Demographic Change in Asia: Demographic Change in Asia: The Implications of Evolving The Implications of Evolving
Support Systems Support Systems
Andrew MasonAndrew MasonEast-West Center and East-West Center and
University of Hawaii at ManoaUniversity of Hawaii at Manoa
Community 50+ AsiaCommunity 50+ Asia
Three Key Features of AsiaThree Key Features of Asia
Demography: Asia is experiencing slower Demography: Asia is experiencing slower population growth and rapid population aging. population growth and rapid population aging.
Economic lifecycle: High consumption but low Economic lifecycle: High consumption but low labor income during old age. labor income during old age.
Diverse systems for meeting the material needs Diverse systems for meeting the material needs of the elderly. of the elderly. Financial systemsFinancial systems Public programsPublic programs Familial supportFamilial support
Why are the three features Why are the three features important?important?
Economic growth and standards of livingEconomic growth and standards of living
Government budgetsGovernment budgets
Intergenerational relationships Intergenerational relationships
Regional distribution of wealth (and power)Regional distribution of wealth (and power)
Bottom LineBottom Line
Basis for optimism: Population aging Basis for optimism: Population aging means fewer workers, but more wealth.means fewer workers, but more wealth.Policy imperativesPolicy imperatives Avoid excessive reliance on transfer Avoid excessive reliance on transfer
programsprograms Improve financial systemsImprove financial systems Promote education of consumers and Promote education of consumers and
policymakerspolicymakers Proceed without delay!Proceed without delay!
Research BackgroundResearch Background
International project based at the East-West International project based at the East-West Center and UC – BerkeleyCenter and UC – Berkeley
Research teams from 23 countries participating Research teams from 23 countries participating including US, Japan, China, Korea, Taiwan, including US, Japan, China, Korea, Taiwan, Thailand, Philippines, Indonesia, and India.Thailand, Philippines, Indonesia, and India.
Results are preliminary.Results are preliminary.
Core support from the National Institute on Core support from the National Institute on Aging.Aging.
Details: Details: www.ntaccounts.orgwww.ntaccounts.org
First Feature:First Feature:The DemographyThe Demography
Population Decline: Labor Force China, Population Decline: Labor Force China, India, Japan, and the US, 1950-2050India, Japan, and the US, 1950-2050
0
100
200
300
400
500
600
700
1950 1975 2000 2025 2050
Eff
ecti
ve l
abo
r fo
rce
(195
0=10
0)
.
India
China
US
Japan
Labor force decline has begun in Japan; on the
horizon in China.
Population Aging: China, India, Population Aging: China, India, Japan, and the US, 1950-2050 Japan, and the US, 1950-2050
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
Po
p 6
5+/P
op
20-
64
China
India
Japan
USA
Cause of Population Aging: Cause of Population Aging: US versus Japan in 2006US versus Japan in 2006
Life expectancy greater in JapanLife expectancy greater in Japan 82 in Japan82 in Japan 78 in US78 in US
Fertility is much lower in Japan Fertility is much lower in Japan 1.3 births per woman in Japan1.3 births per woman in Japan 2.1 births per woman in US2.1 births per woman in US
Immigration is much lower in JapanImmigration is much lower in Japan Negligible in JapanNegligible in Japan 1 million per year in US1 million per year in US
Most important by far!
Low Fertility Common in AsiaLow Fertility Common in Asia
0 0.5 1 1.5 2 2.5 3 3.5
S Korea
Taiwan
Japan
Singapore
China
Thailand
Malaysia
Indonesia
India
Births per woman
Replacement fertility:Below this birth rate population cannot be
sustained.
Source: Population Reference Bureau 2007.
The Demography: SummaryThe Demography: Summary
Rapid population aging is occurring or will Rapid population aging is occurring or will soon begin in many Asian countries.soon begin in many Asian countries.
Population decline is also likely.Population decline is also likely.
Low fertility will exacerbate these trends. Low fertility will exacerbate these trends.
Second Feature:Second Feature:The Economic LifecycleThe Economic Lifecycle
Consumption and Labor Income, US, 2003
0
10000
20000
30000
40000
50000
60000
0 10 20 30 40 50 60 70 80 90+
Age
Per
Cap
ita
Val
ue
($)
Labor Income
Consumption
Consumption by the elderly greatly exceeds
their labor income
Source: Lee et al., 2006. www.ntaccounts.org.
Steep rise in consumption due to health care and long-
term care.
