The Future of Two Economic Powerhouses


Germany and China, the leading economies in their respective
continents - Europe and Asia – share eerily similar demographic and economic
outlooks.  A decline in future working
generations and a corresponding increase in the number of economically dependent
retirees are problems that are looking like they will cause future economic
problems for both of these economic powerhouses.

In China, the country is about to undergo a demographic
shift. The share of the population over the age of 60 is rising rapidly – that
share will rise from 12.5% in 2010 to 20% in 2020 according to the Economist
The absolute number of those over 60 will double by 2030 from the 178 million today.  At the other end of life, the number of
primary-school enrolments has dropped from 25.3 million in 1995 to 16.7 million
in 2008.  This means that China’s “demography
dividend” (the availability of many young workers) is beginning to
disappear.  In the future, couples with
only one child may find themselves with four parents to look after (the 4-2-1
phenomenon).  China may be forced to
rethink some of its policies in the not too distant future, including raising
the retirement age.  The official
retirement age has not changed since 1951 (60 for men, 50 for women, 55 for
civil servants) when the Chinese life expectancy was 46 compared to 73 today.  However, changing this many not be easy:

“[w]hen French workers went on strike last year over plans
to raise their retirement age, officials in China hastily denied reports that
they were planning to do anything of the sort.”

Another major change could be the lifting of the one child
policy. However, merely revoking the one-child policy may not be enough. Mr
Wang Feng of the Brooking Institute argues that couples choose to have small
families because children are expensive. Removing the state ban on larger
families may do little to change this attitude. And of course, there are many
other examples around the world where countries are managing to keep their
birth rates very low (below replacement levels) without state interference.

For example, in Germany, there is no equivalent one-child
policy.  However, its birth rate is among
the lowest in the EU at 1.36 children per woman.  This is leading to a rapidly ageing population
that is not fully reproducing itself. 
According to the Wall Street Journal

“[Germany’s] working-age population is shrinking by more
than 100,000 people a year, raising fears that eventually there will be too
many retirees and not enough working people to support them. Rural areas are
feeling the effects already as Germany's labor shortage draws younger residents
to bigger cities, where companies are fighting to attract skilled workers.”

The overall population of Germany has been predicted to
shrink by 20% to 64.7 million people in 2060 according to government
estimates.  The working-age population is
predicted to shrink even faster, dropping 27% to 36 million by 2060.

The problem may be clear, but what are the solutions, if any?
The Wall Street Journal mentions that the “tough immigration laws have helped
prevent Germany from importing enough skilled labor to compensate” for its
declining working population. This is perhaps one answer, but one that comes with
the problems of integration/assimilation and social cohesion (or lack thereof). 

What about German’s having more babies?  According to Barbara Riedmüller,
a political science professor at Freie Universtät in Berlin:

“the woman must
always choose between her family and her career – there’s no both”.

In a similar vein, the mayor of the town of Kühnhausen
(population 1,200 of whom a quarter are senior citizens), Ms Lindner, states that
“in this day and age, having a family and career is not so easy.”

This issue is one that many countries will have to face up
to – how can countries lift birth rates when a child is seen as the end of
career advancement? Is there anything countries can do to help? Flexible
working hours? Making crèches more readily available? Or are we going to have
to accept that motherhood and career development necessarily conflict? If so,
which one will win out?


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