Another tsunami

In the coming decade, Japan will have to face the consequences of not just one, but two, tsunamis: the recent March 11 wave that devastated the Tohoku region of northeast Honshu and another that will batter its public finances and societal foundations for years to come. This other wave, dubbed the “silver tsunami,” may be more destructive than the first. It is not a natural phenomenon, but a demographic one: Japan is already the oldest country in the world, and it will continue to get older.

The silver tsunami is not your typical tsunami. For one, it is fairly easy to predict. By looking at the number of people living into their elderly years and factoring in the birthrate, demographers can paint a very accurate picture of a population’s future. Japan’s future looks particularly gray. Its population of roughly 130 million people is expected to shrink to 100 million by midcentury with the share of people over 65 years of age to rise from around 20 to over 30 percent of the total population.

It is not the only country facing this problem: South Korea, Russia, Italy, Spain, Germany and other parts of the developed world are also aging rapidly. The demographic tides are even turning in China where there is a great concern that the country will grow old before it can grow rich. Aging is a fundamental economic concern because it limits consumption, places an increased burden on the working population and is thought to stifle innovation. Unlike the typical tsunami that strikes only once and very quickly, the force of the silver tsunami will be distributed in many places and over many years.

In other ways, though, the silver tsunami is not all that different from natural tsunamis. For example, any preparation is likely to be inadequate because there are always unforeseen consequences. No one expected the massive earthquake and tsunami that recently devastated Japan to cause nuclear ruin, but that has been one of the most globally concerning results in a long slew of tragedies.

In order to avert demographic doom, the Japanese will have to exert the same steadfast resolve and unity of purpose that is required to rebuild the country after the recent earthquake and tsunami. Younger generations will have to work hard and continue to pursue world-class educations, and older generations will have to find new ways to contribute to society and continue to be altruistic with the country’s tax dollars. There is room for the government to step in and make sure these things happen.

Seeking to boost fertility, it has already extended tax credits to new parents and multi-children households. But this is hardly enough in a society where there are already more grandparents than future parents: a classic example of too little, too late. More emphasis should be put on dealing with the extant elderly population. Legislators should reduce the burden of healthcare and pension costs on the new generation of workers and require more elderly-friendly business practices. Getting people to be more productive in their later years would go a long way to moderating the negative effects of aging on economic growth.

There is always the danger in a democracy that the preferences of a particular interest group distort government priorities, and there is a risk that Japan’s elderly voter bloc—called by some the “gray peril”—will hijack the system. If, for example, the Japanese government reduced expenditures on education in exchange for more elderly assistance programs, innovation could be stifled. The economic climate of Japan may change, but an older society does not have to be a worse off one.

Aging is not something to fear or resent. If anything, Japan and the other graying countries should be proud that they have reached a stage of developmental maturity when the silver tsunami is a concern. Governments having to support more people for longer stretches of time is not a bad thing. If done effectively, balancing the current needs of the elderly with the need for investment for future growth, their citizens will be happier and better off.