 Okay, we're back. We're live, it's the one o'clock block here on a given Monday. I'm Jay Fidel. This is Think Tech, and this is Looking to the East. Do this every couple of weeks with Steve Zercher at Kansai Gaida University in Kobe, Japan. Welcome to the show, Steve. Hey, my pleasure, Jay. It's wonderful to see you. It's wonderful to be on the program once again. I'm sorry I'm not on the camera for the viewers, but you see the best picture I could possibly produce there. Well, let me say that you have great personal discipline that you could be so very unmoving. Exactly. That's yoga. I do yoga. So I was telling you before the show that we had a very interesting discussion with Nadine Tensal. She's a pediatrician here in Honolulu last week. And we talked about the birth rate, birth rate in Hawaii and maybe elsewhere in the world too, and how COVID has affected it. And there were fewer women who were getting pregnant. Remarkable reduction in the number of pregnancies right now. You know, in the past when we had blackouts and other short-term calamities, the birth rate would actually go up nine months from the given blackout, everybody would be having children. But that's not the case here. The birth rate is going down for a variety of reasons, largely because people have no confidence in the future. And at home, they just don't wanna have kids. And that is very troubling and it's totally relevant to our discussion today, which is about the birth rate in Japan. And for that matter, the birth rate in the US, what it was like before COVID, what it's gonna be like going forward and how it affects the economy and how it affects the society and how it affects, gee, everything, doesn't it? Yeah, it does. Yeah, I remember when we were under the stay at home lockdown that there were many articles saying that the birth rate was going to go up, just the opposite of what your guest indicated yesterday. And I do think that you're right, Jay, it's a different situation. When you're in a blackout, like the New York one, that was, we're dating, I'm dating myself, I remember that. But that was... 45 years ago, we're about 50, 55 years ago. It was 1965, it was. Was it? Okay, my goodness. I'm a part of this demographic wave that we're gonna talk about on this program. But that clearly was a temporary situation and this is not. Furthermore, I would imagine, and I've read too, that many women don't want to go to a hospital and put themselves and their child potentially at risk. The number of visits to hospitals in Japan, which it's kind of a cliche about hospital visits. We have socialized medicine here in Japan and older people, of course, are the number one group who go to hospitals and they've turned it into kind of a social occasion. They meet their friends in the hospital. We don't, they don't hang out in the coffee shop or the local denies or whatever it may be. They go to the hospital. And I had a kidney stone a few years ago and I had to go to the hospital, I think three or four times and I apologized to the doctor and the doctor responded and he said, don't apologize. There are patients who come here more often than I do. So just to show you the frequency, but with COVID here in Japan, the number of visits to the hospital, they're way down. So older people who are at particular risk are not going to the hospital. So I think that may be one of the factors behind this drop in the birth rate. One of our guests gave us some data on that last week. The number of visits to the hospital for serious things like heart attack and stroke have been seriously reduced over the past six months. And my reaction to that is, it's not because there have been fewer heart attacks and fewer strokes. It means not everybody who goes to the hospital complaining of a heart attack or a stroke has a heart attack or a stroke. Nobody wants to take the chance. That's why there are fewer visits to the hospital. Yeah, and that's probably not gonna change anytime soon. And I would imagine what your guest discovered is something that's occurring throughout the world. That women are just looking at the situation and going, no, no, I'm gonna wait. I don't wanna go until a vaccine is out there. It's in my world in academia, it's like students deciding to take a year off rather than go into a university and to take online classes. I mean, it's completely different. They're not gonna die by taking online classes, but they're choosing not to. They're delaying their entry into the school because of the COVID situation. So we're seeing that in many ramifications or many outcome, I think, through society is how COVID is affecting behavior. Well, so it was very interesting because we don't know all the changes that will happen in society because of COVID. We know we'll be more on Zoom than we'd be in personal meetings. We don't know the fallout of how that works if you don't have personal meetings. Maybe you make fewer deals in business for the lack of personal meetings. Maybe you make more deals in business for the Zoom. Maybe it's more efficient and people are more rational, who knows? We don't know yet, we're gonna find out. But one thing is clear, I think, we're gonna have fewer births. And Japan already has a low birth rate. Your fertility rate is way below 1%, I think. Number one fertility rate to number two and all that, right? Yeah, the fertility rate, the way that's measured, you expect a country to be at 2.1 to maintain its population so that every couple has, on average, a little over two children. In