and an improved labor market.

More than 710,000 migrants have entered the European Union (EU) this year, more than double the 282,000 received in 2014, and the Commission expects up to 3 million will arrive by 2017, including from Syria and other war-torn nations.

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“While in the short run, additional public expenditure increases GDP, an additional positive impact on growth is expected in the medium term from the increase in labor supply, provided the right policies are in place to facilitate access to the labor market,” the Commission said in its November 5 statement.

The Commission also stated that non-EU migrants “typically receive less in individual benefits than they contribute in taxes and social contributions…Yet, if the human potential is not used well, the inflow can also weaken fiscal sustainability.”

In his September “State of the Union” address, Commission President Jean-Claude Juncker said migration “must change from a problem to be tackled to a well-managed resource,” although increased immigration alone is not seen solving all the problems of aging.

Portugal and Spain have experienced shrinking populations in recent years, while Germany has the lowest birthrate in the world and could see its population decline from 81 million to 67 million by 2060. In contrast, immigration has helped prop up fertility rates in Britain, France and Scandinavia.

The impact of a graying society has been obvious in Portugal, where reportedly hundreds of schools and toy stores have shut, while petrol stations and motels have been converted into nursing homes. The effect has extended to the ballot box, with the increased voting power of the elderly reportedly leading to a “gerontocractic society” which protects elderly welfare benefits but slugs younger workers with a growing tax burden.

Asia’s Shrinking Powers

The parallels are obvious for Asia’s major economies, with China, Japan and South Korea all facing issues of an aging population, compared to the healthier demographics of rising powers such as India and Indonesia.

China is the world’s most populous nation with nearly 1.4 billion citizens, yet a declining working age population has sparked predictions that the communist giant could “get old before it gets rich.” In 2012, the nation’s working age population fell for the first time in decades, and with predictions that around one in every three Chinese will be over 60 by the middle of the century, policymakers have been forced to ease family planning restrictions.

Last month, the Chinese Communist Party announced it would officially scrap its one child per family policy, which was introduced in the 1970s to curb population growth. The effects have included a skewed sex ratio, with an estimated 35 million unmarried men by 2020 due to a cultural preference for male heirs.

China will “fully implement a policy of allowing each couple to have two children as an active response to an ageing population”, the party said in an official statement.

Yet while describing it as an “historic event, ”demographic analyst Wang Feng told Reuters it may have come too late.

“It won’t have any impact on the issue of the aging society, but it will change the character of many young families,” Wang was quoted saying.

After rules were eased in 2013, only 7 percent of those eligible in Beijing applied to have a second child, citing the growing cost of raising children. In Shanghai, the fertility rate has plunged to just 0.7 children per couple, less than half the national average and a third of the 2.1 replacement rate.

China’s population is expected to peak at 1.41 billion in 2025 but decline thereafter to 1.3 billion in 2050, although analyst Zhang Juwei believes the labor force will remain “roughly stable” until 2030, sustaining “at least 10 years of medium-speed growth.”

Meanwhile, Japanese Prime Minister Shinzo Abe has set a target of maintaining Japan’s population at above 100 million for the next 50 years through increased family support and welfare facilities, along with “Womenomics” policies to strengthen the female labor force.

Convening an advisory panel on the issue, Abe said the world’s third-largest economy could see its population of around 127 million shrink to 80 million in 50 years and 40 million in 100 years, based on the current birthrate.

“This is about one-third of the current population. It will directly lead to a decline of our national power,” Abe said.

However, despite calls for an “immigration revolution” by the former head of Tokyo’s Immigration Bureau, there has been little discussion of opening the door to new arrivals. In 2014, Japan received a record 5,000 refugee applications but accepted just 11 people.

“It is an issue of demography,” Abe told reporters after his September speech to the UN general assembly. “I would say that before accepting immigrants or refugees, we need to have more activities by women, elderly people and we must raise our birth rate. There are many things that we should do before accepting immigrants.”

Neighboring South Korea is also facing its own demographic crisis, given that it has one of the world’s lowest fertility rates. According to a 2014 study by the South Korean government, the nation could face “national extinction by 2750 if the birthrate were maintained at 1.19 children per woman – assuming no reunification with North Korea or significant inflow of migrants.”

South Korea’s population is expected to grow from 49 million to peak at 52.2 million in 2030 before shrinking, while its labor force is seen peaking as early as next year. According to the Korea Economic Research Institute, the nation may need as many as 15 million immigrants by 2060 to prevent the decline, compared to the 2014 total of 1.7 million immigrants.

In contrast, India, Indonesia, the Philippines, and Australia are all seen as benefiting from a “demographic dividend” due to a younger labor force. India is expected to overtake China as the world’s most populous nation by 2022, peaking at an estimated 1.7 billion citizens in 2060, and is already expected to overtake China as Asia’s fastest growing major economy this year.

Warning of the fiscal effects of shrinking and aging populations, International Monetary Fund researchers have urged nations to curb the growth of health care spending, raise retirement ages, encourage more migration, and raise labor force participation among both female and older workers. An increased emphasis on value-added taxes and reduced energy subsidies could also help contain the fiscal burden, according to an October 27 report.

The clock is already ticking on reforms that could stave off the worst effects of the demographic crunch. For now though, mass immigration still appears a step too far for aging Asia, even while other regions lay out the welcome mat to new arrivals.

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