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Economic Effects of Retiring Baby Boomers
August 2nd, 2016Hiroshi TSUBOUCHI
Kyoko ICHIKAWAEconomic and Social Research Institute, Cabinet Office
“Dankai no Sedai” (baby boom generation) is ..Baby boomers who were born in 1947-1949 in Japan. More than 8 million babies were born.Their age is 66-69 this year. The name “Dankai no Sedai” means generation of nodule, which came from the title of the novel written by Mr. Taichi SAKAIYA, the former Minister of Economic Planning Agency.
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Number of births
Source: Ministry of Health, Labor and Welfare Note: 1944-1946 is omitted due to incomplete data.
“Dankai no Sedai”
2
Contents
Estimate of population
Forecast of low birth rate and aging population
Challenge 1 Decrease of productive age population and potential growth rate
Challenge 2 Increase of manpower and cost of social security
Japan’s plan for dynamic engagement of all citizens
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Estimate of PopulationPopulation in 2100 would be the same as population in 1900
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
1850 1900 1950 2000 2050 2100 2150
thou
sand
s
year
Demographic Movement (1872-2110)
Baby boom: “Dankai no Sedai” was born.
Source: National Institute of Population and Social Security Research.Note: Population(2011-2110) is estimated.(medium fertility/ medium mortality),
Population peaked at around 128 million in 2010. It is expected to be about 52 million in 2100.
Baby boomers will be 75 years oldin 2022-2024.
4
Population decrease is expected to accelerate.
-7.00
-6.00
-5.00
-4.00
-3.00
-2.00
-1.00
0.00
1.00
2.00
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060
Demographic change rate
Source: National Institute of Population and Social Security Research.Note: Population(2011-2060) is estimated.(medium fertility/ medium mortality)
Demographic change rate has already been negative since 2010-2015 and decreasing speed is expected to be accelerated.
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(%)
Total fertility rate (TFR) was 1.42 in 2014.
0.00
1.00
2.00
3.00
4.00
5.00
6.00
1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
TFR
year
Total Fertility Rate
Source: National Institute of Population and Social Security Research.
TFR has decreased rapidly since the 1st baby boom (“Dankai no Sedai”) 1947-1949. From mid-1950s till mid-1970s, TFR was around 2.0. Since then, TFR has been decreasing steadily.
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(%)
Forecast of low birth rate and aging populationThe 1st and 2nd baby boomers peak in population distribution.
0
500
1,000
1,500
2,000
2,500
0 10 20 30 40 50 60 70 80 90 100
thou
sand
age
Population Distribution by age (2014)
Source: National Institute of Population and Social Security Research
1st Baby Boomers (“Dankai no Sedai”)
2nd Baby Boomers (“Dankai Jr”)
The 1st baby boomers are in retired age and the 2nd baby boomers are around 40 in age. The 2nd
Baby boomers are the generation of “Dankai no Sedai”’s children, and called “Dankai Jr.”. We did not have a 3rd baby boom.
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Ratio of dependent population is increasing dramatically since around 2025.
Source: National Institute of Population and Social Security Research.Ministry of Internal Affairs and Communication, Statistics Bureau
Note: Population(2011-2060) is estimated.(medium fertility/ medium mortality)
Ratio of dependent population (0-14 & 65-) is increasing rapidly. Especially, over 75 aged population is expected to increase dramatically from around 2025 when “Dankai no Sedai” will become over 75 years old.
0.0
10.0
20.0
30.0
40.0
50.0
60.0
Population 's age structure
0-14/total 65-/total 0-14 & 65-/total 75- 8
(%)
Population is expected to decrease through three stages.