Japan, it's been trending for a long time now at about 1.4, which indicates that the population is going to go down, which it is going down. So just recently, a report was issued indicating that Japan's population in 2019 decreased by over 500,000 people, the population of Japan is going down. And the forecast over the next 10 to 20 years leading up to maybe 2045 is that the current population of Japan at 124 million will be somewhere in the 90 million range because of low birth rate. Who's going to talk to work? Yeah, so Jay, you talk about the ramifications of demographics on economics. There you go. You're going to lose a quarter of your population and therefore you have so many fewer workers and your GDP naturally is going to go down. So the predictions that I read is that based on these demographic trends, Japan's GDP because of lack of workers is trending down 1.1% a year, lower than it would be if it had a higher population rate and there wasn't experiencing this demographic shift. Well, that's pretty serious because if you don't have the workers, your productivity goes way down, your productivity goes way down, your economy goes down. And those 90 million that are left are having a really substandard existence compared to the way it was before. Right, and I would, I'd like to stop there, but it's worse because unfortunately the age distribution in Japan is skewing very strongly towards older people. So right now in this country, it's about 27, 28% of the population is over 65, which is remarkable. And that number over these years that we're talking about as the population goes down is going to trend up to 40%. So not too long in the future, 40% of the Japanese people will be age 65 or older. And that means that the remaining people, the ones that are not in the retirement zone are supporting the older people. So you have fewer and fewer younger people supporting more and more older people, which puts a tremendous drag on the economy and naturally taxes are going to go up in order to support the older people healthcare. And that's a big part of the Japanese government budget is maintaining healthcare for older people who consume health services at a much higher rate than younger people naturally. So you have the population going down and then the mix of the population skewing older and that is not good. So Japan calls itself a super aging society. So didn't we want to have fewer people on the planet? Didn't we all agree that we were overpopulated and 8 billion people was more than a planet to sustain? Isn't this the right thing? It's not the right thing for Japan. If you throw Japan into the population of the whole world, then maybe you could make that point, but the population growth is in where India and other locations. So there are Thailand where the birth rates are high. So some parts of the world, the birth rates are very, very high, much higher than that 2.1 level that you need to achieve parity. But in many, many advanced countries, including the United States, including the state of Hawaii, the demographics are shifting older and the population rate is going down. The United States, most Americans don't know, but the United States population, if it wasn't for immigration would be going down as well, not as dramatically from a percentage perspective as Japan, but the United States, Japan and most of Europe is aging and the population is going down. So there's an economic impact on that. So maybe on the aggregate J, the Earth sustaining 7 billion people is a strain, but then regions, the advanced countries or developed countries are experiencing this demographic challenge. Now, one thing about what Japan's attempting to do, there's two things. The one we've talked about a little bit before, there's kind of a backdoor immigration going on. So the number of foreigners in Japan, which is still quite small, it's like two and a half percent is increasing. Younger people are being brought in on study programs and I put that in quotes. So they're studying Japanese, but they're also working in the local retail like 7-Elevens and so forth, or they're brought in on work visas. So there's been some labor replacement through that. Is this just a policy of the government to allow them to come in? Yeah, it's not something that they put front forward and promote heavily. It's something that is being done because business is complaining to them that they don't have enough people in order to keep their businesses going. So it's a major pressure on the Japanese government, which is the LDP is a conservative government and they're very responsive to business. So that's going on. And that will probably be continued. This is a homogeneous nation and Japanese people have a sense that Japan is for Japanese people. So there's somewhat of a resistance to have being too many foreigners come in. Oh, with the numbers you gave, Steve, the 90 million plus the fact that of the 90 million more elderly people that has got to require new immigration and that new immigration is going to be from Southeast Asia. It is not going to be Japanese by any stretch. And those kids, just like in the US, are going to be looking for work and finding it and they're going to be working as immigrants really hard. They're going to be replacing Japanese workers on all those precision assembly lines, making precision world-class equipment and the like. And they're going to be marrying, are you ready for this one? They're going to be marrying the daughters of Japan. And we are going to