A Demographic Sketch of a Reunified Korea in 2030

by Elizabeth Hervey Stephen

[Population Aging to 2030, Day 4, Essay 2 of 2]

Over the past 60 years North and South Korea have been following distinct paths in terms of political, economic, and social structures; putting the two countries back together is challenging in lieu of what could be a daunting reality.  There are so many unknown circumstances that will affect the reunification, including the potential for violence, conflict, and humanitarian suffering that are impossible to comprehend.

For the purposes of this blog, let us assume a soft reunification that is reached through diplomatic means in 2015.  What would the Korean peninsula look like demographically by 2030?  This is a projection simulation and is not meant to be proscriptive, but rather is an illustration of what might be, using three sets of fertility assumptions.

In order to project the 2030 population it is critical to first look at recent data, which are abundant and of excellent quality in South Korea (also referred to here as the Republic of Korea or ROK).  North Korea (also referred to here as the Democratic Republic of Korea or DPRK), in conjunction with the United Nations, conducted a census most recently in 2008, and prior to that in 1993.

While North Korea became a slightly older country in the 15 years between 1993 and 2008, South Korea became a much older country as a result of sustained low fertility levels.  In 1993, 5.4 percent of the population was aged 65 and over in North Korea and 5.5 percent in South Korea; by 2008 the elderly comprised 8.7 percent in North Korea and 10.3 percent in South Korea. The median age of North Korea in 2008 was 30.1 for males and 33.7 years for females as compared to South Korea: 35.3 years (males) and 37.4 years (females).

Unfortunately historical data on fertility in North Korea are very limited because no published data were available prior to the 1993 census.  The Total Fertility Rate (TFR), or the births per woman, is used here as the measure of fertility.  Eberstadt reconstructed data from the North Korean Central Statistics Bureau to estimate and project the Total Fertility Rates from 1960 to 2010.  The historical trends in the TFR from 1970-2008 are shown in Figure 1 for both countries.  The DPRK trend is based on Eberstadt’s data through 1992 and utilizes US Census Bureau estimates and projections based on the 1993 census up through 2007, with the TFR for 2008 is based on the 2008 Census.  Both countries had high fertility years in the early 1970s.  The rapid fertility declines in the 1970s in the DPRK were followed by more gradual declines in the 1980s and 1990s, reaching replacement level fertility in 1996 and remaining fairly steady through to 2008.

Figure 1. Total Fertility Rates of the DPRK and ROK, 1970-2008


The TFR in the Republic of Korea was 4.53 in 1970, more than two children fewer than the DPRK, but by the mid-1970s the two countries had similar fertility levels. Since 1983 the Republic of Korea has experienced below replacement fertility, which was a 54 percent decline in fertility between 1970 and 1983.  In the next 20 years, the Total Fertility Rate dropped from 2.08 children per woman in 1983 to 1.19 in 2003, and has remained steady at 1.2 ever since 2003.

In order to determine population projections of a unified Korea from 2015 through 2030, data are utilized from Korean Statistical Information Service (for the current ROK) and projections for the DPRK prepared by the author.  The projections utilize a high, medium, and low simulation.  For the purpose of this simulation 2015 is used as the reunification year in order to see what reunification would look like 15 years hence. The first assumption is that there would be a fertility shock in (the former) North Korea that would lower fertility from the 2008 value of 2.01 to 1.58 children per woman for the 2015-19 projection period; this assumption is based on the fertility shock experienced by the DPRK during the famine of the 1990s and in East Germany following reunification. Values used for North Korean TFRs for the 2030-35 projection period are 1.70 (high); 1.45 (medium); 1.30 (low).

The total population of a unified Korea can be expected to range from 76 to 84 million people by 2030; North Korea currently has about 24.5 million people and South Korea 50 million.  Because the population who will be aged 65 and over in 2030 are all already born, there is little variation in the expected elderly population (about 21 percent of the total population) for the three scenarios as seen in Figure 2.  The 0-14 age group varies from 12 percent (low), 14 (medium) and 15 (high) and thus the 15-64 age group mirrors those changes with 67 percent (low), 65 percent (medium), and 64 percent (high).

Figure 2. Population projections for a unified Korea: 2030 (in thousands).

This analysis has shown that a reunification will not change the age restructuring that is already underway in South Korea, and to a slighter extent in North Korea.  When the projection series are continued out until 2050 approximately a third of the population will be elderly, with a decline in the number of children aged 0-14 to as low as 9 percent.  Although fertility is normally the primary driver in determining the age distribution of a population, mortality and migration may play a major role in reunified Korea. Mortality will depend in large part on the ability to bring medical facilities and professionals in the North up to the standards of the South, and to confirm an equitable food distribution system.  Migration will be a critical determinant in overall population and distribution within a reunified country.  If there are massive population shifts within the country, there is a potential for high unemployment rates around city centers where migrants would be most likely to congregate.

