As the annual WorldBank/International Monetary Fund meetings get underway in Tokyo, Japanese leaders must confront an unfolding demographicdisaster. Japan’sNational Institute of Population and Social Security Research recently forecastthat by2060, the country will have lost nearly one-third of its 2010 population of128 million, and just half of this smaller population will be between 15 and 65years old – the most productive age group in any economy.
These are the kinds of numbers usually produced by wars and epidemics, andthey imply both a dramatic drop in the number of young people able to providefor their elders and a much greater debt burden for a country that is alreadycarrying one of the world’s heaviest.
To solve this problem, Japan’spolitical leaders have three options: find some way to raise the country’sbirthrate dramatically, open a long-insularsociety to a wave of immigrants, or finally unveilthe country’s secret weapon – the energy, talents, and ingenuityof Japanese women.
Opening the country to a surge of immigrants makes sense, but Japanis not about to become an American-style meltingpot, and this solution alone would be inadequate to the scale of the demographic challenge. Foreignersmake up less than 2% of Japan’spopulation, and aUnited Nations report from 2001 found that Japan would need inflows averaging609,000 immigrants per year until 2050 to maintain the percentage of itsworking-age population.
That is why Japanese policymakers should prioritize drawing more womeninto the workforce. For the moment, things are moving in the wrong direction. Japan slipped from 80th placein the World Economic Forum’s gender-gap rankings in 2006 to 98th in 2011,a worrying sign that a critical opportunity is being missed. For women in theworkplace, Japan remains theSaudi Arabiaof the developed world.
The first step toward reversing thistrend could be to create work environments that are better suited to the needsof Japanese women, and that promote their talents. Government officials havetaken modest steps in this direction, but culture and inertiaremain powerful obstacles.
Still, the prize for getting this right is worth the effort. A 2010Goldman Sachs study concludes that an increase in female labor-forceparticipation rates to parity with men wouldadd 8.2 million workers to Japan’s economy, virtually erase the projecteddecline in the country’s working-age population, and boost GDP growth by 15%.
The problem is not that Japanese women lack opportunities for highereducation; the university enrollment rate for 18-year-old women alreadyexceeded that of men in 2005. But just 65% of women with college degrees arenow working.
One problem is that working for Japanese firms often requires both longhours on the job and post-work socializing with colleagues – customs that makelife harder for working mothers. But Japanese men, who spend less time caringfor children than fathers in most other industrialized countries, could share moreof the responsibilities of parenting. Better work-life balance would benefitboth men and women. And increasing the availability of affordable child carewould help, too.
Those who resist feminizing theworkforce might argue that doing so would mean fewer children – and thus a newdemographic complication. But the evidencesuggests otherwise. OECDcountries with higher female labor-force participation rates also havehigher birth rates. Japan’sbirthrate has already fallen to just 1.37 children perfemale, far below the level that would keep the population constant.
Beyond the cultural obstacles, Japanese policymakers could take manyconcrete steps. According to Japan’sMinistry of Health, Labor, and Welfare, 54.7% of women were employed on anon-regular basis in 2011. Officials could encourage employers to offer womenpermanent, full-time positions, rather thanall-too-common temporary contracts, which mean lower pay, lessstability, and a lack of opportunity for advancement.
More important, current tax policies that reinforce women’s over-representation in temporary contract workshould be changed. Both the OECD and the Goldman Sachs study identify rulesthat discourage women from working. A “special dependent” exemption that could be claimed by heads ofhouseholds (mainly men) for dependents (mainly women) who earned less thanabout $12,000 per year was eliminated in 2004, but a “dependent” exemptionstill remains.
Policymakers could also find creative ways to increasethe odds that women will return to the labormarket after having children. They could close Japan’ssalary gender gap – wider thanin any OECD country except South Korea – in part by establishing rules thatreward performance rather than seniority.And they could help to create credible opportunities for women to rise to leadership positions.
Opening Japanto more immigrants could help it to meet its demographic challenge. But themore durable solution is already inside the country.