0
20
40
60
80
100
120
140
2010 2020 2030 2040 2050 2060 2070 2080 2090
3 stages of population decrease (year 2000 = 100)
total 0-14 15-64 65-
3rd stage1st stage 2nd stage
Source: National Institute of Population and Social Security Research
Note: Population(2011-2060) is estimated.(medium fertility/ medium mortality)
All three stages have common trend as 0-14 age population decreases and 15-64 age population decreases. The difference among three stages is the trend of over 65 aged population as follows. 1st stage: increase 2nd stage: remain/decrease 3rd stage: decrease(Cabinet Secretariat, “Overcoming Population Decline and Vitalizing Local Economies: Japan’s Long-term and Comprehensive Strategy Reference Materials”).
“Dankai no Sedai” is over 90 years old.
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Challenge 1 Decrease of productive age population and potential growth rateProductive age population had already peaked in 1995.Productive age population (15-64) peaked in 1995 and is decreasing steadily. Ratio of productive age population to total (15-64/total) is expected to be about 50% in 2060. As productive age population decreases, over 75 aged people are expected to increase rapidly.
0.0
10.0
20.0
30.0
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70.0
80.0
0
20,000
40,000
60,000
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100,000
120,000
140,000
Population's age structure and productive age population rate
0-14 15-64 65-74 75- ratio (15-64/total)
Source: National Institute of Population and Social Security Research
Note: Population(2011-2060) is estimated.(medium fertility/ medium mortality)
(%)(thousand)
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Potential growth rate has decreased since 1990s.
Source: Committee for Japan’s Future “Interim Report <Reference Charts>” (2014)
Potential growth rate between 2001 and 2010 was 0.8. The contribution by labor has been negative since the 1990s. The contribution by capital has been decreasing steadily since the 1990s.
Changes in Japan’s potential growth rate
0.6
-0.3 -0.3
2.0
0.5 0.6
1.8
1.4
0.5
4.4
1.6
0.8
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
1981-1990 1991-2000 2001-2010
（年平均成長率、％）
資本投入寄与度
ＴＦＰ寄与度
潜在ＧＤＰ成長率
（年）
労働投入寄与度
Potential GDP growth rate
Contribution byTFP
Contribution bycapital
Contribution by labor
(Average annual growth rate, %)
http://www5.cao.go.jp/keizai-shimon/kaigi/special/future/chuukanseiri/04_e.pdf
11(Year)
There is much room for greater integration of females into the labor force. Female labor force participation rates by age shows an M-shaped curve. It means that a number of women in their 30s (typical child-rearing age) do not work outside the home.
Source: Committee for Japan’s Future “Interim Report <Reference Charts> ” (2014)
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
15－19 20－24 25－29 30－34 35－39 40－44 45－49 50－54 55－59 60－64 65－69 70－74
日本 アメリカ イギリス ドイツ フランス スウェーデンJapan U.S.A. 12Germany SwedenU.K. France
(%)
25% of 1st baby boomers want to work as long as possible.
-6516%
-7021%
-754%
-801%as long as
possible25%
other3%
want to quit as soon as possible
2%
not want to work20%
no reply8%
"Until what age do you want to work?"
-65 -70-75 -80as long as possible otherwant to quit as soon as possible not want to workno reply
Source: Cabinet Office, Survey of “Dankai no Sedai(baby boomers)”(2013)
Compared to other developed countries, labor force participation of elderly people (65-) in Japan has already been high (2011: JP 19.3%, US 16.7%, UK 8.8%, FR 2.0%).
According to a survey, however, 25% of “Dankai no Sedai” want to work as long as possible. There is room for elderly people to keep on working longer.
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Potential growth rate is expected to decrease and TFP is the key for growth. Even if the labor force participation of women and the elderly progresses and working hours of elderly people become longer, contribution by labor between 2031-2060 is estimated to be negative (-0.6). TFP is an important factor for growth.