Reunification will not happen in a vacuum; powerful nation states with interests in the Korean Peninsula will not be standing by idly.  These same actors will have direct and indirect effects on population dynamics.

Elizabeth Hervey Stephen is an Associate Professor of Demography at Georgetown University. 

The Strategic Implications of Japan’s Demographic Decline

by Toshi Yoshihara

[Population Aging to 2030, Day 4, Essay 1 of 2]

Unprecedented demographic decline promises to lead Tokyo into uncharted economic, social, environmental, and diplomatic territory in the coming decades.  Owing to low fertility, high life expectancy, and trifling immigration, Japan will be significantly older and smaller in 2030 than it is today.  The population will decline from 128 million in 2010 to 116 million twenty years hence, averaging a loss of over 660,000 Japanese citizens per year.  During this same period, Japan’s working age population (ages 15-64) will shrink by 17 percent from 81 million to 67 million.  The median age of the population will rise from 45 to 50 while about a third of the population will be over 65 years old by 2030.

The diminishing work force will almost certainly limit the prospects for robust economic growth.  A graying society, meanwhile, will impose potentially overwhelming financial burdens on the polity to care for the elderly.  Beyond the socioeconomic challenges, depopulation and aging will also have worrisome implications for Japan’s national security.  As the population ages and shrinks at accelerating rates, Tokyo will be increasingly hard pressed to fulfill basic military obligations ranging from homeland defense to the discharge of international responsibilities.  Indeed, a sharp mismatch between its strategic posture and resources looms.

For the past decade, successive administrations have deployed ground, air, and naval forces far beyond Japan’s own neighborhood to conduct “international peace cooperation operations,” a vague umbrella term that includes humanitarian assistance, disaster relief, and reconstruction activities.  At the same time, pressures closer to home, including China’s rise and North Korea’s unpredictability, continue to consume policy attention.  Yet, Japan’s proliferating security challenges are already bumping up against a manpower ceiling, potentially stifling its quiet ambitions.

The figures are sobering.  The male population eligible to join Japan’s Self-Defense Forces (aged 18 to 26) peaked at nine million in 1994.  In just over fifteen years, this age group recorded an astounding 30 percent drop, plummeting to around six million.  By 2030, eligible males will fall to less than five million.  By contrast, the United States will post a 16 percent increase for the same cohort between 2010 and 2030.

Manpower constraints are already having a telling effect on force structure.  Faced with new missions even as personnel levels remained fixed, Japan’s maritime service was compelled to siphon servicemen from frontline and support units to fulfill additional duties.  Consequently, crews on some ships became shorthanded by as much as 30 percent.  This in turn forced the transfer of sailors from warships decommissioned well ahead of schedule to replenish undermanned vessels in the fleet.

Recent defense policy documents have held out hope that technology will substitute for people, potentially easing personnel shortages.  But most military operations—ranging from high-end conventional wars to post-conflict reconstruction—soak up manpower. Gee-whiz technologies, such as unmanned systems, only go so far.  War fighters in the field and support crews in the rear must still do much of the heavy lifting.

Japan’s response to the March 2011 tsunami disaster was the starkest reminder of this reality: Tokyo called up over 100,000 military personnel—about 40 percent of the active duty force—for relief operations, the largest deployment of troops in Japan’s postwar history.  In short, boots on the ground still count for much in peacetime as in war.

Unless Japan is prepared for a major military buildup, which appears politically doubtful and fiscally unsustainable, the country’s shrinking pool of manpower will weigh heavily on Japanese decision makers.  Tokyo’s bold claim that it will actively promote international peace and security while bolstering its independent capacity to defend itself strains credulity.

Several implications are discernible from the projected population trends.  First, Japan cannot do it all.  Japanese leaders must set clearer priorities—in effect establishing a hierarchy among traditional war-fighting tasks and the nontraditional tasks Tokyo anticipates. They must also consider the strategic, operational, and force-structure trade-offs of any priorities they choose to set.  Do, say, humanitarian missions outweigh sea-lane defense?  Perhaps a starker choice awaits Tokyo.  Japan may have to favor manpower-intensive conventional operations that match China’s growing military prowess in East Asia while foregoing international peacekeeping missions.

