Every minute in Japan, three people die and 1.3 people are born. That means the population declines by 1.7 people every 60 seconds, by 2,448 every day and by 893,520 every year.
The official statistics show Japan’s population declined by 908,574 to 120 million last year. On current trends, it will fall to 87 million by 2070 (a 27 per cent decrease).
A cycle of fewer babies and longer lives is skewing the population older and older with far-reaching consequences for the country in terms of dynamism, labour supply, pension coverage and healthcare provision.
Japan’s restrictive immigration regime, which favours short-term skilled workers, combined with a concentration of the population in Tokyo, compounds the problem.
Japan is the canary in the population coal mine, the Department of Finance’s chief economist John McCarthy said at the launch of the Government’s “Future Forty” report last week, a document that assesses how various population trends will impact the Irish economy over the next 40 years.
[ Ireland’s ageing population ‘standstill costs’ reach extra €3bn a yearOpens in new window ]
McCarthy noted that Japan’s population super cycle, while more advanced, is beginning to play out in Europe and will soon become Ireland’s demographic fate.
“Why does that matter from an economic and financial perspective? Lower population equals lower labour force, equals lower employment growth, equals lower tax revenue,” McCarthy said.
“On the other side of the equation, an older population means increased pension spending and healthcare spending,” he said.
In 1980, Japan spent 4 per cent of GDP (gross domestic product) on pensions and healthcare. It has now mushroomed to about 10 per cent.
Ireland’s demographic footprint is entirely unique in European terms because of a cataclysmic famine in the 1840s. It is the only European Union state to have a population that is smaller now than it was 180 years ago.
In the 1950s, when the rest of Europe was experiencing a postwar population boom, the Republic’s population continued to fall, leading to speculation that the island might soon become uninhabited.
The “Vanishing Irish” was serious theme.
Even in the early 1990s when our European peers were experiencing net inward migration, we still experiencing mass emigration, a reflection of limited economic opportunities.
The Republic’s population is not expected to eclipse 6.5 million, its pre-Famine total, until 2050, making the Famine a 200-year event in demographic terms.
The fertility rate, the average number of children a woman is expected to have in her lifetime – needs to be 2.1 for an indigenous population to replace itself.
Ireland’s was as high as four in the 1960s and 1970s but has now dropped to 1.5, meaning our population would decline without an influx from abroad.
[ State’s population could hit 7.6m in four decades, department estimatesOpens in new window ]
In its report, the department projects the Republic’s population will rise to somewhere between 6.77 million and 7.59 million by 2065 but because of waning fertility rates, most of the growth will come from net migration.
But the population will – on average – be older with an increasing ratio of retirees to workers, resulting in the same problems currently facing Japan.
The State’s old-age dependency ratio (the number of retirees to workers) is projected to increase from 23.1 per cent in 2022 to 55.2 per cent in 2065.
Put simply, instead of having three to four workers for every retiree, we’ll soon only have just one, creating a financial black hole at the heart of the exchequer.
Europe is in the grip of a populist backlash against mass inward migration, one that has created a deeply fractured politics. And yet it badly needs migrants to address the problem of ageing.
The Government here is hoping to build up excess corporation tax receipts in a new national wealth fund to help pay for the future costs of an ageing population.
The aim is to have a €100 billion war chest by the middle of the next decade. But this won’t be enough to pay for Ireland’s demographic time bomb and will need to be supplemented.
The Government has a narrow tax base and has essentially sat on its hands in the face of calls to broaden it. The billions flowing in from corporation tax has probably driven this inertia.
But, as the department’s report highlights, the State urgently needs to plan for an older population. Part of this means attracting high-skilled migrants and keeping them here.
It noted that 60 per cent of high-skilled immigrants tended to leave Ireland within five years, which had negative implications for productivity and for the Government’s fiscal position as they pay more tax.
Officials linked the trend to the quality-of-life issues including the current housing shortage, which is itself a product of the State’s failure to plan for a bigger population.
