The Washington Post's concern about aging populations is the social science equivalent of flat earth geography. The front page of the Sunday Outlook section features an article highlighting problems that China faces in its rise to superpower status. The top item on the list is that "China's demographics stink." The problem is that people are living longer and China's one-child-per family policy has reduced birth rates. (Actually, even on this first point the article is deceptive. It points out that "life expectancy has shot up, from just 35 in 1949 to more than 73 today." Most of this gain in life expectancy occurred before 1980. There has been surprisingly little increase in life expectancy over the last three decades, in spite of the country's extraordinary growth.) While the Post tries to portray the rising ratio of retirees to workers as a horror story, readers familiar with arithmetic know better. China has been experiencing growth of close to 10 percent annually for the more than a decade. This translates into an almost equal rate of per capita GDP growth, since its population is growing very slowly. This implies very rapid rises in living standards. If some portion of this increase in living standards is taxed away to support a growing population of retirees, then both workers and retirees can still enjoy much higher living standards than they do today. For example, suppose that the rate of growth of output per worker in China falls to a very modest (by comparison) 7.0 percent annual rate. After 20 years, output per workers will be 287 percent higher than it is today, or nearly 4 times as high. If the country imposed an additional tax rate of 15 percentage points on each worker's pay, their after-tax income would still be more three times as high as it is today. If the country has a ratio of two workers per retiree, this tax rate would be sufficient to support each retiree at a level of income that is almost 20 percent higher than the income of a worker today. It is not clear what the problem is in this story. China may have very serious problems with the distribution of income. There has to be some mechanism for ensuring that income flows to retirees, but the problem then is distribution, not demographics. Slow-growing countries with only slowly aging populations will actually face much more serious demographic problems than China. The article is also bizarre in that much of the rest of the piece is devoted to a discussion of China's problems with pollution and resource limitations. These problems would be far more severe if the country had not limited its population growth.
--Dean Baker