Second, Japan will likely rely even more on the United States for its security.  In the worst case scenario, overdependence on Washington could tempt Japanese policymakers to hand off ever more defense responsibilities to the U.S. military, hollowing out the Self-Defense Forces.  The corollary is that the depopulating nation may become less willing and able than it has been for the past six decades to help the United States defend the liberal international order. The larger question for Washington, then, is how it can adjust to an emerging security paradigm in which a key strategic anchor in Asia recedes from the world scene.

Finally, an analytical caveat is warranted.  Strategic axioms that have long guided Japanese security strategy, such as the informal cap on the defense budget, could undergo radical change in times of severe duress.  A violent or peaceful unification of the Korean Peninsula that produced a state hostile to Tokyo or a Sino-Japanese naval war over disputed maritime claims could trigger a fundamental reassessment and reorientation.  While population decline will clearly limit the range of Japanese policy options, there is nothing fated about Japan’s self-imposed restraints.  The role of contingency in international politics will thus remain an ever active ingredient to Japanese strategic choices.

Nevertheless, the population crisis for Japan is undoubtedly approaching, and this crunch will be accompanied by unprecedented pressures and demands. The anguishing decisions to mitigate the strategic consequences of aging are already evident today and will only become more difficult to make as the strategy-resource mismatches worsen in the coming years. It thus behooves policymakers to devote their attention to this looming problem sooner rather than later and, more importantly, before it becomes unmanageable.

Toshi Yoshihara is John A. van Beuren Chair of Asia-Pacific Studies at the U.S. Naval War College.

The Beginning of a History: Advanced Aging and the Liberalness of Democracies

by Richard Cincotta

[Population Aging to 2030, Day 3, Essay 3 of 3]

How powerful is advanced population aging?—powerful enough to place at risk the liberal content of Europe’s democratic regimes? In this essay I’ll argue that it could; that today’s confident clusters of European and East Asian liberal democracies (states rated as “FREE” in Freedom House’s annual survey) will, as they age beyond the median age of 45 years, incur greater risks of losing elements of the political rights and civil liberties that generations of their citizens and political leaders worked hard to attain.

How sure am I of the impending risks? In fact, I’m not sure. There is yet no historic record of states experiencing advanced aging. Despite the well-documented evidence of increasing democratic stability as country-level populations age (Weber 2012, Cincotta & Doces 2012, Cincotta 2008/09 & 2008), current theory cannot hope to forecast political behaviors for countries well beyond the median age of 45—beyond the current demographic frontier and outside the reach of available data.

While no country has yet evolved a deeply post-mature age structure (Fig 1.), by 2030 some will. According to demographers at the US Census Bureau’s International Program Center and the UN Population Division, by 2030, between 19 and 29 states will possess this novel quality. Three or four will be East Asian states. Nearly all the rest will be located in Europe. According to current US Census Bureau and UN Population Division projections, by 2030 both Germany’s and Japan’s populations will range near the median age of 50 years.

Figure 1. Population age structures indicative of four phases of the age-structural transition.

So far, aging (an increase in the median age) has been “good news” for liberal democracy. Since 1972­—when Freedom House (FH) produced its first state-by-state assessments of political rights and civil liberties—the global demographic pattern of liberal democracy has been extraordinarily consistent. Among states with a youthful population (median age 25.0 years or less) the annual proportion of states assessed as FREE (Freedom House status score from 2.5 to 1.0) has been relatively low—around 18 percent, on average, over the past four decades (Figure 2). Around 60 percent of all intermediate countries (median age 25.1 to 35.0 years) and about 88 percent of mature countries (35.1 to 45.0 years) have received the “Free” assessment.

Figure 2. The mean annual proportion of states in each of three age-structural categories that were assessed as FREE in Freedom House’s annual survey, 1972 to 2011.

More importantly, youthful liberal democracies have shown themselves to be inherently unstable. Over the past four decades, youthful states have ascended to FH’s annual list of FREE regimes on 52 occasions. On 51 occasions, youthful states dropped off of that list, retreating to a less democratic or even autocratic regime in the wake of a coup d’état, after elected or unelected leaders have assumed extraordinary executive powers, or when political violence has led to restrictions on individual freedoms. As a group, states that have ascended to the FREE category as either intermediate or mature populations have experienced much greater success at maintaining this rating (Figure 3). In fact, liberal democracies over the median age of 30 years seem the most stable. From this politico-demographic vantage point, Huntington’s third wave of democracy—an empirical wave of successive democratization that began in southern Europe in the early 1970s—owes its accumulation of liberal regimes neither to popular revolution nor to gradual regime-motivated reforms, but to the democratic stability attained as population age structures mature.

