The Hindu Business Line : Facing up to demographic changes

THE problems arising from a `population explosion' with attendant fears of food shortages and slow growth is a serious issue afflicting the developing world. The developed world had managed to control their numbers.

For many years, China and India have struggled with the burden of excess population and have tried many creative ways to limit the growth of their numbers. The developed world had managed to control theirs. Now, it looks like payback time as things seem to be turning on their heads! For, today, the populations of China and India are an asset, offering market size and human resources which can be harnessed for development. Conversely, the problem of low population growth or decline in many countries such as Italy, Japan, and Spain, is resulting in aging populations and shrinking workforces that could well result in shrinking economies in the future.

The present population of Japan, about 127 million, is believed to be the country's highest and may begin falling to about 100 million by 2050. Japan is probably the worst hit by the combination of declining birth rate and increasing life expectancy. The result is an aging population. By next year, about 20 per cent of its population will be 65 years or older; this was only 10 per cent about 20 years ago. This is putting additional demands on public services, and the shrinking workforce is insufficient to serve the needs of the economy.

Social expenditure, which accounted for 6 per cent of the national income in 1970 had grown to 18 per cent in 1992 and is expected to hit about 27 per cent next year. Being a very close-knit society, the Japanese do not favoured immigration as a solution to their problems. Companies in Japan are coping with the shrinking workforce by hiring the elderly, and expanding overseas. The government has helped by increasing the retirement age from 60 to 65. But in a country where promotions come with seniority, this can mean an increasingly more expensive workforce.

Changing demographics also mean companies need to adjust to serving a different range of products — they need to pull those designers from racing cars and direct them towards better walking canes!

The US has a higher birth rate than Japan, and also follows a more liberal immigration policy compared to most of the developed world. So there is no concern here yet about a shrinking workforce. But there are other worries. Bill Gates recently criticised the limit placed on the number of technology workers who can work in the US temporarily (on H1B visas) saying it will affect the economy.

Yet, the changing demographics are reflected in other ways. The US Census Bureau announced in early June that both due to higher birth rates and immigration, Hispanics now account for about 14 per cent of the population. The Hispanics growth rate is 3.6 per cent compared to the overall population growth rate of 1 per cent. If you look at children under 5 years of age, Hispanics are about 22 per cent. These figures do not distinguish between legal and illegal immigrants. Several immigrants try to cross over into the US illegally across the southern border, which has resulted in a group of citizen vigilantes who patrol the border in the state of Arizona.

But American society has already begun adjusting to this changing pattern in several ways. Even as far north as Massachusetts where the Hispanic population is not yet as significant as in the states along the southern border, ATM machines first ask you to pick the language in which you want instructions — English or Spanish. The same is true when you dial a toll-free number for a company's customer service.

Recognising that Spanish is the first language for a growing number of people requires a change in mindset for a society that has, for long, thought of itself as a melting pot. Although the country was built on immigrants, they were people fleeing religious and other persecution in their homeland and were happy to forget their past and meld into a new nation. Everyone learnt English.

The immigrants these days migrate to the US for economic reasons. The culture in the US is changing from being a melting pot to being a salad bowl with immigrants retaining their language and culture. This upsets some. For instance, a millionaire from California has used his own funds to lead a campaign against bilingual education. He wants Hispanic immigrants to have a brief immersion course and then be taught only in English.

Meanwhile, as more Hispanics enter the workforce, organisations have been gearing up to receive them and make them feel welcome through multicultural training programmes. Aging population is also an issue in the US though it not as severe as in Japan. It is estimated that 20 per cent of the US population will be 65 years of age and over by 2036. This has already stirred a debate on how the government is going to meet its commitment on Social Security (state-funded pension for all), which is supported by a system whereby the current population is taxed to make payments to the elderly. As the numbers of the elderly rises in proportion to the workforce, the system will require increasing taxation levels in the future.

Too few seems to cause as much of a problem as too many! Brazil, like China and India, also has a younger population, but this is a temporary phenomenon. As prosperity spreads, families are more inclined to restrict their size. From a global system point of view, given the strain it places on a family's and nation's resources, and the ecology, we need to restrict our population growth.

China, which was successful in its draconian restriction of one child per family, is now said to have relaxed its enforcement of the policy pursuant to the economic boom.

While we wait for the day when the world's population stabilises, companies will have to rely on outsourcing work apart from using labour-saving technologies and systems to deal with their needs. And that is a short window for the over-populated countries to use their numbers productively while coping with the strain that it puts on their resources.

(The author is professor of international business and strategic management at Suffolk University, Boston, US. His Internet address is cgopinat@suffolk.edu)

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Co-opting States as exporters

Is Gujarat up there in governance?

Cultural stumbling blocks to excellence

Facing up to demographic changes

Will oil prices rise even higher?

Divestment: The Chinese example

`Privatise and incentivise transport infrastructure'

Laurels from morals

Farm relief

Fuel price hike