Public Policy and Politics in Times of Population Decline

Part 8: The Influential Elderly

OGURO Kazumasa
Consulting Fellow, RIETI

Japan is probably the first country in human history to experience democracy with its population aging at tremendous speed. Undoubtedly the ratio of the retired generation among all voters will rise in many other advanced countries as well. If each individual person acts in a self-interested manner and follows the lifestyle hypothesis of trying to use all of his or her savings by the end of their lifetime, the time perspective for political decision making narrows even further.

When politicians respond to the strong influence exerted by the retired generation and act to maximize this generation's utility, such case is referred to as the silver democracy hypothesis. This axiom is thought to be one reason why government debt has ballooned in recent years and intergenerational disparities have not been rectified.

The median voter theorem, well accepted in the study of political economy, holds that policies easily reflect the intentions of voters who maintain a median preference (middle-aged and elderly generations in Japan today). The reason why such an inclination has developed is obvious if one realizes that the median age in Japan in 2015, including people who are under 20 years old and do not have the right to vote, is around 47 years old. In other words, those people who are 47 years old and over account for a majority of the population. It seems clear which generation will see an advantage if it attains a majority.

However, it is not indisputable that silver democracy actually exists. Together with then Senior Researcher Manabu Shimasawa of the National Institute for Research Advancement, I used data from 2000 to 2010 to verify whether or not the elderly have become more politically influential as the population composition has progressively changed. The results confirmed that welfare expenditures for the elderly have risen along with a rise in the median age even after controlling for income, expenditures, business activity, and political factors.

We need to be cautious when making a decision about the validity of the silver democracy hypothesis. Yet, regardless of whether such changes are intentional or unintentional, it is sufficiently possible that the elderly generation, which possesses comparatively strong political power, has imposed an excessive burden on the younger and future generations that do not have the right to vote. This may be said to be one example of government failure and, by extension, a failure of democracy.

>> Original text in Japanese

* Translated by RIETI.

November 5, 2015 Nihon Keizai Shimbun

January 28, 2016