Japan’s Aging Population And Long-Term Growth

Today’s FOMC minutes release illustrates labor shortages are global in the advanced economies (AE).

Contacts in several Districts reported difficulties finding qualified workers, and, in some cases, firms were coping with labor shortages by increasing salaries and benefits in order to attract or retain workers. Other business contacts facing labor shortages were responding by increasing training for less-qualified workers or by investing in automation.  – FOMC minutes

The structural issues, such as aging populations, are finally catching up and overwhelming cyclical factors, which have traditionally been “fixed” by monetary policy, and to some extent, fiscal policy.

Time for some economic overhaul and structural reform.  Good luck with that given our economically ignorant pols.


Nowhere is it more an issue than in Japan.   ZIRP (zero interest rate policy) and QE won’t create more babies, at least, we don’t believe so!

Here’s a simplified version of the Solow-Swan  long-term growth  model (LTGM),

GDP growth = Labor growth + productivity growth

Japan is making a big bet on robots to increase productivity in order to offset the perilous effects of a rapidly aging population and shrinking labor force.


May13_Japan's Aging PopMoney quote from video:  

“We will disappear.”

That’s serious business, folks.  Existential crises everywhere!


This entry was posted in Economics, Japan, Uncategorized and tagged , . Bookmark the permalink.

2 Responses to Japan’s Aging Population And Long-Term Growth

  1. michael moran says:

    Are there labor shortages in Southern Italy or Spain? US, unlike Japan, does not have declining population. A bit of bait and switch. Maybe less regulation = productivity increase.

  2. macromon says:

    Thanks for comments, MM. Italy probably has worst indigenous demographics but allows immigration, which is meeting severe pushback. Here is some food for thought. No coincidence our shortage of skilled construction workers is linked to immigration crackdown.

    The Italian fertility rate (of indigenous and naturalized female citizens), i.e. the number of children per woman, is 1.34, which is far below the replacement level of 2.1. Much the same is true of the whole European continent. In this respect Europe resembles Japan. The difference is that while the Japanese authorities expect the country’s population to decline by a stunning 60% by the end of this century, the European governments predict a population growth. Why is that so? The answer is simple. The European leaders have opted for replenishing their nations with migrants whereas their Japanese counterparts have not. The Tokyo authorities refuse to replace their people with aliens, knowing full well that in the long run such a step would mean that Japan will only continue to exist in name.


    The rising costs of building, primarily labor shortages in the construction sector, and restrictive zoning laws are constraining building and the supply of new homes.

    The lack of enough skilled workers and a narrow talent pipeline has added extra hurdles, time, and costs to many current projects, according to builders, hindering the current boom time in the industry.

    “The number one issue is the cost and availability of labor,” says Randy Strauss, owner of Strauss Construction in Amherst, Ohio, roughly 40 miles east of Cleveland.

    The issue is a nationwide one. Contractors in areas such as Houston, which were battered by Hurricane Harvey last year, have struggled to staff up, and the National Association of Home Builders recently found that 82 percent of its members believe the cost and availability of labor are their biggest issues. In 2011, only 13 percent named labor costs as their biggest worry. — Curbed

    The immigration crackdown has played a significant role in the labor shortage in the construction sector.


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