The region’s aging population poses challenges and opportunities. As the age dependency ratio rises, it's vital to address healthcare, pensions, and food security. Investments in capital, technology, and human capital development are crucial for the 'silver workforce'
In 2018, for the first time in human history, the number of people older than 64 surpassed the number of children under 5. By 2050, one in four people in Asia and the Pacific will be over 60 years old. The number of older people in the region will triple between 2010 and 2050, reaching close to 1.3 billion people.
The age dependency ratio, which indicates the ratio of people under 15 and over 64 to the working population, has been on a steady rise in 19 of 46 developing economies in the region over the past decade. The ratio is an indicator of how many people are out of the workforce and assumed to be dependent on those in the workforce. This trend, as demonstrated by data from Asian Development Bank’s Basic Statistics 2023, reverses the decline seen throughout the century.
In Thailand, the age dependency ratio has risen from 38.8 in 2012 to 43.5 in 2021, while in the People’s Republic of China it has increased from 37.6 to 44.5 over the same period. Significant increases in the age dependency ratio have also been observed in Georgia, Armenia, and Turkmenistan. These trends suggest that the issue is more prevalent in middle- and high-income countries, rather than being regionally based.
Indeed, prosperity often brings with it demographic decline. Several Asian countries are now grappling with a shrinking population. A combination of low fertility rates and rising age dependency ratio signifies notable increases in the elderly population.
United Nations' World Population Prospects 2022 confirms this trend. The old age dependency ratio, or the ratio of elderly people (65 and over) to the working-age population, is rising rapidly in the region. In the People’s Republic of China and Sri Lanka, the ratio has almost doubled since 2000.
In Thailand, it has more than doubled over the same period, from 8.7 to 20.8. Other large Asian economies, such as Cambodia and Indonesia, also demonstrate rapidly rising old age dependency ratios. India, soon to be the world's most populous country, has seen this ratio increase from 7.4 in 2000 to 10.1 in 2021.
This demographic shift is not necessarily a cause for concern. Lower fertility rates, improved healthcare, and better diets, all leading to longer life expectancy, are indicators of economic and social progress. The challenge lies in managing the associated pressures on health, social care, pension, food security, and fiscal systems due to an increasing elderly population.
Cultivating the 'silver workforce' involves more than just extending the working lives of the elderly.
It is crucial to establish comprehensive pension systems and ensure widespread coverage as the region ages. Adequate pension systems not only help older people avoid poverty, but they also contribute to increased savings, which is important for continued economic growth in aging societies.
Unfortunately, current pension schemes in Asia and the Pacific are insufficient for the existing elderly population, let alone the upcoming influx. In many countries, less than half of the working-age population has access to a pension.
The question, then, is how to enable low- or middle-income countries, which comprise more than half of the top ten countries in the region with the highest old age dependency ratio, to adequately support their elderly populations in the latter half of this century. Policies need to be devised that maximize the social and economic contribution of older citizens, and this may not be as simple as extending their working years.
Technological advancements necessitate the updating of skills among older workers. Policies that promote lifelong vocational learning, especially those catering to older learners, can be beneficial. In addition, strengthening health services and preventive care to keep the elderly fit and active at work is important. Using technology to enhance the productivity of older individuals and match them to suitable jobs can also be advantageous.
While reducing societal dependency on the increasing number of elderly individuals by prolonging their working lives is one strategy, another is recognizing this new workforce as a potential economic asset. While the "demographic dividend" refers to the increase in the working-age population, the "silver dividend" alludes to increased longevity and extended working lives as potential sources of growth in aging societies. There is optimism that an aging population can yield an economic "silver dividend" that can counteract reductions in the demographic dividend.
Labor shortages caused by population aging are largely compensated for by higher labor force participation rates among older workers, according to a recent study. Higher life expectancy, increased investment in human capital, and greater trade openness enhance the mitigating effect of an increased labor force participation rate among older people.
However, a key concern is that this trade-off (more older workers in the economy as the population gets older) is often insufficient to ensure sustained economic growth. This is because an increase in the number of older workers often negatively affects overall economic output.
Therefore, maintaining growth in aging societies that are still developing may necessitate policies that address labor productivity. This includes investing in capital and technology, as well as human capital development.
These policies would need to be tailored to the elderly, such as providing education later in life and offering focused vocational training that imparts relevant, contemporary skills. This ensures their ability to participate in the economy at the same level as their younger counterparts.
Cultivating the 'silver workforce', therefore, involves more than just extending the working lives of the elderly. Enhancing productivity by ensuring their skills remain up-to-date and relevant may be increasingly crucial if the growing presence of older individuals in the workforce in Asia and the Pacific is not to impede economic growth in the 21st century.
This blog post was based on research from the publication, Basic Statistics 2023.