Source: Committee for Japan’s Future “Interim Report <Reference Charts>” (2014)
Changes in Japan’s potential growth rate(presented as previous page)
0.6
-0.3 -0.3
2.0
0.5 0.6
1.8
1.4
0.5
4.4
1.6
0.8
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
1981-1990 1991-2000 2001-2010
（年平均成長率、％）
資本投入寄与度
ＴＦＰ寄与度
潜在ＧＤＰ成長率
（年）
労働投入寄与度
Potential GDP growth rate
Contribution by TFP
Contribution by capital
Contribution by labor
(Average annual growth rate, %)
(Year)
-0.5 -0.6
-0.9
-0.1 -0.3
-0.6
-0.3
-2.0
-1.0
0.0
1.0
2.0
3.0
2011-2020 2021-2030 2031-2060
（年平均成長率、％）
現状継続ケース
（年）
女性・高齢者の労働参加が図られ、高齢者の労働時間が伸びるケース
出生率が回復し、女性・高齢者の労働参加が図られ、高齢者の労働時間が伸びるケース
経済成長・労働参加ケース
労 働 投 入 寄 与 度
Case where the birthrate recovers, the labor force participation of women and elderly progresses and working hours of elderly people becomes longer
Case where the labor force participation of women and elderly progresses and working hours of elderly people becomes longer
Case of economic growth and labor participation
Case where the current situation continues
Contribution degree of labor input
(Average annual growth rate, %)
14(Year)
“New productive age population” does not show negative future.In case that “new productive age population” is defined as age of 20-70 and that the TFR is assumed to recover to 2.07 by 2030, “new productive age population” is estimated to reach around 56 million in 2060. There is a gap of 11 million between productive age population (15-64) and “new productive age population(20-70)” in 2060.
Source: Committee for Japan’s Future “Interim Report <Reference Charts>” (2014)15
Challenge 2 Increase of manpower and cost of social securityAging society requires rapid increase of medical and nursing care staff.
Source: Ministry of Health, Labor and Welfare, “Long-term estimation of medical and nursing care service” (2011), “Demand and supplyestimation for nursing care staffs toward 2025”(2015)Institution for Population and Social Security
Note: Population(2013 & 2025) is estimated.(medium fertility/ medium mortality)Doctor/nurse/medical staff for 2025 is estimated on the conditionthat the current medical system is kept on.
Estimation of demand for medical and nursing care service (thousand)
As for medical service, demand for doctors, nurses, and medical staff is expected to increase by about 30% in 2025 compared to in 2011. As for nursing care service, demand for nursing care staff is expected to increase by 50% in 2025 compared to 2013. However, productive age population (15-64) is expected to decrease during the same period.
2011/2013 2025
doctor 290 330-350
nurse 1410 1720-1810
medical staff 850 1020-1070
nursing care staff 1710 2530
productive age population (15-64) 79010 70772
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Social welfare benefit: Medical care 54.0 trillion JPY, Nursing care 34.4 trillion JPY in 2025.
As the ratio of aged 75 and over persons to total population increases, social welfare benefits increase. In contrast with pensions, medical care sector and nursing care sector are expected to increase rapidly, which will cause a serious fiscal burden.
Public share of the cost of social welfare benefit is 38.8% for medical service (2016), 51.9% for nursing care service (2016) and 50% for basic pension (2004-).
Source: Committee for Japan’s Future “Interim Report <Reference Charts>” (2014) 17
2010年
1,419万人
（11.1％）
2020年
1,879万人
（15.1％） 2030年
2,278万人
（19.5％）
2040年
2,223万人
（20.7％）
2050年
2,385万人
（24.6％）
2060年
2,336万人
（26.9％）
0
500
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1,500
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2,500
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2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060
（万人）（兆円）
Nursing care, etc.
Medical care
Pension
FY2011Medical care:
34.1 trillion yenPension:
53.1 trillion yenNursing care, etc.:
20.4 trillion yenTotal: 107.5 trillion yen
FY2025Medical care:
54.0 trillion yenPension:
60.4 trillion yenNursing care, etc.:
34.4 trillion yenTotal: 148.9 trillion yen
201014.19 mil.
people2020
18.79 mil. people
203022.78 mil.
people2040
22.23 mil. people
205023.85 mil. people
206023.36 mil.
people
EstimatePopulation aged 75 and over(Percentage of total population) (10,000 people)(Trillion yen)
Rapid increase of medical care and nursing care spending is expected around 2025 due to increase of over 75 aged population.