But that was then—before any liberal democracies ventured beyond the median age of 45. Only the passage of time will allow an evaluation of the durability of post-mature liberal democracies. For now, political demographers are left to search among the behaviors of aging states for premature indications of democratic setbacks.

Figure 3. The absolute number of states, by age-structural type, that newly attained and lost the status of FREE in Freedom House’s annual survey, from 1973 to 2011.

Do such indications exist? Perhaps. Nearly all of the rapidly aging states along Europe’s southern flank have fallen into some degree of fiscal distress—and the shakiest among them appears to be Greece, now at a median age of 42 years. Under the pressure of civil disorder, Greece’s government has backed away from fiscal reforms and tough austerity measures. Although still assessed as FREE in FH’s most recent annual survey (Jan. 2012), Freedom House downgraded Greece’s political rights score (from 1.5 to 2.0). In Eastern Europe, declines from high levels of liberal democracy have been more obvious and widespread. Ukraine (median age of 40 years) dropped from FH’s FREE rating to PARTLY FREE in 2009. While remaining with FH’s FREE status, both Latvia’s (median age of 41 years) and Hungary’s (40 years) scores have trended toward declining political and individual freedoms over the past two years.

Nonetheless, few political scientists are ready to investigate the possibility that some of this drift away from liberal democracy is related to advanced population aging. Perhaps they should entertain the thought. In the case of Greece, one can easily imagine the rising burden of public pensions and old-age healthcare contributing to public sector deficits and the loss of fiscal flexibility, particularly during a global recession. For Ukraine, Latvia and Hungary, most experts will argue—with justification—that the strength of democratic institutions and liberal traditions in these post-communist states is still weak. That said, some have had difficulty explaining why these particular eastern European states, where the transition from state communism to liberal democracy went relatively smoothly (and enthusiastically), and not others, have experienced significant erosion of press freedoms and weakening of executive-judicial separation.

Could these lapses in “liberalness” be symptoms of the degree of fragility that, in the future, analysts will expect from post-mature liberal democracies? Just as age-structurally youthful democracies bear high statistical risks of a retreat to a less democratic regime type in the wake of intra-state conflict and electoral violence, perhaps post-mature liberal states will find themselves vulnerable to more subtle expansions of executive power and decay of judicial checks.

Significantly, no recent overt signs of illiberalness have emerged from within the world’s oldest aging states: Germany, Japan and Italy. Apparently, these have (so far) taken their rapid pace of aging in stride. Despite its fiscal problems, Italy (the next in line to enter the post-mature category) was recently upgraded by Freedom House—from 1.5 to the highest average rating, 1.0. Still, the history of advanced aging is just beginning, and depths of their future aging challenges have yet to be plumbed. By 2030, roughly 28 percent of all Germans and 26 percent of Italians are expected to be aged 65 and older. For Japan, that figure is should reach 30 percent by the same year.

How well-anchored are liberal political and institutional traditions in the societies of Europe’s and East Asia’s aging liberal democracies? Will these traditions permit prompt and adequate policy responses to aging’s oncoming challenges? So far, we cannot know. After all, we stand at the beginning of a new history.

Richard Cincotta is Demographer-in-residence at the Stimson Center in Washington, DC, and a consultant on political demography for the Woodrow Wilson Center’s Environmental Change and Security Program. From 2006-09, he served as a long-range analyst for the National Intelligence Council.

 

References cited

Cincotta, R. P. (2008). “How Democracies Grow Up: Countries with Too Many Young People May Not Have a Fighting Chance for Freedom.Foreign Policy (165): 80-82.

Cincotta, R. P. (2008/09). “Half a Chance: Youth Bulges and Transitions to Liberal Democracy.Environmental Change and Security Report(13): 10-18.

Cincotta, R. P. and J. Doces (2012). The Age-structural Maturity Thesis: the Youth Bulge’s Influence on the Advent and Stability of Liberal Democracy. Political Demography: How Population Changes Are Reshaping Security and National Politics. J. A. Goldstone, E. Kaufmann and M. D. Toft. Basingstoke and New York, Palgrave-MacMillan, pp.98-116.

Weber, H. (2012). “Demography and Democracy: the Impact of Youth Cohort Size on Democratic Stability in the World.” Democratization, iFirst (1-23).

Population Aging and the Future of NATO

by Mark Haas

[Population Aging to 2030, Day 3, Essay 2 of 3]

According to a number of analysts, including the last two U.S. Secretaries of Defense, America’s relations with its partners within the NATO alliance are nearing crisis.  In June 2011, Secretary of Defense Robert Gates warned that NATO faces “a dim if not dismal future” and “irrelevance” as America’s allies remain “unwilling to devote the necessary resources or make the necessary changes to be serious and capable partners in their own defense.”  The following October, Gates’ successor, Leon Panetta, stated that “we are at a critical moment for our defense partnership,” and he implored America’s allies to increase their defense spending to ensure that NATO remained “relevant.”

