Age & Reason
America Follows Japan's Lead on Aging at Our Peril
Tuesday, June 17, 2014 - 5:00am
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As the U.S. continues to grapple with immigration reform, especially in this midterm election cycle, there are lessons to be learned from one of the most xenophobic nations on the planet: Japan.

In the last few weeks the Japanese Prime Minister, Shinzo Abe, has made clear he’ll continue to oppose any real immigration for Japan. While Abe can be applauded for lowering corporate tax rates to attract global investment and revive the sleeping Japanese economy, he undercuts those efforts with retrograde immigration policies.  

Related: Why An Aging Japan Is a Top Economic Priority

The connection between economic growth and immigration is its impact on the labor supply, given Japan’s burden of an aging population. While immigration may not be the only issue that can help transform an “old” population into a driver of economic growth, it is self-defeating to refuse it as a part of the solution

In the post-World War II era, Japan was the place to look for models of economic growth. For decades, Japan seemed it could do no wrong as it exploded from a crippled, defeated, impoverished nation to a thriving industrial power. This rise is captured brilliantly by Ezra F. Vogel in his 1999 book, Japan As Number One: Lessons for America.  

But, oh, how things have changed. Japan’s refusal to let go of its 20th century social welfare model shows us what not to do.

Japan imported its welfare model from the industrial West (mainly European) as it rebuilt after WWII. Over half a century later, there emerges a fiscally unsustainable condition, which, not surprisingly, correlates with Japan’s two-decades of economic malaise. Japan is now a country where in roughly a decade roughly 40 percent of its people will be over age 60 and by 2020 they will sell more adult diapers than baby diapers. Yet they cling to welfare models built for populations much younger.

Here are three things Abe can do to reenergize Japan as a global economic powerhouse, all of which have relevance for us as well:

Be a leader on immigration: A number of countries in the region – the Philippines, for example – are far more youthful than Japan and can be a source of labor. Allowing younger, more fertile immigrants into the country will fill the gaps created by low birth rates. While there are a multitude of sectors experiencing labor shortage, the need for care is especially dramatic. The burgeoning home care industry could be helped immensely by immigration from Asian countries in the region. 

Use tax policy more creatively and aggressively: If Abe understands that tax policy can be an incentive for investment and a basis for growth, why not apply that thinking to enable greater innovation and job creation in and around the Silver Economy? Give tax breaks to companies that keep older workers healthier and more active. Use tax incentives to spur entrepreneurship among older Japanese who are healthy and want to keep working by creating their own businesses. The so-called “peril” of an aging population is only the case if we apply 20th century ideas and behavior to 21st century life.

Get rid of a fixed and silly retirement age: The age of 65 was chosen by Otto von Bismarck in the 19th century, after which the newly constituted German government would give social and health benefits to its citizens. It could afford to do that for the tiny number who lived past 65 in 1880. It was still a reasonable age – fiscally manageable – in the U.S. in the 1930s when FDR embedded it into Social Security and Depression-era benefits. But no more. Since Japan has the distinction of being the oldest population on the planet and therefore the first to experience all the challenges of this current century, it could lead the world on a re-thinking of the antiquated retirement age notion.

In this country, we need to de-link the aging of our societies with the economic and fiscal funk the Japanese have been experiencing. A more enlightened path to 21st century success will rethink intolerant notions of immigration. Until now, this has been one of America’s competitive advantages. Will we continue?

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Executive director of the Global Coalition on Aging, Michael W. Hodin, Ph.D., is also managing partner at High Lantern Group and a fellow at Oxford University's Harris Manchester College.