Many advanced democracies face slowing growth of GDP because their birth rates are low, implying aging populations.
Because demographics are supposed to be destiny, Japan was long ago consigned to stagnation with its aging population and rock-bottom birthrate.
But in recent years Japan has defied destiny. Since 2012, its working-age population has shrunk by 4.7 million, yet the number of people working has surged by 4.4. million, the critical ingredient in what is now Japan’s second-longest economic expansion since World War II. The proportion of the population in the labor force has risen sharply since 2012, by more than in any other major advanced economy.
Japan is refreshing its labor force from three often-neglected pools: the elderly, women and foreigners.
As the article notes, Japan's experience
offers important lessons for the many other countries that now, or will soon, face similar demographic pressures. A population’s size can still impose limits on long-term growth, but they may be further away than long assumed by economists and policy makers.
Assuming, of course, policy does not disincentivize labor force participation by the elderly and women, or unduly restrict immigration.