Why Japan’s low birth rate makes economic sense

 17-Dec-17, The Japan Times

Japan’s low birth rate is often framed as the definitive crisis facing the country. A shrinking population constricts the labor force, drives economic stagnation and exacerbates elderly care costs. But Japan’s shrinking population may present a hidden advantage.

Image: The Japan Times / ISTOCK

Thinning labor puts upward pressure on wages, increasing living standards and reducing unemployment, but also making Japanese products less competitive.

But this downside is only true if labor cannot be effectively substituted with technology. Advances in artificial intelligence (AI) and automation will eliminate 30-60 percent of today’s jobs. Given this massive technological shift, a reduced birth rate makes anticipatory sense.

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