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Abe Hits On A Solution

Shinzo Abe speaking in front of a Japanese flag at the John F. Kennedy School of Government
Japanese Prime Minister Shinzo Abe speaking at Harvard in 2015. Photo courtesy the U.S. Embassy Tokyo.

Japanese Prime Minister Shinzo Abe, whose Abenomics has sputtered, has hit on what could be the best method to stimulate the Japanese economy: Find a way to get more working-age people to live in Japan.

Japan’s population is getting older even as it shrinks. Between 2010 and 2015, the nation’s population dropped by almost 1 million people, according to its census. Last year, nearly a third of all Japanese citizens were older than 65, and the birth rate hovered around 1.4 per woman. This is significantly below the level needed to sustain current population levels, let alone provide any growth.

The only way for an economy in that situation to grow internally is by increasing productivity at a rate faster than the working-age population decreases. That is a very difficult feat for an already advanced economy like Japan’s. This fact, in turn, helps explain why nobody in the past 20 years has been able to do it, despite a variety of attempts.

Who is going to support Japan’s aged and long-lived population and maintain its extensive and highly developed infrastructure as we move into the middle decades of the century? There are not nearly enough Japanese babies being born to expect them to manage it alone. While observers disagree about the factors behind Japan’s low birth rate, and thus what steps to take to reverse the trend, the fact remains that there will not be enough workers to support older generations a few decades from now if Japan remains on its current course.

But with the right changes in Japan’s law and its society, the answer could come from immigrant workers and the families they would start.

The Wall Street Journal recently reported that Abe wants to create an easier path to permanent residency for foreign workers, as stated in his annual list of policy changes. The prime minister suggested a variety of ideas to that end, including encouraging foreign students to settle permanently in Japan after graduation and attracting more foreign-born workers to staff Japanese nursing homes.

Among developed economies, Japan stands out as by far the hardest for foreigners to make a long-term home. The law strongly discourages it. The culture does not welcome strangers who come to stay, even as it is extremely polite and hospitable to temporary guests. The linguistic and cultural barriers in Japanese society make it much easier for people with skills to go elsewhere – or just stay home in developing countries like China.

All of these factors have had clear results. The Journal reported that foreign workers make up slightly less than 2 percent of the workforce in Japan, compared to 11 percent in the United Kingdom and 17 percent in the United States. (The figures, particularly for the U.S., are not directly comparable, however; the American statistic includes foreign-born U.S. citizens as well as permanent residents.) Japan established a program in 2012 to extend permanent residency to highly skilled professionals, but fewer than 5,000 workers took advantage of the program in its first three years.

Part of problem is that easier immigration policy has proven hard to implement without support from the general population, as Ito Peng, a professor of sociology and public policy at the University of Toronto, has argued. Without greater acceptance of immigration in Japan’s business community and society at large, changes in government policy alone probably will not be enough to encourage significant skilled immigration.

But if Japan can somehow make the necessary legal and cultural transitions, it could offer many enticements to workers looking for new opportunities. That same expensive infrastructure supports a comfortable way of life. Crime is essentially a nonfactor. Japanese law protects personal freedom as much as it does life and property, which is hardly the case in China and other potential sources of foreign labor.

This change will not be easy, especially for Abe. It will take a great deal of work to make Japan the easiest and fastest place to obtain what Americans, and now Japanese, call a green card. But if they can pull it off, it may be Japan’s best hope to avoid sliding into a doddering national old age.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book Looking Ahead: Life, Family, Wealth and Business After 55.

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