The Third Pillar: How Markets and the State Leave the Community Behind

by Raghuram G. Rajan

As nations get wealthier, women have fewer children, and have them later. Wealthy populations are, therefore, aging. As the population ages, the labour force shrinks, and fewer and fewer workers support more and more retirees. Forty countries now have shrinking working-age populations, including China, Japan, and Russia.2 Fear naturally sets in as middle-aged citizens wonder who will pay for their retirement. Japan is in the forefront of population aging, with its working-age population falling at 1 per cent per year, and nearly four hundred schools shutting every year.3 Thus far, it has adapted in two ways. Its workers are staying in the workforce longer, beyond the normal retirement age, and women are working outside the home at a greater rate. At some point, these additional sources of labour will reach their limits. Recognising this, Japan also plans to automate more, using robots to substitute for the lack of workers. For example, Pepper, a big-eyed humanoid robot made by SoftBank, can lead exercise activities for a group of the elderly, talk to lonely patients in nursing homes, and patrol corridors at night. There is another solution, though: allow more immigration. After all, humans are still considerably more flexible than robots in accomplishing a variety of tasks. Immigrants have children who can add to the shrinking labour force and stabilise it, well before the burdens of supporting the elderly become impossible. They also spend their wages on consumption, some...

Machines versus humans