I’m not well versed in the topic, but this sounds like a contradiction to me. I have not seen it addressed anywhere.
1. The issue with an aging population is that there are not enough young people working to support the elderly. But if there are not enough working-age people, then shouldn’t youth unemployment (and in general), be low? (I do get the idea of skill-job mismatch, but one also has to be employed to gain skills)
Eg in China, they have an aging population, and fewer working-age people due to the one-child policy, but youth unemployment is high.
2. If youth unemployment is high, doesn’t it suggest that there are too many young people? If there are too many young people, then why is low fertility a problem? (I do understand that low fertility and youth unemployment are one generation apart though)
Thanks.
In: Economics
One way to look at the problem is that of capital formation/deployment along with consumption/savings patterns.
Young people generally don’t have capital. This is a major problem for most modernish economies since the major employers are firms that require capital. Hence these economies sort of require savings/investments – generally from the middle age population (say 45ish to 60ish) to capitalize firms to employ younger workers. This is how middle to high income economies develop.
The aging working population means fewer people in the “savings/investment” category and there is less capital to grow new firms. (all capital depreciates so it has to be continuously refreshed with more capital). These firms are the engine for employment of the younger workers. Although “caring for the elderly” captures the mind, it is not really the basis for the problem. Well before you have this elderly care problem, you have stagnant economies with few new or growing firms and lack of innovation. This is broadly where Europe/Japan is today.
There is also concern that China is rapidly heading this way especially since the Chinese government appears to have “wastefully” used the savings/capital of the last 10 years on non-productive capital (too many houses and high speed trains) – hence they don’t have enough capital deployed into hiring their new graduates. In the past China used to get TONS of FDI to supplement domestic capital formation – but the aging Japanese, Taiwanese and European economies reversed this. It isn’t totally hopeless but it is a huge concern.
This is unlike poorer economies or economies of 150 years ago. In those economies, there is both low capital and low productivity. Younger people work on farms or low skilled labor occupations. This “soaks up” the younger labor pool but the economy is sort of stuck in the lower income status – lots of back breaking work, not a lot of career progression, not a lot of excess savings/capital. This is sort of where India is today although it still has the potential to turn this around given that they still have a significant population in the middle class in their 40s-50s and a healthy pool of younger workers – the so-called demographic dividend.
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