Growing old before growing rich in Asia

 

The 21st century will be one of ageing populations in all Asian countries — driven by the spectacular falls in fertility and mortality rates in the second half of the 20th century. These demographic changes date back to as early as the 1950s when countries across the region pursued policy measures to reduce fertility rates.

In a study of 14 Asian countries, all but two (Japan and Australia) had high fertility of between five and eight births per woman in the early 1950s. By 2005–10, only two countries, the Philippines and Pakistan, had a fertility rate above three and, in both these cases, fertility was trending downwards strongly. Evidently, the campaign to reduce fertility rates in Asia has been remarkably successful.

Yet the speed and timing of the decline in fertility has varied across countries. In India, for example, the decline started in the early 1960s but has proceeded slowly. In contrast, the decline in Iran started in the mid-1980s but was spectacularly fast. Generally, the falls in the Southeast Asian countries proceeded more slowly than in the East Asian countries with Thailand being on the faster end and the Philippines on the slower end. In Pakistan, fertility did not start falling until the 1990s, but has declined strongly since.

In five of the countries studied (Japan, South Korea, China, Singapore and Thailand), the fertility rate is now very low at under 1.5 births per woman. Combined with previously high fertility rates, this will produce large increases in the proportion of population at older ages.

Increases in life expectancy have also been spectacular. Life expectancy at birth exceeded 65 years in only one of the countries (Australia) in 1950–55, but it did so in all 14 countries by 2005–10.

As life expectancy rises, countries are facing substantial increases in the demand for aged care and health services and income support for elderly people. Australia and Japan have had many years to develop policies and programs to address these challenges. Singapore has policies for an ageing population in place, but still also faces a significant problem because of its very low fertility rate. For the other 11 countries, aged care and income support policies are, at best, in an embryonic state and health systems are not well prepared.

As populations in Asia age rapidly, numbers entering the labour force will be declining. This will be a greater problem for those countries that have experienced rapid and substantial fertility decline compared to those where the decline was more gradual.

The trends in labour supply can be seen by looking at the ratio of the projected number of persons aged 15–24 years in 2050 compared to the number in the same age group in 2010. For China, this ratio is 0.57 meaning that the number aged 15–24 in 2050 (139 million) will be 43 per cent lower than the number in 2010 (242 million), a fall of over 100 million in the labour force entry ages. In 2050, the numbers aged 70–74 in China will be larger than in any other age group and the numbers taper down across all the labour force ages. So, not only will the labour force in China be much smaller, it will also be much older.

Immigration cannot be a solution to these labour shortages given that China’s population base is so large. China will likely have to look to investment in other countries that will have large labour supplies (India, Indonesia or several Sub-Saharan African countries).

For seven of the 14 countries, the fall in the size of the labour force entry age group is more than 80 per cent with the falls in Thailand and Vietnam being similar to that of China.

The fall is not as large in Japan. Still, the labour force will fall year upon year and will age further in coming years. The challenges ahead for the Japanese economy are probably greater than has been the case in the past two decades.

In India and Indonesia, the number of persons aged 15–24 years in 2050 will be roughly the same as in 2010. Provided their young people are well educated, India and Indonesia should have a labour supply advantage over the next 40 years. In the Philippines, the population aged 15–24 in 2050 will be 35 per cent larger than in 2010. We can expect the Philippines to continue to be a major supplier of labour around the globe.

Finally, with a 44 per cent increase in the population aged 15–24 over the years from 2010 to 2050, Australia stands out as a country with a growing supply of young workers. This is because its fertility rate has continued to remain close to the replacement level and because of its sustained immigration program.

A number of countries (Australia, Malaysia, India, Bangladesh, Indonesia and the Philippines) are projected to have a ‘beehive’ shaped age structure by 2060. This is generally considered to be a favourable age structure with a relatively high concentration in the working ages. The issues for these countries will be more economic than demographic with a strong need to improve labour productivity through education and training.

India and Pakistan will have huge growth in the working age population from 2010 to 2060, and growth in the labour supply will easily compensate for the combined falls in labour force in the advanced countries of Asia and Europe. Out-sourcing of jobs to South Asia will be a growing feature of 21st century Asian economies.

Peter McDonald is professor of demography at the Crawford School of Public Policy, The Australian National University.

An extended version of this article was published in the most recent edition of the East Asia Forum Quarterly, ‘Asia’s Intergenerational Challenges‘.