ANALYSIS: ASIAN AGEING of more than ten years each. “Although median age is set to rise throughout the region, smaller Asian economies are more at risk. In particular, note that median age will hit around 55 in Taiwan, Japan, Korea, Hong Kong and Singapore. In contrast, US will stay relatively young at 40 thanks to a higher birth rate,” said HSBC’s Wang. “A direct implication of rising median ages and over 65 ratios is a much larger old age dependent population vis-à-vis a shrinking workforce. In other words, dependency ratios – the number of 0-14 plus over 65 year olds to those aged 15-64 – will rise sharply. Over the next four decades, dependency ratios will more than double in Hong Kong, Japan, Korea, Singapore and Taiwan. The ratio will be higher than 1:1 in Hong Kong, Japan, Korea and Singapore,” added Wang. The fast graying of Asia is not merely a possibility, but more an inevitability, according to Wang. “Bear in mind that demographic projections are based on parameters such as fertility, mortality and life expectancy, which are largely known and unlikely to change short of major catastrophes or scientific breakthroughs. As such, demographics are more like projections than forecasts.” Driving forces for aging Asia’s demographic transition toward older populations is part of a natural progression, said Donghyun Park, Principal Economist, Economics and Research Department at Asian Development Bank (ADB). “The region is simply following in the footsteps of the advanced countries. As in the advanced countries, Asia’s demographic transition is driven by rising life expectancy - i.e. people are living longer - and falling fertility - i.e. women are having fewer babies,” said Park. The biggest headline is not that Asia is getting older, it is that it is getting older at such a brisk pace that it might catch unprepared countries flat-footed. “What separates Asia from other parts of the world is the exceptional speed and scale of the demographic transition. This
is especially true in East Asian countries,” said Park. Different strategies Asian countries, Park said, face different strategies for coping based on their stage of aging, which can range from early to advanced. “Some Asian countries such as Korea and Singapore are at the advanced stage of aging. Other countries such as India and Philippines are still at the early stages while yet others such as China and Thailand are in between,” said Park. Advanced-aging countries should be the most aggressive in addressing the impact of population aging, according to Park. Relatively younger countries have some more leeway, but it will do them well to begin preparing earlier than later. “Addressing the impact of population aging is an urgent priority for advanced-aging countries. In contrast, the much more important priority for early-aging countries is to take full advantage of their youthful populations and thus reap the demographic dividend,” said Park. “However, even for younger Asian countries, the time to prepare for population aging is now even though a greyer future may seem to lie on the distant horizon. This is because policies implemented today will affect the ability of individuals to prepare for their retirement two to three decades down the road.”
A direct implication of rising median ages and over 65 ratios is a much larger old age dependent population visà-vis a shrinking workforce.
Two socio-economic challenges ABD’s Park said population aging poses two strategic socio-economic challenges for Asia: Sustaining growth that has so far been driven by the now-shrinking youth cohort, and providing the rising number of elderly with sufficient support, financial or otherwise. “First, the region must find ways to sustain growth in the face of less favorable demographics. A relatively youthful population and consequently an ample pool of workers gave Asia a sizable demographic dividend in the past but, as a result of rapid aging, the dividend is gradually turning into a tax across the region,” said Park. “Second, Asia must strive to deliver affordable, adequate and sustainable old-age income support for its fastgrowing elderly population. Failure to do so poses a serious risk to inclusive growth since a large and expanding segment of Asia’s population may become poor and marginalized,” said Park. Underdeveloped public transfer payments There are three main forms of oldage income support, according to ADB’s Park. First is private transfer payment in which adult children support their parents financially. Second is asset draw down in which the elderly spend their savings to pay
Percentage over 65 in total population: graying fast.
50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%
Sour e UNPD
Source: UNPD, HSBC
SINGAPORE BUSINESS REVIEW | FEBRUARY 2012 43
Published on Feb 13, 2013