Wednesday, June 07, 2006

The Age Time Bomb

This is one where the US is better than all other developed countries - even than China! But we have to be concerned about the aging of our population. The portion of our population over age 60 will increase from 16.7% to 26.4% by 2050. With fewer people in the work force, but more on Social Security and Medicare, our economy will slow down. For the investor this means we must demand higher returns on long-term bonds, not in 2050, but soon. Higher interest rates. So we want and need more workers in the next generation. Either by birth of by immigration. The situation is much worse in Japan, Germany, the UK, France, Russia. And CHINA! China's one-child policy is already "paying off" with shortages of young workers in many skills. See "Shortage of Workers in China?" But the future will be much worse. According to the UN data China will move from lower than the US to considerably higher on the over age 60 fraction. This Wall Street Journal email link should work for a few days.
... geopoliticians are focusing most on China and the U.S. -- the world's fastest-rising power and its incumbent. China is following an aging course similar to that of Japan, but its trends hold more dangers as it begins from a lower income base with less-developed pension and health systems. Mr. Bennett talks about a 1-2-4 equation, where one Chinese child supports two parents who support four grandparents, but in reality, many parents have no child to support them. "There's this slow-motion humanitarian tragedy coming down the track for China," Mr. Eberstadt says.
And Russia is in terrible shape. The birth rate is lower and the death rate is higher. Oil in the ground can only be used once. But the human resource is creative for 50 years and is what makes a nation great. The US:
He says the U.S. trend is more a story of its "exceptionalism" among industrialized countries, with higher birthrates that grow out of significantly different attitudes. U.S. birthrates are 30% higher per family than those of Europe or Canada. "This is the expression of millions of unorganized, spontaneous couples," says Mr. Eberstadt, who adds that the U.S. will be the only industrialized country to hold on to its share of global population in the next half century. That also will give it more of a risk-taking nature than allies on matters ranging from fighting terrorism to technological innovation. "The U.S. will have less and less affinity with other developed countries," he says. "It will be harder and not easier to find common ground with allies."

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