The issue of an ageing population has been well covered in Australia but its affect on major Asian nations like China and Japan, given the size of their economies, will be even significant. So how will shifting population growth change Asia's economy by 2050?
" China may not be the cheap place of manufacture in the 2020s it has been in the last 20 or 30 years."
Bernard Salt, KPMG partner and adjunct professor at Curtin University Business School
We can glean insights from looking at growth in individual country populations in the key 15 to 64 demographic, the traditional working age. These are people who buy consumer goods, take out loans, reproduce. And they pay tax. This is the gut, the engine, the piston that drives the world's economy.
Let's begin by looking at Australia.
The rate of immigration in the first 100 years of the chart is around about 100,000 per year. The projected growth if Australia maintains that level is represented in the light orange bars. As you can see it drops off a cliff around now.
The reason for this is in 2011 more baby boomers began leaving the workforce in Australia than those from the next generation entering it.
Australia's response has been to increase migration, the “Big Australia" represented by the dark orange bars. This is a policy setting coming out of Canberra which offers workforce surety to the economy (as long as it's maintained).
It's a different story in China.
Wow. The chart shows strong growth until China's one-child policy implemented in 1975 comes back to bite them from, well gosh, it's around about now isn't it? And of course when did they change that policy? The worst part is the full impact of the policy is probably still about 10 or 15 years away.
In previous decades the workforce in China delivered an absolute mountain of labour and with so many people competing for a job the value of that labour was haggled down.
The upcoming shift in the power balance will be huge and the cost of labour in China will increase as a consequence. China may not be the cheap place of manufacture in the 2020s it has been in the last 20 or 30 years. Indeed, we are already seeing that.
Let's move on to Japan.
When was Japan at its peak? I would say the late 1980s or early 1990s. Then of course it all went south. The number of people of working age in Japan has been contracting since 1994.
When did Japan go into its malaise? Probably about 1994. And this isn't going to get better soon. Not in the first half of the 20th century and I'm not sure when after that.
In a strategic sense, how do you respond to this? You could start by encouraging every business in Japan not to focus on the domestic market but to have a global perspective. You need to foster a policy of worker inclusiveness, including more elderly workers. Could age be the new front in workplace diversity in the 2020s?
Finally, let's look at India.
There ain't no problems around access to labour in India...
Bernard Salt is a partner at KPMG and adjunct professor at Curtin University Business School.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
03 Feb 2016
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