One example is found in the high and smoothed payout ratios to both executives and shareholders of public companies even when underlying company profitability is low, perhaps even negative. Another is that longer-term cashflows from company projects appear to be “excessively” discounted (Davies et al (2014)). This can lead to projects which boost the long-run value of the company being wrongly rejected. Consistent with that hypothesis, privately-owned companies seem to invest more than otherwise-identical public companies (Davies et al (2014)). There is some debate about where the blames for this corporate myopia problem may lie. Some place it at the door of shareholders, driven to demand short-term returns by short 4  BIS central bankers’ speeches  holding periods. Others blame management for seeking short-term financial gain given their short tenure. This distinction may anyway be artificial. In a world where executive compensation is largely in stock, the two are one and the same, their incentives largely indistinguishable. So how does all of this link to inequality? If impatient (money-scarce) individuals are failing to invest sufficiently in skills, and impatient (short-termist) companies are failing to invest sufficiently in capital, this is a recipe for weak (human and physical) capital accumulation. This will show up in weak long-term investment and skills deficits. The most likely casualties from this are productivity and growth. If there are legs to this story, then one important element is corporate governance. This defines decision-making within firms – how much to invest, how much to distribute, and to whom.
This has weighed heavily on resident population growth as seen from the relatively close correlation with the TFR. There appears to be three distinct phases in the last 30 years: In the 1990s, both the TFR and resident population growth declined in tandem. In the 2000s, the TFR continued to decline but resident population growth recovered. This reflected net positive immigration as the number of new citizens and Permanent Residents grew. In this decade, the TFR appears to have stabilised at around 1.2–1.3 while resident population growth fell sharply reflecting the tightening of immigration flows. 2 / 17  BIS central bankers' speeches  The next two slides are a thought experiment. They are not a forecast or prediction but aim to illustrate the implications of having very low resident population growth. First, let us assume that we have zero net immigration starting from this year. The resident working-age population – this is defined as citizens and permanent residents between the ages of 15–64 – will begin to shrink from around 2020. The exact year is not key. What is important to note is that it is not far off. By 2035, the working-age resident population will possibly decline by a cumulative 3.5%. 3 / 17  BIS central bankers' speeches  Second, let us assume zero net increase in foreign workers from now on. The overall labour force will decline gradually from around 2022, driven fundamentally by the shrinking resident labour force. These two assumptions taken together – zero net migration (i.e.