Gap between Consumption and Labor Gap between Consumption and Labor Income at Older Ages, 13 CountriesIncome at Older Ages, 13 Countries
23456789
101112
0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5
Old-age Dependency Ratio: N(60+)/N(20-59)
LC
D E
lder
ly/Y
l(30
-49)
UrJpUS
Sw
CRTw
ThCh
SK
Ph InIndo
Average gap is larger in “old” Japan, US, and Uruguay than in
“young countries”.
But Sweden has a more modest gaps.
Economic Lifecycle SummaryEconomic Lifecycle Summary
In all countries the per person gap In all countries the per person gap between consumption and labor income at between consumption and labor income at older ages is large.older ages is large.
Some tendency for the gap to be larger in Some tendency for the gap to be larger in older countries. Implies that the economic older countries. Implies that the economic resources to older ages may increase resources to older ages may increase faster than the population in those groups. faster than the population in those groups.
Gap is not larger in some older countries.Gap is not larger in some older countries.
Third Feature:Third Feature:The Support SystemThe Support System
(How do we fill the gap at (How do we fill the gap at older ages?)older ages?)
Old-Age Support SystemsOld-Age Support Systems
Saving
Public Transfers
FamilialTransfers
Older adults rely on private pensions,
housing, personal saving, etc.
Older adults rely on adult children
often living together.
Older adults rely on public
pensions, health care, and other
transfer programs.
Old-Age Support SystemsOld-Age Support Systems
Saving
Public Transfers
FamilialTransfers
Asia (except Japan)
Japan and West
Latin America
Trend: Old-Age Support SystemsTrend: Old-Age Support Systems
Saving
Public Transfers
FamilialTransfers
Taiwan: Decline in family, increase
in public and saving.
Japan: Decline in family and
saving; increase in public.
Three Scenarios for Three Scenarios for Aging SocietiesAging Societies
Possibility IPossibility I
Rapid population agingRapid population aging
Large lifecycle gap for the elderlyLarge lifecycle gap for the elderly
Reliance on public support systems Reliance on public support systems
Heavy burden on future generations Heavy burden on future generations of taxpayers of taxpayers
Possibility IIPossibility II
Rapid population agingRapid population aging
Large lifecycle gap for the elderlyLarge lifecycle gap for the elderly
Reliance on familial support systems Reliance on familial support systems
Heavy burden on our adult children Heavy burden on our adult children
Possibility IIIPossibility III
Rapid population agingRapid population aging
Large lifecycle gap for the elderlyLarge lifecycle gap for the elderly
Reliance on saving Reliance on saving
Increase in wealth and more rapid Increase in wealth and more rapid economic growth economic growth
Actual Outcome Depends on:Actual Outcome Depends on:
Trends in demographic variablesTrends in demographic variables
Extent to which the gap between Extent to which the gap between consumption and labor income widens, consumption and labor income widens, narrows, or remains the samenarrows, or remains the same
Shifts in the relative importance of familial Shifts in the relative importance of familial support, public support, and retirement support, public support, and retirement saving.saving.
An Optimistic Scenario: 65% Saving OptionAssets Relative to Labor Income
0
2
4
6
8
10
12
14
1950 1975 2000 2025 2050
Ass
ets/
lab
or
inco
me
India
US
China
Japan
A Positive OutcomeA Positive Outcome
If people save to support themselves in If people save to support themselves in retirement, population aging leads toretirement, population aging leads to
An increase in per capita wealthAn increase in per capita wealth An increase in wages due to the greater An increase in wages due to the greater
investmentinvestment Higher standards of living.Higher standards of living.
Implications for PolicyImplications for Policy
Emphasize asset accumulation over public Emphasize asset accumulation over public and familial and familial financialfinancial support systems. support systems.But some major problemsBut some major problems How do we deal with rising costs of health and How do we deal with rising costs of health and
long-term care?long-term care? How do we promote the development of How do we promote the development of
sound and reliable financial sectors in sound and reliable financial sectors in countries where they do not yet exist?countries where they do not yet exist?
How do we get people to save (and to do so How do we get people to save (and to do so wisely)?wisely)?
Implications for PolicyImplications for Policy
To what extent should immigration policy To what extent should immigration policy be influenced by aging? Transfers from be influenced by aging? Transfers from legal immigrants to older Americans, legal immigrants to older Americans, through Social Security, Medicare, and through Social Security, Medicare, and Medicaid are substantial.Medicaid are substantial.
What steps should low fertility countries What steps should low fertility countries take to encourage marriage and take to encourage marriage and childbearing? childbearing?
