Aging in Asia: trends, impacts and responses
The demographic transition towards an aging population is more advanced in developed countries like Japan and in People’s Republic of China and the newly-industrialised economies (NIEs) - Hong Kong, China; Republic of Korea (Korea); and Singapore. However, many of the developing countries in the region are on the same demographic path, and they are making the transition at a much faster rate.
This paper analyses the impact that ageing is having in Asia, examines the policy options for dealing with the problems it is causing, and outlines how different sub-regions may
require different responses.
Policy options highlighted include:
- in the case of Japan, the PRC and the NIEs, where aging is relatively advanced, the biggest
challenge will involve sustaining output growth and preventing a decline in standards of living,
despite a contraction in the labour supply. Where possible, labour force participation rates should be increased. This will mean exploring education reforms to facilitate the entry of young
adults into the labour force; removing barriers to the participation of women; and increasing the
mandatory retirement age, or scrapping it altogether
- ageing countries could also use regional interactions as a way of getting around labour shortages, by allowing greater migration or immigration, or continuing to export capital to countries with a youth bulge
- there is a need to find more sustainable alternatives to unfunded, PAYG pension systems. Where possible, moving to funded pensions should be considered
- policymakers could consider creating voluntary personal accounts or provident funds as supplements to PAYG systems. PAYG systems can also be redesigned. One way to do this would be to shift to a notional defined contribution system, which establishes a direct link between contributions and benefits. The use of automatic benefit stabilisers, where benefits are indexed to demographics instead of wages, could also be explored