Why today’s economy is not dependent on the number or age of the population

Vladislav Inozemtsev on why today’s economy is not dependent on the number or age of the population

Last week, speaking at the Eastern economic forum, the President set the governmentthe task “in the next three years to reach a sustainable population growth in the far East”.

In those days the specialists of Rosstat published figuresshowing that the proportion of economically active population peaked in 1992 — today in Russia there are 70.1% of working-age population aged 15 to 72 years. Does this mean that the country is facing growing demographic problems that require raising the retirement age, more active involvement in the production activities of labor reserves, the planned work to stimulate the relocation in depressed regions, and, finally, the promotion of immigration? Personally I’m not so sure.

Most popular judgments on demographic topics date back to the days when the population was a major indicator of the power and success of the state. It was understandable in the era of agrarian and less, but still an industrial society, when production grew in proportion to the number of employees, the rulers needed a mass army, while the number of children determined by the possibility of the survival of the older generation in the absence of social security.

However, those days are gone, and approaches should change.

You can start with the total population. Today, it’s not like this figure is significantly affect a country’s economic power or standard of living. 36 million people in Canada exceeds its GDP (calculated at purchasing power parity of currencies, about the nominal figures I do not speak) industrial Turkey and oil-rich Iran, two countries with 79 million inhabitants and 17 million people in Holland — 100-millions in the Philippines.

Does not exist as such, and the optimal population density: if we compare formally successful and quickly expanding the number of their inhabitants, States with Italy, whose population is stagnating in the last thirty years, be that in America, per 1 sq. km accounting for 35 people, whereas in Italy is 202 people.

Until recently, a significant figure was considered the average age of citizens: a significant increase in the number of retired and elderly individuals presented a threat to economic activity, as maintaining the balance of the pension system required a tax increase. But even that ceases to be a problem, as, on the one hand, increase the duration of active life allows you to review the minimum retirement age and, on the other hand, medicine and personal care to be one of the most important sectors of the modern economy.

Economically, the ageing of the population has not yet “brought to a standstill” no country.

And coming from a threat, in my opinion, resemble a primitive “horror” of 1970-ies: the exhaustion of fossil resources, the inability of humanity to feed itself, stories about automation and robotics that will make the unemployed a large part of the population of any developed country.

 

 

I am convinced that in the XXI century successful may be the state with any population and any population density, without regard to its median age and fertility rate. In the same way it was true that the state whose population has the most “favorable” characteristics, can go from one failure to another.

All questions, anyhow concerning the population mean in our world, not demographic but economic in nature. If we turn to Russia, we have in this area there are obvious problems, not related to neither the population nor its spatial distribution and due solely to the primitivism and inferiority of our government.

Russia should not call due to the number of its citizens.

The country is quite able to feed and provide jobs and 200 million and 300 million people, but at the same time, it can be a much more lived-in and well-groomed, even if her population reduced in half, twice.

Before Russia is not worth a call associated with the aging of the population. More than a third of retirees (14.2 million of the 35.5 million people as of January 1, 2016) continue to work, and the pension system should, on the one hand, to bring into line with the changed economic and social realities, as I already wrote, and with another — to cease to withdraw from her savings component, plugging the holes that appear in the budget because of the insane financial appetites of the security forces.

 

Before Russia is not worth calling the territorial distribution of the population in the world are well-known cases when sparsely populated and not suitable for living areas make a significant contribution to the welfare of the country and the standard of living in them is significantly superior to the average.

In my opinion, the Russian leadership and people should be aware of some important considerations.

First, what employment employment strife. Although, it would seem that all the workers receive a salary, spend money on goods and services and thereby multiply the country’s GDP, the situation is not so simple.

A significant portion of economically active people perform pointless and even harmful functions, constraining economic growth.

While in Russia their number in recent decades it has grown to enormous quantities. I mean police officers (more than 1 million people), guards (about 900 thousand), representatives of different kinds of regulatory and inspection bodies (about 700 thousand), as well as drivers and lower staff of public and parastatal offices.

Together with the military and security authorities, these categories of citizens have counted as many as 7 million people, or about 10% of the economically active population.

These people mostly either duplicate the function, in fact, not coping with them (in a normal society, the number of police and security guards can not grow at the same time), or create artificial barriers in the way of economic growth. Here, if Russia will in the future normally — hidden with a large reserve of replenishment of the number of productive workers and overcoming demographic problems.

Second, we need to realize that the desire to save on wages — is deeply flawed from an economic point of view practice. First of all, in this case artificially restrained consumer demand in Russia now wages are less than 40% of GDP, whereas in the USA almost 70%) in competitive sectors, which supports the nationalization of the economy and the preservation of its legacy structure.

In addition, low salaries impede technological upgrading (if you have a nearly free labor force, why to invest to new machinery and equipment), and in Russia it shows how little where else.

Finally, low wages rise in some sectors, an artificial shortage of workers, which stimulates migration, more pressure wages down and reproducing the cycle.

In other words, you need a significant increase in the level of the minimum wage, it will help to reduce excess employment, and to launch a process of technological renewal.

 

The excess of the minimum salary subsistence minimum of able-bodied citizen, at least 1.5 times (which is logical, given the need to contain children and senior citizens) will quickly show the lack of any shortages on the Russian labor market.

Thirdly, you should not reviving the Soviet myths, to keep the population in the regions uninhabitable.

With the Kuril Islands and other remote areas leaving not because there is little pay, but because there is nothing to do.

Contrary to popular notions, the Russian far East is pretty crowded. The average population density in the far Eastern Federal district of 1.05 persons per 1 sq km, whereas in Alaska — 0,48, and in the Canadian Northern territories — 0.07 man. However, the regional gross product of the same Alaska exceeds the GRP of the far Eastern Federal district 15% and the average income of the population in this U.S. state is above 11 times. And this situation makes the economy of Alaska less competitive. For information: main export product is oil, and processed fish and other marine bio-resources.

Moral: if in the region have nothing to do, no need to bring people there and create cities on the permafrost for the sake of “exploration of space”, it is much wiser to extract minerals on a rotational basis, to develop large settlements and rely on the fact that a potential enemy from the South will not hamper the local militia, and responsible and rational foreign policy or, at worst, the world’s largest nuclear Arsenal.

Finally, fourth, the government should pursue sound policies in education and training. Today Russia has a universal higher education, which, given the state of our economy, there is no need. However, studying at University, young people lose four to six years of potentially productive age in terms of when to work on the received speciality” manages less than 35% of the graduates.

 

Shortening the excess of education, improving the system of selection and promotion of talented young people and cutting off those who are unlikely to benefit from learning, is another important resource from which the economy can “draw” the required frames.

All depends not on how many people live in a particular society, but because they live in it or work, and if working, how effectively.

The list goes on, but the General meaning is clear: the era when the population of what was decided, was held. Today the determining factor of economic growth is the quality of the workforce, not the quantity.

In the “knowledge economy” hundreds of mediocre programmers will not do what will achieve one talented professional.

The work that was done before a farm can use high-quality equipment to perform three or four of the farmer. The modern world is a civilization that has already entered the period when semi-skilled labor is a resource available to the greatest excess.

And if the country feels increasing its deficit, the problem is not low birth rates, and outdated thinking of its elite.