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Demographic Change in Asia: The Implications of Evolving Support Systems

Demographic Change in Asia: The Implications of Evolving Support Systems. Community 50+ Asia. Andrew Mason East-West Center and University of Hawaii at Manoa. Three Key Features of Asia. Demography: Asia is experiencing slower population growth and rapid population aging.

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Demographic Change in Asia: The Implications of Evolving Support Systems

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  1. Demographic Change in Asia: The Implications of Evolving Support Systems Community 50+ Asia Andrew Mason East-West Center and University of Hawaii at Manoa

  2. Three Key Features of Asia • Demography: Asia is experiencing slower population growth and rapid population aging. • Economic lifecycle: High consumption but low labor income during old age. • Diverse systems for meeting the material needs of the elderly. • Financial systems • Public programs • Familial support

  3. Why are the three features important? • Economic growth and standards of living • Government budgets • Intergenerational relationships • Regional distribution of wealth (and power)

  4. Bottom Line • Basis for optimism: Population aging means fewer workers, but more wealth. • Policy imperatives • Avoid excessive reliance on transfer programs • Improve financial systems • Promote education of consumers and policymakers • Proceed without delay!

  5. Research Background • International project based at the East-West Center and UC – Berkeley • Research teams from 23 countries participating including US, Japan, China, Korea, Taiwan, Thailand, Philippines, Indonesia, and India. • Results are preliminary. • Core support from the National Institute on Aging. • Details: www.ntaccounts.org

  6. First Feature:The Demography

  7. Population Decline: Labor Force China, India, Japan, and the US, 1950-2050 Labor force decline has begun in Japan; on the horizon in China.

  8. Population Aging: China, India, Japan, and the US, 1950-2050

  9. Cause of Population Aging: US versus Japan in 2006 • Life expectancy greater in Japan • 82 in Japan • 78 in US • Fertility is much lower in Japan • 1.3 births per woman in Japan • 2.1 births per woman in US • Immigration is much lower in Japan • Negligible in Japan • 1 million per year in US Most important by far!

  10. Low Fertility Common in Asia Replacement fertility: Below this birth rate population cannot be sustained. Source: Population Reference Bureau 2007.

  11. The Demography: Summary • Rapid population aging is occurring or will soon begin in many Asian countries. • Population decline is also likely. • Low fertility will exacerbate these trends.

  12. Second Feature:The Economic Lifecycle

  13. Consumption by the elderly greatly exceeds their labor income Steep rise in consumption due to health care and long-term care. Consumption Labor Income Source: Lee et al., 2006. www.ntaccounts.org.

  14. Gap between Consumption and Labor Income at Older Ages, 13 Countries Average gap is larger in “old” Japan, US, and Uruguay than in “young countries”. Ur Jp US CR Tw Th Ch Sw SK But Sweden has a more modest gap. Ph In Indo

  15. Economic Lifecycle Summary • In all countries the per person gap between consumption and labor income at older ages is large. • Some tendency for the gap to be larger in older countries. Implies that the economic resources to older ages may increase faster than the population in those groups. • Gap is not larger in some older countries.

  16. Third Feature:The Support System(How do we fill the gap at older ages?)

  17. Older adults rely on private pensions, housing, personal saving, etc. Old-Age Support Systems Saving Older adults rely on public pensions, health care, and other transfer programs. Older adults rely on adult children often living together. Familial Transfers Public Transfers

  18. Old-Age Support Systems Saving Asia (except Japan) Latin America Japan and West Familial Transfers Public Transfers

  19. Trend: Old-Age Support Systems Saving Japan: Decline in family and saving; increase in public. Taiwan: Decline in family, increase in public and saving. Familial Transfers Public Transfers

  20. Three Scenarios for Aging Societies

  21. Possibility I Rapid population aging Large lifecycle gap for the elderly Reliance on public support systems Heavy burden on future generations of taxpayers

  22. Possibility II Rapid population aging Large lifecycle gap for the elderly Reliance on familial support systems Heavy burden on our adult children

  23. Possibility III Rapid population aging Large lifecycle gap for the elderly Reliance on saving Increase in wealth and more rapid economic growth

  24. Actual Outcome Depends on: • Trends in demographic variables • Extent to which the gap between consumption and labor income widens, narrows, or remains the same • Shifts in the relative importance of familial support, public support, and retirement saving.

  25. A Positive Outcome If people save to support themselves in retirement, population aging leads to • An increase in per capita wealth • An increase in wages due to the greater investment • Higher standards of living.

  26. Implications for Policy • Emphasize asset accumulation over public and familial financial support systems. • But some major problems • How do we deal with rising costs of health and long-term care? • How do we promote the development of sound and reliable financial sectors in countries where they do not yet exist? • How do we get people to save (and to do so wisely)?

  27. Implications for Policy • To what extent should immigration policy be influenced by aging? Transfers from legal immigrants to older Americans, through Social Security, Medicare, and Medicaid are substantial. • What steps should low fertility countries take to encourage marriage and childbearing?

  28. Important Role for NGOs Educate consumers Encourage dialogue across generations Elevate public policy discourse

  29. 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

  30. 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, Hajime Suzuki, Kosuke Akasaka, Katsuya Moriki, Yoshie Makabe, Naomi Ogawa, Maki

  31. Australia Key Institution: Australia National University Jeromey Temple, Country Leader Brazil Turra, Cassio, Country Leader Lanza Queiroz, Bernardo Renteria, Elisenda Perez Chile Key Institution: United Nations Economic Commission for Latin America and the Carribean, Santiago, Chile Bravo, Jorge Mauricio Holz

  32. China Key Institution: China Center for Economic Research, Beijing, China. Ling, Li, Country Leader Chen, Quilin Jiang, Yu Taiwan Key Institution: The Institute of Economics, Academia Sinica, Taipei, Taiwan. Tung, An-Chi, Country Leader Lai, Mun Sim (Nicole) Liu, Paul K.C. Andrew Mason

  33. 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. Mexico Key Institution: Consejo Nacional de Población Partida, Virgilio, Country Leader Mejía-Guevara, Iván

  34. 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

  35. Uruguay Bucheli, Marisa, Country Leader Furtado, Magdalena Rodrigo Ceni Cecilia Rodriguez South Korea An, Chong-Bum , Country Leader Chun, Young-Jun Lim, Byung-In Kim, Cheol-Hee Jeon, Seung-Hoon Gim, Eul-Sik Seok, Sang-Hun Kim, Jae-Ho

  36. 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 Institute Gal, Robert Medgyesi, Marton Finland Key institutions: The Finnish Center for Pensions And the Finnish Pension Alliance Vanne, Reijo Gröhn, Jukka Vaittinen, Risto

  37. United States Key Institution: Center for the Economics and Demography of Aging Lee, Ronald, Country Leader Miller, Tim Ebenstein, Avi Boe, Carl Comelatto, Pablo Donehower, Gretchen Schiff, Eric Langer, Ellen

  38. Kenya Mwabu, Germano Nigeria Soyibo, Adedoyin

  39. The End Support: National Institutes of Health NIA, R01-AG025488 NIA, R37-AG025247

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