Everyone has their problems, and economies are no different. Roger Williams takes a look at how two of the largest world economies laid the path to trouble.
When you look at your contemporaries, each has their endowments and achievements. From a cup-half-full perspective, that is a great way to look at life and your friends. Sadly, each of your contemporaries has their problems too. Sometimes these are things that are inherited, genetic, or sometimes they are self-made. Age naturally brings its own problems, medically or behaviourally. It is the same with countries and their economies.
If you look at the second and third largest economies in the world, China and Japan respectively, it is instructive to see how the challenges they face arose. Look back at the year 1800: in per capita income and political structure, both countries were similar. Both had emperors. Looking back, it turns out the biggest difference was in the laws of inheritance. Japan had primogeniture: the eldest inherited all. At that time, this was principally land. Upon the death of the father of the household, younger siblings left home and migrated to the cities. They transferred their allegiance from the family to the Emperor and created an educated middle class. This was the basis of Japan’s industrial revolution.
In China, inheritance was divided equally among siblings, spreading wealth wider and wider, in smaller and smaller amounts. People stayed rooted to the shrinking plots of land. Their allegiance was to the family, and it undermined national identity and industrialisation. The Communist party, who banned private property ownership, successfully broke down this family allegiance by its one-child policy but not before per-capita income had fallen to a fraction of its more successful neighbour.
Today, both countries face demographic and cultural problems that are the legacy of policies. Japan’s working-age population is projected to fall by 40 per cent by 2050. China has a similar problem, as the proportion of its population over 60 years old rapidly expands. In 1960, 8 per cent of the population was over 60 years old. Last year, this number reached over 14 per cent and will increase from 200 million to 360 million by 2030. This is forecast to occur when China’s working population is already in decline: earlier this year the National Bureau of Statistics announced that China’s working population had declined in 2012 by 0.6 per cent – nearly three and a half million.
So, just like the UK, in Japan and China, a smaller proportion of the population is going to have to look after an increasingly larger proportion of older people. With continued advances in medicine, most economies are going to see the life expectancy of their citizens lengthen. In more developed economies this impact is greatest. In Japan and China, this problem is their main structural challenge and the one that is most intractable.
Addressing this particular problem can lead to policies that require major social changes. Obviously in China an end to the one-child policy can assist, but it is a slow cure – 15 years at best. A faster cure is to increase the numbers of people in work. Goldman Sachs recently estimated that in Japan, if women in employment were employed at the same rate as men, it would add 8 million working people to the economy and boost GDP by 14 per cent.
The UK has an aging population as the baby boom moves into old age. You can see the impact of this on our healthcare services and the intractable demand by the baby boomers upon pensions in both the private and public sectors.
What are governments going to do about this? I’m not sure. China will reverse its one-child policy; elsewhere, perhaps it’s not what governments will do, but what we do as individuals. Women in the US are going to work – 47 per cent of the labour force is female. Mothers have become the main or sole earner in a record 40 per cent of American households with children under 18 years. In 23 per cent of married couples with children, the woman is the higher earner.
In the UK, over the last four decades the number of women in employment has tripled. A recent part of this increase (i.e. since April 2010) has been because the age at which women can first receive a state pension has been rising from 60. It is currently 61 years and five months and is due to rise to 66 by 2020.
The Institute for Fiscal Studies (IFS) says: “This is having a strong effect in increasing employment among those women directly affected. It has also changed the behaviour of some of the husbands of the affected women; they are delaying their own retirement, possibly to retire together or perhaps to cover their wives’ lost pension income. In April 2012, there were 27,000 more women in work (compared to 2010) than there would otherwise have been as a result of the increase in the female state pension age from age 60 to 61. Moreover, employment rates among their husbands increased by 4.2 percentage points, meaning 8,300 more men were in work than would otherwise have been.”
Jonathan Cribb, a research economist at the IFS and co-author of the report, said: “Increasing the age at which women can first receive their state pension has led to significant numbers of women deferring their retirement, with over half aged 60 now in paid work for the first time ever. So, despite the weak performance of the UK economy over these two years, many have been able to limit the loss of state pension income through increased earnings.”
As part of the above trend, part-time working is becoming more and more common in the UK. One impact of ‘Obamacare’ in the USA will be to create even more part-timers. For employers of 50 or more people in the US, there will be a fine of $2,000 for every employee who does 30 hours or more and does not have an employer-provided health plan. Employers are splitting jobs and creating more part-time roles to avoid having to provide healthcare cover.
In the UK, the evidence of my own eyes shows that fewer of my contacts have full-time work. This may be partly age-related, but a quick survey of the local jobs on offer shows a 90 per cent-plus predominance of part-time over full-time jobs. I predict this will be good for shooting in all its forms. Our industry caters to ‘free time’.
Our customers have been predominantly men. The trend in developed markets is for more working women and older populations with less disposable income per capita (but more time) in the western world, and less free time for the fittest of the population in the east.
The increasing employed population of women in the US and UK is an opportunity to draw new customers into our orbit. Personal protection in the US is not the only growing female market. Camo patterns and pink airguns and shotguns increasingly constitute a part of product offerings in the USA. This trend will not stop there.
Less disposable income but more time for older participants and more newcomers to our sport both indicate that the value end of the market should see the most strength.