Andrew Mason: ASIA'S SHRINKING WORKER POPULATION WILL MEAN SLOWER ECONOMIC GROWTH
Date: 01-26-2001
Andrew Mason, senior fellow in population and economics, East-West Center, and speaker at the
East-West Center's Asia Pacific Executive Forum on "Doing Business in a Changing Asia: A Strategic Vision" held Jan. 16-19. Topic: "Aging Asia: Most Pressing Demographic Issue of the Century"
ASIA'S SHRINKING WORKER POPULATION WILL MEAN SLOWER ECONOMIC GROWTH
In Japan there are more people 65 and older than under 15. The working age population is being squeezed between longer life expectancies and declining birth rates in Japan, South Korea, China and other Asian countries.
Rapidly aging populations among the 3 billion people in Asia today will bring challenges such as labor shortages, aging work forces, lower rates of savings and investment, and substantially higher tax rates. With less demand for capital, foreign investment will seek countries with more abundant work forces.
Aging populations will mean growth in certain sectors such as financial services due to greater pension wealth, health care, and tourism among retired people. However, the bottom line: slower economic growth in the region.
Pension issues will create great challenges. The average duration of retirement is increasing due to longer life expectancy, but more to earlier retirement. In Japan in the last 15 years, half of the increase in the length of retirement was due to people leaving work at a younger age. Meanwhile the number of workers to support retirees has shrunk.
There are three important approaches to supporting the elderly. One is traditional family support systems. They are much more important than in the West, but they are beginning to erode. In Japan and South Korea, about half of the elderly live with their children compared to 80 percent a few decades ago.
The second approach is saving. Overall, saving rates are much higher in many Asian countries than in the United States. But like the United States, many elderly have accumulated little financial reserves. Moreover, "the recent financial crisis has destroyed the financial resources of many."
Many Asian governments are considering proposals to expand public pension programs. Some are based on pay-as-you-go principles, like the social security system in the United States. Other countries are considering compulsory saving programs such as those found in Singapore and Malaysia.
Public pension policies can be successful only if governments are sufficiently efficient and stable to make long-term commitments. Reliable retirement programs require complex administration, dependable financial systems, adequate government regulations, and low levels of corruption.
Some of the more advanced countries of Asia have public and financial institutions that can meet the major challenges that rapid aging will bring. "But other Asian countries are experiencing population aging at a much lower level of development. It is uncertain that countries like Indonesia will have the political and financial institutions in place to handle retirement programs."
Andrew Mason can be reached at the East-West Center at 808-944-7455 or amason@hawaii.edu