While irritation by American leaders toward their European allies over free riding and related calls for Europeans to increase their share of military spending are not new, European NATO countries’ defense expenditures—both relative to the United States and as a percentage of GDP—are at historically low proportions.  For most of the Cold War, America accounted for 50 percent of total NATO military spending.  That figure is 75 percent today.  According to official NATO figures, only three of NATO’s 28 members—Britain (2.6), Greece (2.1), and the U.S. (4.8)—currently spend the agreed two percent of GDP on defense.

Low levels of defense spending are already having major effects on military effectiveness.  In the 2011 campaign to topple Muammar Qaddafi’s government in Libya, the Europeans lacked the weaponry, as well as the reconnaissance, intelligence, heavy airlift, and refueling equipment necessary to defeat a minor power.  As Gates put it, “the mightiest military alliance in history is only eleven weeks into an operation against a poorly armed regime in a sparsely populated country—yet many allies are beginning to run short of munitions, requiring the U.S., once more, to make up the difference.”

Although a number of factors contribute to contracting military spending across Europe, demography—particularly widespread, massive populating aging—is among the most important of these causes.  Due to a combination of increasing life expectancies and very low fertility rates (which are the average number of babies per woman in a country), NATO states are growing older.  The number of retirees throughout Europe is rapidly expanding, while the number of working-age people is quickly shrinking.  In 2030, Europe will have over 50 million fewer working-age people (ages 15 to 59) than it does today, and over 53 million more people over sixty.

These demographic realities will have major effects on states’ ability to project power abroad.  Three outcomes are particularly important.  First, population aging is likely to slow a state’s overall economic growth.  The primary problem is that as societies age, more people exit the workforce than enter it.  A state’s gross domestic product (GDP), in its most basic formulation, is a product of the number of workers and overall productivity.  As a country’s workforce shrinks as more people enter retirement than enter the labor market, so, too, will its GDP unless productivity levels rise sufficiently to compensate for this loss.  Although the last is likely to be the case in most states, workforce contraction will still act as a substantial brake on economic growth for the decades to come.  One study calculates that with shrinking workforces and a 1.5 percent growth in overall economic productivity per year (which is slightly higher than the European average the last fifteen years of 1.3 percent), GDP growth in the next thirty years will average 1.25 percent in France and 1 percent in Germany.  In such an economic climate, significant increases in military expenditures are unlikely.

Compounding this tendency is a second and even more important economic effect of social aging:  the strain that this phenomenon places on state resources.  European governments have made commitments to pay for substantial portions of the retirement and health care costs of their elderly citizens.  By 2030, public benefits to the elderly are projected to rise for many European countries to over twenty percent of GDP, and they will continue to grow after this date.  In order to pay for the exploding costs of aging populations, significant spending cuts in other areas—including for militaries—will be necessary

A third and final way in which population aging is likely to impact states’ defense budgets is by pushing militaries to spend more on personnel and less on other areas, including weapons development and procurement.  As working-age populations shrink, competition among businesses and organizations—including the military—to hire workers will grow.  Consequently, if states’ militaries want to be able to attract and keep the best employees in vital areas of operation, they are going to have to pay more to do so.  Europe’s NATO members are already devoting significantly more resources to military personnel than weapons purchases and research (well over twice as much in most countries).  Without major investments in weapons and military equipment, NATO’s European powers will be hard pressed to project force beyond their borders for a sustained period of time, as we witnessed in the attack on Libya in 2011.

The preceding effects of population aging on European states’ military budgets might spell the doom of NATO from the American point of view.  Because the United States is aging to a lesser extent and less quickly than its European allies, America’s public obligations to the elderly as a percent of GDP will be lower and its working-age population will continue to expand (by over 10 million by 2030).  The U.S., as a result, will be able to continue to devote significantly more resources to the military—both absolutely and as a percentage of GDP—than will European states because the forces pushing for the crowding out of military spending for increased care for the elderly will be weaker.  Gates in 2011 referred to NATO as a “two-tiered alliance,” with the U.S. dedicating roughly 5 percent of GDP to military spending and most of its European allies less than 2 percent, and he described the resentment this bifurcation created in America.  As the aging crisis in Europe intensifies in coming decades, this spending gap is likely to increase, as will the resentment.  America’s aging European allies between now and 2030 are very unlikely to either increase their share of the burden in defense of common interests or become more effective in projecting force abroad.  As NATO’s commitment to deal with shared threats becomes increasingly hollow, the likelihood of U.S. leaders looking for more reliable—likely “younger”—allies will grow.

