EXPANDING WORLD...SHRINKING COUNTRIES

The recent news that Japan's population count continues to fall brought to mind the similar seemingly irreversible trend that other countries are facing, several of them in the developed first world. We see an scenario like Japan's playing for those countries over the next years. But also, more revealingly, many of these countries with falling population are in what was formerly the Soviet Union or its satellites, such as Cuba. Russia itself, still the 9th most populous country in the world, has seen its population drop dramatically since the fall of the Iron Curtain. However, as the chart nearby shows, Russia's population appears to have stabilized this decade- perhaps Putin's expansionary policies of slowly swallowing the Ukraine, after taking Crimea last year, may be working after all. But aside from this lull in the long term trend, Russia's population is projected to fall a further 2% by the year 2015.

Shrinking Countries
In total, we find that 23 countries, out of the 158 with population above one million inhabitants, will see their total population fall over the next 10 years. The majority of them, shown in light blue bars, were part of the former Soviet Union. In fact, only 4 out of these 23 are outside the former Soviet Union area. Most notably is Germany, the so-called economic engine for Europe, whose population 10 years from now will be about 2% lower. And poor, sad Greece, on top of its intractable economic debt problems, will see its population fall by another 1% over the next decade. This trend only compounds the likelihood that it will never be able to pay its debts.

Now a declining population is not necessarily a bad thing; in fact, if you are an ardent follower of Paul Ehrlich you'd think it's a good thing. But ignoring Ehrlich and his always-wrong predictions about the end of the world caused by high population growth and limited resources, the fact is that the declining population in these countries is accompanied with fewer working-age people who are expected to sustain its elderly folks. And this is where a crisis could originate.

Thus we find that many of these countries also face an "elderly population" problem, that is an increasing elderly population with all the potential burdens that this implies. Living longer is a blessing if one is a healthy individual; it could be curse if infirmities take over the body. Although there is no hard and fast rule at which point an elderly population becomes an onerous burden, we can assume that a critical point may be reached when this group exceeds one fifth, that is 20%, of the population. Given the relatively high unemployment rates in these countries, except Germany of course, combined with declining labor participation rates, we find fewer working people forced to sustain the elderly population (through taxes or debt to maintain the levels of support services required.

The chart to the right displays the percentage of the population that is 65 years and older for the 23 countries whose population is falling. Nearly half of them are above 20%, and several others are hovering just under this percentage.
The chart shows that leading all is Japan that by the year 2025 will have over 30% of its population aged 65 years and over. Germany is not far behind with fully one quarter of its population in this age group; Greece posts a percentage slightly over 23%.




Rest of the World
There are several other countries, twelve in fact, that also have a relatively high percentage of their population among the elderly. These countries are shown in the chart to the right, above the 20% horizontal line. But these countries have the advantage that their population is growing- this means that the number of working people to help sustain the elderly is not necessarily falling.
many countries, xx in fact, that also have a relatively high percentage of their population among the elderly, but at least they will see their population grow over the next few years.
We see that the United States falls in this group, with population growth of 8.1% over the next decade or just under one percent per year. Canada will have about 23% of its population in the 65+ years group, but has modest growth of 7% over the next ten years. But Finland and Italy, have nearly a quarter of their population in the elderly group and show very low rates of population growth- 2.8% and 1.2% each, respectively.

Is all downhill from here?
But there is some sunshine behind these gray clouds. Many of the elderly are not necessarily quitting the workforce altogether, since they are continuing to work. This is particularly evident in the United States where we find that the labor participation rate among the "65 year and older" group has doubled over the last 10-15 years (see my post for evidence: http://econlives.blogspot.com/2015/03/fewer-workers-must-we-worry-when.html.) Moreover, as Anthony de Jasay has pointed out recently, more elderly people will be able to work in the future as the nature of work will be much less demanding physically, he says "fewer and fewer jobs in the modern world call for much physical exertion for which the old would be unfit."