The Washington Post (a.k.a. Fox on 15th Street) is once again touting the "demographic crisis" shtick, this time in reference to China. The Post tells readers that China faces a "looming demographic crisis" that: "it is going to be the first nation in the world to grow old before it gets rich. By the middle of this century the percentage of its population above age 60 will be higher than in the United States, and more than 100 million Chinese will be older than 80." Fans of arithmetic are no doubt saying "huh?" Since we use arithmetic at Beat the Press, even if it is shunned at the Post, let's look at this one a bit more closely. In China, per capita income has been growing at a 9.0 percent annual rate over the last decade. Let's say that this extraordinary growth rate slows to an average of 5.0 percent annually over the next three decades. This means that per capita income in China will be on average 4.3 times as high as it is today. Let's assume that wage growth increases in step with per capita income so that before tax wages in 30 years are 4.3 times what they are today. Suppose that China will have two workers for every retiree in 30 years (the ratio that the U.S. is expected to reach around 2030). If each worker is taxed at a 30 percent rate to support retirees, then workers will enjoy an after-tax wage that is more than three times higher than the wage they receive today. Retirees will receive a retirement benefit that is more than two and half times as high as their wage today. Now where is the demographic crisis in this picture? Doesn't anyone at the Post think about these things before putting them into print? One final note that shows the truly bizarre nature of the Post's "demographic crisis" story: the very next sentence is: "China also faces serious water shortages that could hurt enterprises from wheat farms to power plants to microchip manufacturers."
--Dean Baker