Mark L. Haas is Associate Professor of Political Science at Duquesne University.

Population Aging and the Welfare State in Europe

by Ronald Lee and Andrew Mason

[Population Aging to 2030, Day 3, Essay 1 of 3]

Many countries in Europe and elsewhere are aging rapidly.  In part this is occurring because of the enormous strides that have been made in reducing death rates at older ages and in part because of low fertility.  Fertility is particularly low in Southern and Eastern Europe where the total fertility rate, the number of births per woman over her reproductive span, is typically around 1.5 or less.  This means that the next generation will be twenty five percent smaller than the current generation unless fertility rebounds.  This is a recipe for both population decline and an old population, one with more elderly relative to those in the working ages.

Population projections are a powerful tool to look into the future.  We can be confident that in Europe the number 65 and older will rise substantially relative to those in the working ages however defined.  Demography can tell us only so much, however.  The economic effects of changes in population age structure in Europe depend on what people do at each age.  This is changing over time and varies considerably across countries depending on health status, values, public policies, standards of living and a variety of other factors.

Figure 1. Consumption (C) and labor income (Yl) by age in Germany, Spain, and Sweden. Source: National Transfer Accounts

The importance of this can be seen by comparing Sweden, Germany, and Spain.  In Spain and Germany labor income declines very rapidly at older ages as compared with Sweden.  Swedes in their late 50s and early 60s are producing much more than Germans and Spaniards at those ages.   Sweden has a different problem, however, which is very high consumption at older ages, largely due to publicly funded health care and long term care.  One could say that Swedes in their 80s are a much greater economic burden, while Germans and Spaniards in their 60s create more strain.

The support ratio, the ratio of effective producers per effective consumer, provides a way of measuring population aging that allows for differences in consumption and labor income patterns.  The support ratio counts people at each age according to what they produce and what they consume as according to the curves in Figure 1.

Figure 2. Percentage decline in the support ratio, 2010-2030.

By this measure, population aging will have the greatest impact in Germany where the support ratio will decline by over 20 percent between 2010 and 2030.  Germany has two factors working against it – low fertility and low labor income among older adults.  The decline in the support ratio in Sweden, the United Kingdom and the United States is projected to be at about half the rate as in Germany.  Spain is roughly in the middle between these two extremes.

The difference between Spain and Germany is primarily a matter of timing.  Germany is aging earlier than Spain because its fertility declined earlier.  Both countries will experience a decline in their support ratio by about 25% between 2010 and 2050, about twice as great a decline as in the other three countries.

A final element in thinking about the welfare state and population aging is that countries differ greatly in the mechanisms on which they rely to meet the needs of the elderly.  In general, countries in Europe rely more on the public sector than in the US or many other countries.

This is clear in Figure 3 which shows the relative contribution of net public transfers, net familial transfers, and asset-based flows to funding the gap between consumption and labor income for those 65 and older.

There is great variation in Europe with Sweden (SE) relying entirely on net public transfer to fund the old-age support system.  In Germany (DE), about two-thirds of the support comes from public transfers while in Spain (ES) it is closer to one-half.  Population aging will place particular strains on the public old age support system in Sweden.

http://ntaccounts.org/web/nta/show/Population%20aging%20and%20the%20generational%20economy%3a%20A%20global%20perspective

Figure 3. Old-age support system for selected countries. Public transfers, family transfers, and asset-based flows as a share of the lifecycle deficit for those 65 and older. Source: Ronald Lee and Andrew Mason, lead authors and editors, 2011. Population aging and the generational economy: A global perspective. Cheltenham, UK: Edward Elgar.

Note that all the European countries that are shown in Figure 3 rely very heavily on the public sector to fund net consumption by the elderly. None relies on help from children, and generally they rely very little on assets, unlike the US. Figure 3 also shows that some but not all Asian countries do rely on families to provide old age support. In these countries population aging will also put pressure on adult children of the elderly.

Ronald Lee is Professor of Demography at the University of California, Berkeley, and Chair of the Center on the Economics and Demography of Aging (CEDA). Andrew Mason is Professor, Department of Economics at the University of Hawaii and Senior Fellow at the East West Center. They are Co-Directors of the National Transfer Accounts Project.

