Monday, May 24, 2010

That's The Spirit

Labor market statistics from Taiwan today confirmed the strong recovery indicated by Thursday's GDP numbers. Employment grew 0.3% compared to the previous month and 1.85% compared to April 2009, while average pay increased 5.7% (note that in introductory text it is described as a decrease, but if you look at the table it is clear that it is an increase).

Apart from confirming that Taiwan and the rest of Asia is experiencing a rigorous recovery, there was another interesting aspect in the way the pool of potential workers was defined.

Both the employment rate and the labor force participation rate are calculated as employment or labor force relative to the working age population. The working age population in turn is usually defined as everyone in the age range of 15 to 64 (or sometimes 16 to 64, 20 to 64 or 15 to 74). People younger or older than that are considered too young or too old to work, so they aren't included.

Yet in Taiwan, the working age is defined as everyone older than 15. By assuming that even people older than 65 or 75 is capable of working they have the kind of spirit which can solve the problems associated with an ageing population (meaning the increased burden of providing for people that have retired).

There are many proposed solutions to this problem, including increasing the birth rate, increasing immigration and the use of robots and other forms of mechanization, yet none is as effective as raising the retirement age. Because not only will this mean more workers, it will mean that the number of people the workers have to provide for will be fewer.

Of course, as long as only a small fraction of old people work, it can in some contexts be analytically misleading to include old people in the working age population, so the popular Western definitions are not always wrong. But to the extent Taiwan's definition an attitude that anyone capable and willing to work should do so no matter how old that person is, it increases Taiwan's chance of avoiding the problems associated with an ageing population.