Japan's Population Dilemma

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Finally an article that brings out the dilemmas and Hobson`s choices linked to Japan's plunging population growth:

Japan’s Phony Solution - The half-truths about immigration, Paul J. Scalise, NEWSWEEK, Apr 30, 2010

Exerpts -

Japan’s population has peaked. A downward turn is expected to follow, reaching close to 100 million in 2050 and 45 million in 2105. That means fewer workers paying fewer taxes to support an already expanding army of senior citizens. With social security, pensions, and interest payments on the national debt occupying more than 50 percent of Japan’s national budget in 2009 (up from 19 percent in 1960), the government, sooner or later, will face a decision of crisis proportions. Does it raise taxes sharply? Cut benefits drastically? Go deeper into debt? Or throw open the doors to young foreigners to restore balance between workers and retirees?

...Highly skilled, high-wage immigrants present their own problems. Feldman’s Japan model assumes that the average immigrant would be less productive than local hires because of different languages, work habits, traditions, and educational needs. And what’s never explained is how to attract the “right” immigrants and assimilate them in the first place. Right now, Japan’s average compensation per employee (adjusted for purchasing-power parity) is 36 percent lower than in the U.S. and 15 percent lower than in the euro area, according to the OECD. Worse, monthly cash earnings have been falling slowly for the past decade. If Japan wants to attract doctors, nurses, and engineers, and keep them, it needs to pay them more. And therein lies the rub. Is it really worth it in the long run?

Japan’s Ministry of Health, Labor and Welfare estimates the fiscal cost and benefits of an influx at three different stages of an immigrant’s life. In stage one, when only single youths are admitted, the government gains more in tax payments than it pays in benefits. In stage two (with spouse) and stage three (with spouse and two children), the benefits paid by the local and central governments far exceed the tax revenues. If 500,000 migrants were to enter Japan in stage three, the ministry estimates, the net loss would become a whopping ¥1.1 trillion, or about $12 billion.

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REFERENCE - 

Japan’s Phony Solution - The half-truths about immigration, Paul J. Scalise, NEWSWEEK, Apr 30, 2010 http://www.newsweek.com/id/237213