have a call it a browning, a hop of Japanese community in fairly short order, I think. And there's going to be kicking and screaming about it, but it's got to happen. Yeah, the numbers actually indicate what you are saying, Jay. The mixed couples in Japan are having more children than Japanese Japanese couples. So I don't know the reason for that. Immigrants maybe have a more positive outlook. They're happy to be in Japan as opposed to where they came from. And for them they feel that they have a positive future, whereas there is a sense within the Japanese culture, Japanese younger people that I'm never going to achieve the same life as my parents because it's just not possible given the economic conditions. There is this kind of sense of dourness about the future when it comes to getting married and holding a job and so forth. But the other thing, and this is what caught my eye initially and made me think about doing this program, is that Japan is also encouraging people who would normally retire to continue to work. So there was an article that I saw just a few days ago from electronics retailer. The name of them is Nojima. And they have decided to let their workers work until they're 80 years old. So Jay, in Japan, 80 is the new 60. Yeah. Well, I mean, with modern public health, if you do it right, you can keep people alive a long time. And 80 still, if they're gonna live till 90 or more, 80 gives them a retirement on top of an 80 year working life. Yeah, so this solves several problems actually for Japan. Number one, these retailers can't find young people to take these jobs. Older people have been doing this for a while and they understand the products and can explain them much better. This is what the article was indicating. From the Japanese government perspective, that keeps these people producing and paying taxes and hopefully not ending up in the hospital and consuming more hospital services and so forth. So I don't know if it'll work. I mean, theoretically, it seems to make sense and Japan in some sense doesn't have a choice. They need to utilize these people. Now, my school, we have a retirement age set at 65, but I would imagine that's probably going to change. It may depend on the industry. Some companies have policies in place to try and encourage retirement because the problem is if you keep old people, especially in higher management, then the young people never have a chance to move up. They're just kind of stuck at the lower level because the upper management levels are continually being done by people who do not retire. So you can see on balance, maybe from a societal perspective, having older people work solves the labor problem, solves the problem perhaps of old people by not working, becoming sicker, quicker potentially. But on the other hand, at the micro level, if you keep older people in higher level positions, then you stunt the growth of the company because younger people never have a chance to move up and be able to contribute their ideas and their energy and so forth to the company. So it's a complex matter, but... What's the solution? What do you do in order to take the old people out of this kind of glass ceiling thing where they're stopping the young people from getting promoted with new ideas? Yeah, so one thing, this happens at universities, and I think it's more pronounced within companies. Traditionally, what Japan would do is at the retirement age, whether it be 60, for some companies it's as young as 60 or 65, you would kind of retire, but then they would give you another job. And it may be a management job or it may not be a management job and your salary would be cut by like 40 or 50%. So you're kind of moved into a related job, but not the one that you had before. But what's happening is that this is occurring so much now because people are getting so much older in Japan that some Japanese managers are suing their company and saying, hey, I was being paid $100,000 a year in my old position, I'm doing basically the same thing now and you're only paying me 50. That's not fair. And under the old regimen, when Japanese demographic issues were not so strongly skewed towards older people, the society kind of let that go and the judges were siding with the companies and say, oh no, the company has the right to do that. But lately, the judges are beginning to say, no, that is unfair, what you're doing. So you need to pay more to this employee that you're kind of semi retiring into a new job which may be the same as the old job or may not be depending on the case. So that's at a micro level, that's how some companies are beginning to address this. Well, I think you need national policy on it in Japan. And I also think that this is part of a whole transformation around the bell curve where you try to save the economy by making everybody more productive and so forth. The other part, of course, is immigration. But one thing is clear, Steve, and I'm interested in your thoughts about this, is transformations of which Japan is involved in and the US too. Transformations are painful. Transformations discombobulate people. They dislocate people. They dislocate those careers. In Japan, the whole thing is you get a job and you stay there for your whole working life until you retire or drop debt. And you're completely loyal and faithful to that job and that company. I don't think that's possible anymore. And I think that transformation is gonna discombobulate a lot of people. That's been occurring over the last 15 years or so