Population Ageing and Social Security in Asia

• Author: Rafal Chomik,John Piggott
• Published date: 01 July 2015
• Date: 01 July 2015
• DOI: http://doi.org/10.1111/aepr.12098

Population Ageing and Social Security

in Asia

Rafal CHOMIK† and John PIGGOTT

The University of New South Wales

Asian countries are at different stages of demographic transition. While Central and South Asian

countries are relatively young and will remain so for some time, East and Southeast Asia are

expected to age at an unprecedented rate in the next few decades. Japan has reached the future

first. Other nations, such as China, are still young but ageing faster than many advanced econo-

mies, including Australia and the USA. This demographic shift has considerable implications for

the development of social policy. Here too,countries differ w idely. This paper sets the context for

the rest of the volume. The focus is mostly on countries in East and Southeast Asia, but it includes

contrasting comparisons to key regional countries such as India and Australia. First, the paper

presents the context: the demographic, urbanization, and social trends facing Asia. Second, it

tackles the allocation of resources for the elderly, in particular,by summarizing approaches to two

areas of social policy most pertinent to population ageing: retirement income and health care.

Key words: Asia, health care, pension, population ageing, social policy

JEL codes: I18, I38, J1

1. Introduction

To understand ageing inAsia is to appreciate the commonalities as well as the differences

between countries. The direction of demographic change is common, but each country

had a different starting point and is ageing at a different pace. East Asia is at the forefront

of the demographic transition. It will be followed by Southeast Asia and then Central

and South Asia. The policies that will support older Asian societies also share important

similarities and differences.

Section 2 presents the background: demographic, urbanization, and social trends

across East and South East Asia, with contrasting comparisons to regional countries

such as India and Australia. Sections 3 and 4 summarize approaches to two most rel-

evant areas of social policy: retirement income and health care. Here we compare the

structure, parameters, and outcomes, and identify issues with respective systems.

Section 5 concludes.

This paper was initially prepared for an Asian Economic Policy Review (AEPR) Conference held in

Tokyo on Saturday, October 18, 2014.We acknowledge financial support from the ARC Centre of

Excellence in Population Ageing Research.

†Corresponding author: Rafal Chomik, ARC Centre of Excellence in Population Ageing Research,

Australian School of Business, The University of New South Wales, Sydney 2052 Australia. Email:

r.chomik@unsw.edu.au

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doi: 10.1111/aepr.12098 Asian Economic Policy Review (2015) 10, 199–222

© 2015 Japan Center for Economic Research 199

The message is clear. Well-designed social policies may not only address the chal-

lenges of population ageing but may also represent a macroeconomic opportunity to

rebalance growth across Asia – allowing individuals to pool idiosyncratic risks associated

with income and health shocks and reducing the need for households to accrue excessive

precautionary savings (Chamon & Prasad, 2007; Baldacci et al., 2010). In rebuilding

fiscal capacity following the global financial crisis, Asian countries are advised to focus

on social spending to ensure inclusive growth (International Monetary Fund [IMF],

2013, 2014).

2. Context

2.1 Population age structure

On median projections, by 2050, many countries in Asia will have an age structure com-

parable to the Organisation for Economic Cooperation and Development (OECD)

countries. Figure 1 groups Asian countries based on expected trajectories of their old-age

dependency ratio. Those ageing the most include Japan, Korea, and Singapore, where the

ratio of the older population (65+) compared to the working-age population (15–64)

will be between 58% and 70% by 2050. For Singapore, this means a quadrupling of the

dependency ratio from 14% to 58% in less than two generations.

At the other extreme are countries with younger populations, including India and the

Philippines, which despite some ageing, are projected to have age-dependency ratios at

or below the level seen in Europe, Australia, and the USA today.In between are countries

that are expected to achieve age-dependency ratios similar to those expected for Australia

and the USA in 2050. These consist of several Southeast Asian countries and China,

0%

10%

20%

30%

40%

50%

60%

70%

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

70% Japan

61% Korea

58% Singapore

42% China

41% Thailand

37% Vietnam

35% Sri Lanka

30% Indonesia

27% Myanmar

23% Malaysia

20% India

18% Laos

16% Philippines

15% Pakistan

Figure 1 Old-age dependency ratio.

Source: United Nations (UN) (2011).

Population Ageing and Social Security in Asia Rafal Chomik and John Piggott

© 2015 Japan Center for Economic Research200