Taiwan’s Population Will Decline By 2021: Why That’s Bad News For Its Tech-Led Economy

23-May-2018 Intellasia | Forbes | 6:00 AM Print This Post

The Taiwan government predicts that its population will start declining as early as 2021. That’s because the birth rate has held at one of the world’s lowest for seven years. The number of Taiwanese would peak at up to 23.8 million before falling to between 17.3 million and 19.7 million by 2060, the National Development Council says. The birth rate fell to 0.9 in 2011, alarming policymakers about long-term productivity on the island that depends on manufacturing as an economic staple.

Since then little has changed. The National Development Council reported a 1.2 birth rate in 2016, meaning 1.2 babies born that year per 1,000 women aged 15 to 49. Reasons often given include costs of childcare, a focus on career that includes long working hours away from a would-be family and hesitation to marry without the money to buy property.

A population decline, without intervention, will hurt Taiwan’s productivity by taking people and government funds away from industry. It would manifest as increased government spending on the elderly instead of on economic initiatives and decreased average incomes as people retire early to look after their parents, economists say. A dearth of younger people in workplaces could cramp tech innovation but require longer hours to keep companies healthy.

“Overall productivity tends to decline as a population ages,” says Ma Tieying, a Taiwan-specialised economist with DBS Bank in Singapore. “Older workers are less productive than younger ones, and the increase in pension and healthcare benefits in an aging society could crowd out public spending on technology and education.”

Aging workers

Taiwan’s $530 billion economy depends largely on development of consumer electronics. The GDP rises and falls with shifts in world consumer demand, which means keeping up with what consumers want. Younger people are more likely than their elders to have ideas for high-tech innovation and spare the long working hours often required in Taiwan, some analysts say.

“Retaining productivity in the manufacturing sector, which is a key driver of economic growth but has faced increasing risk of being hollowed out, is perhaps most crucial for Taiwan,” says Anushka Shah, assistant vice president and analyst for sovereign risk group at Moody’s Investors Service. “Ensuring strong rates of productivity in this sector would eventually play out in visible impacts on Taiwan’s growth performance and economic competitiveness.”

Startup founders over age 40 are less likely to toy with new technology than younger ones despite their networks and management experience, said Jamie Lin, founding partner of the accelerator AppWorks Ventures in Taipei. Older founders in Taiwan often invest in traditional industries such as biotech and chip design rather than e-commerce, Lin says.

A country faced with population decline–and a number of those are sprouting in Asia–should increase worker output through other means, such as automation, says Tony Phoo, an economist with Standard Chartered in Taipei. Otherwise employees must work longer hours to sustain the productivity of years when the population grew. “You try to make everyone more productive,” Phoo says. “But not as easy [done] as said. You have to invest a lot in infrastructure to allow your population to grapple with a falling birth rate.”

A media liaison for the National Development Council said Friday the department lacked research on how Taiwan will manage its low birth rates over time.

Shifting resources to the elderly

Average incomes in Taiwan will eventually fall without government intervention in a shrinking population, Phoo says. By looking to neighbouring Asian countries that have struggled with the same issue, it offers a clue to what other problems may lie ahead for Taiwan’s economy if birth rates stay low.

For example, Japanese sometimes quit jobs early in life to take care of aging parents, an obvious drag on a country’s average pay. “These are people in prime of their productive years, so that’s the biggest loss,” Phoo says. Japan began grappling with low birth rates before Taiwan and other parts of Asia faced them.

Taiwan’s government will eventually be pressured to raise its healthcare budget to help the elderly too, economists predict. Partly for this reason, Japan is the most indebted country in the world.

“A structural shift away from digitalisation or modernisation of the economy would, over time, be reflected in increased spending on pensions and aging-related expenditures, with possibly adverse fiscal implications,” Shah says.

https://www.forbes.com/sites/ralphjennings/2018/05/20/taiwans-population-will-decline-by-2021-why-thats-bad-news-for-its-tech-led-economy/#245648625792

 


Category: Taiwan

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