Harry S. Dent | Monday, October 21, 2013 >>
Imagine you’re building a house…
Three builders show up to work today, as they have every day since you started the project.
One’s a roofer.
One’s a floor man.
One’s the dry-waller.
But tomorrow the roofer doesn’t show up for work. Nor will he be coming back. He’s retired. “Time for him to enjoy his hard-earned freedom,” he says.
Now you’ve got a problem.
So you hunt around for someone to continue his work. Only everywhere you ask you hear the same story. “Roofers are hard to come by. They’re retiring left, right and center.”
Your building has slowed to a crawl. And all the work the other two builders have done are now in jeopardy because there’s torrential rain forecast and you have a big hole where you roof should be.
Well, welcome to our future…
I’ve utterly oversimplified the problem, but I’ve made my point: The demographic cliffs countries around the world face between now and 2050 will have devastating effects on economies as workforces shrink and consumer spending slows.
Japan was the first major country to fall off the demographic cliff between late 1989 and late 1996. The result was more than two lost decades.
Unfortunately for Japan, it hasn’t hit the bottom of the cliff yet. It’s the fastest aging country in the world with a projected 37% decline in its workforce by 2050. That’s devastating. Just ask Detroit.
South Korea will see very similar trends, only on a 22-year lag from Japan. It’ll see its workforce growth fall 32% by 2050.
When I spoke in South Korea earlier this year, conference attendees asked me what these countries can do to stop the disaster. The only answer I had for them was to work longer. Instead of making people retiring at 65, make them work for 10 years longer.
Immigration is the best solution because immigrants are mostly at working age. But countries like Japan and South Korea have a language barrier to immigration, unlike English-speaking countries such as Singapore, the U.S., Canada, Great Britain, Australia and New Zealand.
Birth incentives aren’t a near term option because even if they could convince people to have more children, it would take 20 years for those new babies to enter the workforce and they would only cost more money until that point.
The bottom line is that Japan and South Korea face a tough demographic future.
And they’re not alone.
Here’s a table that shows which major countries will see their workforce decline in the coming decades. It also shows the declines these countries can expect in the prime earning-and-spending cohort, which consists of households between the ages of 35 and 54.
After Japan and South Korea, Russia faces the next steepest decline. It has a 31% smaller workforce to look forward to.
Germany’s next, as the fastest aging country in Europe. The country that is supposed to hold up the European Union is headed for a 38% drop in its prime spending-and-earning group. And its workforce is going to shrink by 29%.
The big surprise here is China. It’s the only emerging country that will see its workforce decline in the coming decades, and by a significant 11%. Its prime earning-and-spending households will decline even faster, by 17%.
The future is clear. Emerging countries, with the exception of China, are going to drive all the demographic growth.
People in developed countries will have to work much longer to slow the inevitable decline. And we’ll find ourselves fighting over the best immigrants and exports.
This is a game that all cannot win.
P.S. My book – The Demographic Cliff: How to Survive & Prosper During the Great Deflation of 2014 to 2019 – will cover all of these gory details AND provide you with what you can and should do with this knowledge. It’s on schedule for an early January release. Stay tuned for pre-order details.
|Follow me on Twitter @HarryDentjr|
Ahead of the Curve with Adam O’Dell
When it comes to a robust working-age population, no nation will match China or India over the coming decades.