that golden job at major corporations. That image has been shattered. Now, there still are many people who have worked at one company their entire life, but that is becoming less common. And over the last 10 years, some of the blue-chip companies like Hitachi and others have laid people off. Under the old Japan, that just never would have happened. The company would have sucked it up and maybe lowered salaries or reallocated people. But now these corporations are at a point where they can no longer do that. And you read in the headlines that Hitachi is laying off 15,000 people or Sony is laying off 20,000 people. So that image is shattered. The reality is that those types of jobs are becoming very, very rare. And what's becoming more common is the part-time jobs or non-corporate jobs where you're working in the service industry, you're working for Starbucks when you graduate out of college and you're making minimum wage, basically, 1,000 yen or 1,500, about $10 or $15 an hour. And you get kind of trapped in that world, this kind of part-time job world. And many children, many students who graduate end up living with their parents because they can't afford really to be out on their own. And that's a big segment of the Japanese population now. That's about a third of all workers are in those types of positions. And getting back to the demographic issue, if you're a male and you're making $20,000 or $25,000 a year, would you have the confidence to start a family? Or if you're a female looking at that male and going, can I really believe that we can have enough funds to pay for children and have a quality life? So these are the things that are going on economically that are influencing demographics that younger people, like we mentioned before, do not have a feeling that the prospects for them are bright in the future. And they're stuck in the top. And they're right, they're right about that. It's very rational. And some social scientists don't really, they see that there's other factors at society that is influencing this demographic shift and so forth. But I really, maybe it's my economics background or management background. I think this is the core problem. You're not providing opportunity to young people. They don't believe in the future. They tend not to want to get married. They tend not to want to have children even if they do get married. And it just drives the population demographics down and allows this skewing of older people in the society. So. I think it's all connected what you're talking about. And I think the same thing is happening in Hawaii and the same thing is happening on the mainland and maybe it's happening in Europe too. It's the way things are moving. And there was a program on last night on television by this guy, W. Kamau Bell, who's a black guy that sort of travels the country and he's a really relatable, really a good reporter on things like this. And what he did is he covered the gig economy last night, hither and yon all across the country. And he went and talked to people. And that's what you're talking about, Steve. It's a gig economy. Basically, yes. Where people try to sort of emulate a middle-class life even though they have no confidence that the jobs they have will last through a career. And the problem is that they can't be confident about building families. They can't be confident about, you know, doing the middle-class life that way because the gigs are by definition just gigs. And this country is largely into that. And there's a lot of people who in the last generation would have had actually a better shake on it than they would have now. They don't get married, they don't have kids. The whole thing is like flimsy. And so I keep thinking as a result of that concern, that condition, I keep thinking of, what was this name Yang, the Chinese guy who wanted to be president? Right. He talked about guaranteed minimum income. Right. That's what these economies need. They need a guaranteed minimum income. So you can have the best of both worlds. You can have a middle-class life. You can have some confidence in your income. You can become, you can get married. You can have kids. You can buy a house, whatever it is because the government is going to take care of you with guaranteed minimum income, with health insurance automatically. That's what we need. That's where it's all driving, don't you think? I agree with you, although there would be many people who would vehemently disagree, as you can imagine, to have that kind of program in place. That Yang kind of popularized that idea because he was running for the president, but that idea is an old idea. And I was introduced to it back when I was an undergraduate. It was Milton Friedman. You remember him? The iconic conservative economist, Chicago. He came up with the idea of a negative income tax. He said, America, rather than providing all these different programs, you know, food stamps and so forth, just have one overall program that guarantees the basic income of Americans. And that's the right way to do it. And that would benefit the economy overall. So he was the one who came up with this idea many, many decades ago. It's never really caught on because it kind of cuts across the American individualism culture and you need to pull yourself up by the bootstraps. But that also, it's just like the myth of the Japanese corporate job, that's gone. Economic mobility within the United States is terrible. If you're born into a certain class, then you kind of get stuck there. There's