Important Role for NGOsImportant Role for NGOs
Educate consumersEducate consumers
Encourage dialogue across Encourage dialogue across generationsgenerations
Elevate public policy discourseElevate public policy discourse
The National Transfer Accounts project is a collaborative effort of East-West Center, Honolulu
and Center for the Economics and
Demography of Aging, University of California - Berkeley
Lee, Ronald, Co-DirectorLee, Ronald, Co-Director
Mason, Andrew , Co-Director Mason, Andrew , Co-Director
Auerbach, Alan Auerbach, Alan
Miller, Tim Miller, Tim
Lee, Sang-Hyop Lee, Sang-Hyop
Donehower, Gretchen Donehower, Gretchen
Ebenstein, Avi Ebenstein, Avi
Wongkaren, TurroWongkaren, Turro
Takayesu, Ann Takayesu, Ann
Boe, Carl Boe, Carl
Comelatto, Pablo Comelatto, Pablo
Sumida, Comfort Sumida, Comfort
Schiff, Eric Schiff, Eric
Stojanovic, Diana Stojanovic, Diana
Langer, EllenLanger, Ellen
Chawla, AmonthepChawla, Amonthep
Pajaron, Marjorie CincoPajaron, Marjorie Cinco
Japan Key Institutions: Nihon University Population Research
Institute and the Statistics Bureau of Japan, Tokyo, Japan. Ogawa, Naohiro, Country Leader
Matsukura, Rikiya Maliki
Obayashi, Senichi Kondo, Makoto Fukui, Takehiro
Ihara, HajimeSuzuki, Kosuke
Akasaka, Katsuya Moriki, Yoshie
Makabe, Naomi Ogawa, Maki
AustraliaKey Institution: Australia National University
Jeromey Temple, Country LeaderBrazil
Turra, Cassio, Country Leader Lanza Queiroz, BernardoRenteria, Elisenda Perez
Chile Key Institution: United Nations Economic Commission for
Latin America and the Carribean, Santiago, Chile Bravo, JorgeMauricio Holz
Taiwan Key Institution: The Institute of
Economics, Academia Sinica, Taipei, Taiwan.
Tung, An-Chi, Country LeaderLai, Mun Sim (Nicole)
Liu, Paul K.C.Andrew Mason
China Key Institution: China Center for
Economic Research, Beijing, China.
Ling, Li, Country Leader Chen, Quilin
Jiang, Yu
France Wolff, Francois-Charles, Country Leader
Bommier, Antoine Thailand
Key Institution: Economics Department, Thammasat University. Phananiramai, Mathana, Country Leader
Chawla, Amonthep (Beet) Inthornon, Suntichai
India Key Institution: Institute for Social and Economic Change, Bangalore
Narayana, M.R., Country Leader Ladusingh, L.
MexicoKey Institution: Consejo Nacional de Población
Partida, Virgilio, Country Leader Mejía-Guevara, Iván
Indonesia Key Institution: Lembaga Demografi, University of Indonesia, Jakarta, Indonesia.
Maliki, Country Leader Wiyono, Nur Hadi Nazara, Suahasil
Chotib Philippines
Key Institution: Philippine Institute for Development Studies. Racelis, Rachel H., Country Leader
Salas, John Michael Ian S.Pajaron, Marjorie Cinco
Sweden Key Institution: Institute for Future Studies, Stockholm, Sweden.
Lindh, Thomas, Country Leader Johansson, Mats Forsell, Charlotte
Uruguay Bucheli, Marisa, Country Leader
Furtado, Magdalena Rodrigo Ceni
Cecilia Rodriguez South Korea
An, Chong-Bum , Country LeaderChun, Young-JunLim, Byung-In
Kim, Cheol-Hee Jeon, Seung-Hoon
Gim, Eul-Sik Seok, Sang-Hun
Kim, Jae-Ho
Austria Key Institution: Vienna Institute of Demography Fuernkranz-Prskawetz, Alexia, Country Leader
Sambt, Joze Costa Rica
Key Institution: CCP, Universidad de Costa Rica Rosero-Bixby, Luis, Country Leader
Maria Paola Zuniga Slovenia
Sambt, Joze, Country Leader Hungary
Key Institution: TARKI Social Research InstituteGal, Robert
Medgyesi, Marton Finland
Key institutions: The Finnish Center for Pensions And the Finnish Pension Alliance
Vanne, ReijoGröhn, Jukka
Vaittinen, Risto
United States Key Institution: Center for the Economics and Demography of Aging
Lee, Ronald, Country LeaderMiller, Tim
Ebenstein, Avi Boe, Carl
Comelatto, Pablo Donehower, Gretchen
Schiff, EricLanger, Ellen
Kenya Mwabu, Germano
NigeriaSoyibo, Adedoyin
The EndThe EndSupport: Support:
National Institutes of Health National Institutes of Health NIA, R01-AG025488NIA, R01-AG025488NIA, R37-AG025247 NIA, R37-AG025247