The Sun Has Yet to Set on China

by Jennifer Dabbs Sciubba

[Population Aging to 2030, Day 2, Essay 2 of 2]

Recent news of China’s economic slowdown has many American defense analysts predicting the end of the Chinese challenge to US dominance in world affairs. These predictions are based, in part, on China’s rapid population aging and signs of internal political fissures, both of which call into question China’s ability to continue to rise.

Such celebrations are premature. For many reasons, China’s economic power could match or even surpass US power in 20 years. Domestic political and demographic trends in China suggest continued growth, while domestic political and demographic trends in the US are concerning.

Seriously considering this contrarian view of demographic trends in China and the US is important because, as many political scientists have shown, the possibility of war becomes more probable when a rising power sees the decline of the dominant power and acts to surpass it. If Chinese leaders see the following picture of demographic and political trends, they will perceive that the US is in decline while their own power is rapidly rising. The outcome could result in a more aggressive Chinese posture.

The Dragon Still Has Fire

Just as it is possible to see the picture of a declining China that many defense analysts have clung to, we can also easily amass evidence to support the argument that China’s trajectory is positive. Long-term demographic trends in China suggest significant opportunities for growing the country’s economy, even if at a slower pace than the last decade.

First, despite the rapid pace of China’s population aging, the leadership has made few entitlement promises to the elderly and health coverage is sparse, meaning that the direct costs of aging are low.

Second, there will be fewer youth entering the labor market each year as the population ages. Even if China’s economic slowdown is inevitable and the supply of jobs is lower, the demand for them will be lower as well.

Third, the concern over so-called “excess males” in the Chinese population may be overblown. Differential growth in the male population could help China increase its national security through mobilizing surplus males for the state’s economic benefit. China has already recruited young men into large-scale public works projects both in its urban centers and its more remote regions. China has also been sending young men abroad to harvest natural resources on other continents for China’s benefit.

Finally, the Chinese political system allows leaders to focus on long-term planning, unlike the US system, which encourages policies that are politically expedient and take into account the never-ending election cycle.

Signs of US Decline

There are serious signs that the United States is actually the country in decline. Health care costs are sky high in the US, when compared with its peers, and particularly when compared with China. The role of interest groups in US policy making means that narrow interests—such as drug companies or organizations focused on protecting entitlements for seniors—have undue political influence. The US political system is sclerotic and polarized, and the country suffers from high national and personal debt.

Demographically, total life expectancy in urban China is only one year less than in the United States and healthy life expectancy (HALE)—the number of years a newborn can expect to live in “full health” (an adjustment of the life expectancy estimate)—is declining in the US. It is possible that Chinese could soon work longer than Americans.

Additionally, while it is true that replacement-level fertility in the US and continued immigration would prevent the country from aging as rapidly as Europe and Japan—and perhaps even China—the generational gap between old and young Americans bodes poorly for the future of US supremacy. Specifically, young Americans today face a host of serious challenges that will affect their long term economic prospects and, when aggregated, mean that the US in 2030 may be worse off than today.

First, the US has the highest rate of child poverty in the developed world.

Second, trends in education, particularly among minorities, are particularly worrisome considering that minorities will make up an increasing portion of the adult population over the next 20 years. Minorities accounted for 92 percent of the nation’s population growth in the decade that ended in 2010, but blacks and Latinos lag far behind whites in earning a college degree. For those that do manage to get an education, student debt is astronomical, while many recent graduates struggle to find employment. How will this generation take care of retired baby boomers when their own needs are so great?

Third, home wealth has been an important safety net for elderly Americans for generations. The current generation of young Americans differs from previous generations because many can’t afford their own homes. Their needs in old age will be greater than today’s elderly and their demands on state higher. As a result, it is entirely possible that today’s youth will be the first generation in a long time that will not be better off than their parents.

Bucking the Trends

Despite the preceding evidence, there is still reason to give credence to discussions about China’s demise and continued US supremacy. Chinese leaders are right to be worried about the divide in living standards between rural and urban inhabitants. There is also much uncertainty as to what today’s Chinese youth will want as adults. How might they be shaped by their greater educational opportunities, and in what ways will this translate to political demands?  Will they push China to adopt a more democratic political system where power is less centralized and interest groups gain influence?

The United States of America still has several aces as well. American creativity and ingenuity have historically played an important role in economic growth. The sheer size of the US economy and the country’s ability to recover from crises may also be important.

There are ample opportunities for the US to cement its place as the world’s most powerful state by turning more attention to domestic matters, specifically strengthening education—particularly for minorities—and balancing entitlement commitments with other national priorities, like defense. But rest assured, the Chinese will be working on their own domestic issues, as well.

Jennifer Dabbs Sciubba is Assistant Professor in the Department of International Relations at Rhodes College, Memphis, Tennessee, USA. 