not a lot of movement. I was able to move up, but I'm a product of the 70s. So there you still had economic growth and I was fortunate enough to get into the tech industry. And that created a wonderful career for me. I'm an example of someone who was able to move up economically compared to my parents, but that example is becoming less and less prevalent and unfortunate. So I agree with you, Jay, but you and I, we agree on many things. I think some of the listeners, we may get comments on this saying that, no, we can't do that. People should make their own way in the world. And if they work hard enough, they'll be able to survive. But that's, if you look at it on a macro level, I just don't see that anymore. The economic conditions are really stacked against people now. It's unfortunate. You know, I think it's possible for this to happen. Maybe in some ways it is happening in kind of a, may I say a socialist trend in Europe. I agree with you, there'd be a lot of controversy about it here. And the Republicans in the right wing would oppose it vehemently. And so the only hope for it to happen here is we get new people running government, new people, and I actually hope for that. Yeah, my students, the younger people, they're on board. They understand all of this, Jay. It's not a mystery to them. They know what their future is going to be like. And they know what a failure the government has been over the last 30, 40 years. So they are looking for change in a very dramatic way, which is, you know, why you see the support for Bernie and others. Old guy is, you know, galvanizing young people because he's painting a different picture of the future, which if, unless we make those changes, what Americans are gonna experience is what Japanese people are experiencing now, unfortunately. Well, yeah, I wanted to ask you about that. So, you know, here's a comparison between Japan and the US, including Hawaii. Do you think that it would be easier or harder to achieve universal income, universal healthcare in Japan as compared to the US? Ooh. That's a tough one, Jay. Probably here, although it would not be easy. Both countries, it would be extremely challenging, but maybe under different leadership, it would be possible. Even if the Democrats take over in the next election, I still don't know if this would be able to be accomplished in the United States. There would be so much resistance. So, yeah, if you're forcing me to make a call on this, probably the chances, they're not good, but they would be relatively better than the United States in Japan. That's encouraging. You know, I think the way to look at this though is if you don't do this and you let it continue the way it is, you let the bell curve, you know, get bigger at the top and the facility rate going down and the retirement age going wherever it's gonna go. God knows where it's going. Hey, DJ. Maybe you're okay. You know, we're going to have a different kind of society. And we're already on that track and a different kind of economy and a different kind of future and a different kind. It'll be a gig economy, I think, to sort of coalesce these ideas. And the gig economy for the people involved is really not as attractive because you have no safety net, either in health or longevity. And so the governments really have to do something about it. And I actually can't think of anything else that they can do except take the reality and support it and say, okay, this is the way it is, gig economy. Now we're gonna help you make it work for the individual person and family. I mean, I can't think of anything. Can you think of anything else from an economic point of view that governments could do to take the sting out of what's happening? No, I see so much investment on the part of government to try and encourage business development, business growth. Most of it's ineffective, quite frankly. So if all of that money was put into basic income, the benefit to society, certainly to the individuals and then economically, the fact that that much money would be then spent because people lower income do spend the money that they get. They have to, right? They don't save it like wealthy people do. Where a lot of it just goes into investments and so forth. So it would have a profound impact positively for the economies overall. So I think many economists would make that point. So yeah, I can't think of anything else either, Jay. I mean, I have two weeks before our next show. Let me try and come up with something different. But at this point, I agree with you. That's probably the only thing that can be done that would have a positive impact that's within the realm of possibilities. Yeah, yeah. And I would like to add something to make your work all the more difficult in these two weeks. Homework, Jay? Are you giving me homework? I'm giving you homework. You know, COVID is going to accelerate this process. It is already accelerating this process. I think you are right. The early signs like your guest yesterday, the population rate going even further down. Oh my gosh. Yeah. That just is not good. I know we can work this out, Steve. Yeah, thank you. Thank you for the assignment, Jay. You're welcome. So it's great to assign a college professor a dean of a major university homework. I've never done that before, but I must say it feels good. Congratulations. Thank you, Steve. Steve Zurcher. My pleasure, Jay. It's always wonderful. Got to say, Gada University in Kobe. We look forward to our next show. Thank you so much. Thank you.