Source: Ministry of Finance “Data on Fiscal situation in Japan” (2016)
The population over age 75 is expected to be 18% of total population in 2025. This group of people needs more medical and nursing care spending than other generations.
population and ratio per total population (million, %)
medical care (2013)
(10000 JPY)
nursing care (2013)
(10000 JPY)
2013 2025medical
spending per person
nursing care spending per
person
65-741.6312.8%
1.47912.3%
55.3 5.0
over 751.5612.3%
2.17918.1%
90.3 47.0
18
People over age 75 need more nursing care.
19
Number of insured persons
Number persons
needing care
Percentage of people
needing care
65-74 17,164,412 507,865 3.0 %
75- 15,856,142 3,733,437 23.6 %
People over age 75 need more nursing care than those age 65-74. Concretely, just 3% of people age 65-74 need nursing care. However, that percentage increases dramatically, to 23.6%, for those over 75.
Source: The percentage is calculated based on the Ministry of Health, Labor and Welfare’s “Report on nursing care insurance (FY2014)” (2016)
Is nursing care service received at home or at a nursing care institution?
20
Types of nursing care service Number of nursing care received person
over 65 years old (thousand)
Service at home 2,716
Service in local community 400
Service at nursing care institution 909Source: The data is calculated based on Ministry of Health, Labor and Welfare’s “Report on nursing care insurance ” (2016.4)
Nursing care service is mainly received at home in 2016. As number of people needing nursing care increases, striking a balance between service at home and service at nursing institutions is necessary. This issue is mainly due to the difficulties of getting family nursing care for service at home in the face of Japan’s tight labor supply.
How will share of equity in Japan change?
21
Financial assets held by households
Source: Bank of Japan “Flow of funds – overview of Japan, the United States, and Euro area-” (2016).
Japan’s households hold their financial assets mainly as cash and deposits (52.4% in 1st quarter 2016). The share of equity is 9.0%.
It is necessary to be paid attention how this small share of equity in Japan is expected to change in the future.
34.4
13.8
52.4
3.9
6.3
1.6
8.8
10.8
5.4
17.1
34.9
9.0
33.4
31.5
29.9
2.3
2.8
1.8
0% 20% 40% 60% 80% 100%
Euroarea
US
Japan
Cash and depositsDebt securitiesInvestment trustsEquityInsurance, pension and standardized guaranteesOthers
Japan’s Plan for Dynamic Engagement of All Citizenswas adopted on 2nd June as a Cabinet Decision.
Working style reforms Improvement in the environment for childcare
toward the “Desirable Birth rate of 1.8” Improvement in the environment for nursing care
towards the “No one should leave their jobs to perform nursing care”Other efforts
“Toward a society participated by all citizens, whether they are women or men, the elderly or youths, people who have experienced a failure, people with disabilities and people fighting an illness, can play active roles in their respective homes, workplaces and local communities or any other places.”
http://www.kantei.go.jp/jp/singi/ichiokusoukatsuyaku/pdf/plan2.pdf 22
Concretely… To realize “Desirable Birth rate of 1.8”, we will improve working conditions of childcare providers.
Concretely we will newly implement a pay rise equivalent to 2% (about 6,000 JPY per month). In addition, we will additionally improve working conditions for childcare providers with skills and experiences to eliminate the wage gap between childcare providers and female workers across all industries, which is currently around 40,000 JPY.
To improve the environment for nursing care providers, and to eliminate the wage gap between nursing care providers and workers in other competing industries, we will improve their wages by 10,000 JPY per month on average. (average wage of nursing care providers after revision in FY2015: 287,000 JPY as of 2015.9)
To promote employment of the elderly, we will provide supports for businesses raising the retirement age to 65 and extending employment beyond the age of 65 while encouraging other businesses to do so.
23
Thank you for your kind attention !
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