China and the Challenge of Premature Aging

by Richard Jackson

[Population Aging to 2030, Day 2, Essay 1 of 2]

China stands on the threshold of a stunning demographic transformation with profound implications for its future prosperity and stability.  For the past three decades, China’s unusually favorable demographics, with a rapidly declining dependency burden and a rapidly rising share of the population in the working years, have helped to propel its spectacular rise in living standards.  Beginning around 2015, however, the demographic climate will change abruptly.  The elderly share of the population, now just 8 percent, will double to 16 percent by 2030, and then triple to 24 percent by 2050—making China an older country than the United States.  Along the way, China’s working-age population will also peak and begin to decline.

The most direct and certain impact of the demographic transformation will be a growing old-age dependency burden.  As China ages, a rising share of total economic resources will have to be transferred from working-age adults to nonworking elders.  In 2010, there were 7.8 Chinese working-age adults available to support each elder.  That ratio is due to fall to 3.8 by 2030 and to 2.4 by 2050, which means that the average burden that must be shouldered by each worker will more than triple.  Much of this burden falls on families today.  But in a rapidly aging and developing China, a larger share is bound to show up in public budgets and higher tax rates.

Figure 1. Proportion of seniors in China and the US, 1950 to 2050.

Even as the old-age dependency burden grows, economic growth will slow.  Over the three decades of the reform era, China’s working-age population has expanded at 2.0 percent per year.  By the 2030s, it will be contracting by 0.7 percent per year.  Contrary to common wisdom, the scope for internal migration to offset slower growth in the working-age population is limited.  Until recently, China was able to boost GDP growth by shifting millions of underemployed workers each year from the non-market rural sector into full-time, low-skilled manufacturing jobs that are integrated with the global economy.  But as China’s industries move up the global value-added scale, a serious mismatch is emerging between the skills of its remaining surplus rural labor and the demands of the jobs being created in the growth sectors of its economy.

Slower economic growth in turn has the potential to trigger social and political crisis.  The incredible speed of China’s development is already straining the economic and social fabric. Urbanization is weakening the extended family while industrialization is degrading the environment.   Worker mobility and turnover are rising and the income gap between the rich and poor is widening.  Social services are spotty and civic authority is strained.  Such stresses, bearable in a youthful society in which incomes are rising rapidly, may become less tolerable in an aging society in which economic growth is slowing.

Figure 2. Average Annual Change in Chinese Working-Age Population Size, by Decade

The rapid aging of China’s population could act as a multiplier on the stresses of rapid modernization.  While today’s developed countries became affluent societies before they became aging societies, China’s age wave will be arriving in a society that is still in the midst of development—and that has not yet had time to put in place the social protections of a modern welfare state.  Less than one-third of China’s workforce is now earning a formal retirement benefit of any kind, public or private.  Despite China’s lofty national savings rate, only a small minority of workers are accumulating sufficient financial assets to support themselves in retirement. The majority may have to fall back on the most traditional form of old-age insurance: children.  But many will have only one child, and among these many will not have a son, who in Confucian culture bears the responsibility of caring for aged parents.  Imagine, in China’s cities, tens of millions of today’s midlife adults maturing by the year 2020 or 2030 into tens of millions of indigent elders who lack pensions, lack access to health care, and lack adequate family support. Or imagine, in China’s countryside, entire towns of demographically stranded elders. Meanwhile, China’s yawning gender imbalance and the enormous bachelor surplus to which it is giving rise will threaten to become another source of social unrest.

China has been “peacefully rising” while its demographics have leaned with economic growth.  But by the 2020s, when China’s age wave arrives in full force, demographic trends may be weakening the twin pillars of the current regime’s legitimacy—rapidly rising living standards and social stability.  It is hard to gauge how great the risk of social and political crisis is, but the Chinese government, with its new mantra of “balanced development” and its increasing alarm about the dangers of the rural-urban income gap, the shredded social safety net, and environmental degradation, appears to be taking it seriously.  Throughout China’s long history, periods of strong central authority and empire building have alternated with periods of social and political chaos.  China’s premature aging may usher in the next turn of the cycle—or, as the regime attempts to avert this outcome, a new authoritarian clampdown.

As it happens, the 2020s is also the decade in which China is expected to displace the United States as the world’s largest economy.  “Power transition” theories of global conflict suggest that this moment could be fraught with danger.  The fact that it coincides with the arrival of China’s potentially destabilizing age wave may make it even more perilous.

Richard Jackson is a senior fellow at the Washington-based Center for Strategic and International Studies, where he directs the Global Aging Initiative.