World's ageing population

WITH the world's population growing older, there will be a lot more elderly people willing and able to work longer periods in their lives in both developed and emerging economies.

According to the United Nations (UN) population division, the number of people over 60 years old is projected to grow from under 800 million currently (representing about 11% of the world's population) to over two billion by 2050 (accounting for about 22% of the world's population).

Increasing longevity, declining fertility (families having fewer children) and with people becoming more health conscious, the global age structure is changing rapidly.

This is leading to wide-ranging economic and social consequences that governments around the world have begun to tweak and make amendments to their retirement age policies.

The following are how some developed and emerging economies are managing the aging population situation.



The United States
According to the Administration on Aging (AOA), an agency under the US Department of Health and Human Services, persons 65 years or older numbered 39.6 million in 2009, representing 12.9% of the US population or about one in every eight Americans. By 2030, it estimates that there will be about 72.1 million older persons.

According to the Urban Institute, a US-based think tank that carries out non-partisan economic and social policy research, retirees are eligible to receive Social Security benefits at age 62 but these benefits are reduced progressively before they reach full retirement.

The full retirement age was raised from 65 to 66. A 1983 legislation raised retirement age for those who will turn 62 in 2000. The full retirement age will increase gradually again beginning with those turning 62 in 2017.

“Those retiring at 62 will receive only 70% of their benefits when the full retirement age is 67, compared with 80% for those who retired early when the full retirement age was 65,” it says.

It pointed out that since 1940, when Social Security began paying monthly retirement benefits, life expectancy at age 65 has increased 5.1 years for men and 6 years for women.

“The full retirement age would have to increase to 73 to have the same expected years of remaining life in retirement today as in 1940,” it says, adding that increasing the Social Security's retirement age has been gaining political traction in the US.

“In June 2010, the majority and minority leaders of the US House of Representatives both expressed willingness to raise the retirement age. This would promote work at older ages, improve the system's solvency by shortening retirements and reducing lifetime benefits, and better target benefits to the oldest Americans.”

China
According to data released by China's National Bureau of Statistics last year, the number of young people in the world's most populous country dropped significantly as a proportion of the population in 2010. Those under 14 years accounted for 16.6% of the population, down 6.3 percentage points from 2000.

The number of people over 60, however, rose by nearly three percentage points to 13.3% of the total population.

The Chinese government's family-planning policy, such as its one-child policy, also reduced annual population growth to below 1%, with the rate projected to turn negative in the coming decades.

According to the UN, more than 30% of China's population is expected to be aged 60 or older in 2050.

Last year, various news reports said the country is planning to push back the age at which workers can retire - due to its “aging population dilemma.”

The retirement age in China currently is 60 for men and 55 for female civil servants and 50 for female workers.

The Harvard Initiative for Global Health, in its working paper series titled “Population Aging and Economic Growth in China,” said despite a projected decline in China's economic growth going forward, its aging population is unlikely to create significant economic problems.

“Its highly productive economy is awashed with skilled workers and with those seeking to join the labour force. There is little prospect of a lack of workers leading to a marked slowing of growth in gross domestic product (GDP) or GDP per capita.

“To the extent that older workers are retiring, there are more than enough working-age people to fill their shoes and to support the daily needs of China's elderly population. Nevertheless, policy reforms in education, health, pensions, labour policy and internal migration - could make China's economic future all the more secure,” it says.

Japan
According to data by the UN in 2009, Japan has the oldest population with a median age of 44 years, with Japanese women having a life expectancy of 86 years, the highest in the world.

By 2050, the UN says it expects more than 40% of Japan's population to be 60 years old.

Japan is also expected to experience a significant increase in the number of centenarians, from less than 76,000 in 2009 to almost 800,000 in 2050.

“Consequently, by mid-century, Japan is expected to have the world's largest number and proportion of centenarians, since nearly 1% of Japan's population will be aged 100 years or over,” the UN says.

With this data, it's not surprising that Japan's aging population are willing to continue working as long as they are still able.

“According to a survey by Japan's Ministry of Health, Labour and Welfare, workers in general still have a strong motivation to continue working after age 60,” according to a 2011 working paper by the Harvard Initiative for Global Health.

It pointed out however that Japan's public pension system still uses an earnings test, which encourages early retirement and part-time work and thus deprives the country of a capable and willing older workforce.

“Compounding this problem is the predominance of mandatory retirement practices, typically at age 60, in Japanese firms.

“In order to avoid these negative effects of the public pension's earnings test and mandatory retirement on the labour supply behaviour of the elderly, the Japanese government has started to raise the pension-eligible age from 60 to 65 and to require employers to extend employment to age 65,” it says.

The working paper adds that this has had a significant impact, with the labour force participation rate for men aged 60 to 64 increasing from 71% in 2006 to 77% in 2009.


South Korea
South Korea's rapidly growing aging population has become a cause for concern that its economic growth potential could be seriously affected.

According to reports, the country's GDP grew just 0.4% in the fourth quarter of 2011 over the previous quarter, when from 1970 to 2011, its average quarterly growth was around 1.8%.

News reports, citing economists, said the dip in South Korea's economic growth was attributable to its aging population and structural problems. According to the UN, the country's population aged 65 and older is expected to reach 12.7 million in 2050.

But the South Korean government had already been contemplating extending its retirement age - even before announcing its lacklustre GDP figures.

Early last year, The Korean Herald reported that the South Korean government was considering raising the average retirement age to 60 from the present average of 57 to lessen the impact of the retirement the country's baby-boomers.

The report, citing an online survey that was conducted in 2010, revealed that 61% of the respondents considered a rise in retirement age necessary while 49% said they needed the skills and experience of older workers.
Neighbouring Asean countries
According to reports, Malaysia is currently in the final stages of drafting a new law that will see the retirement age in the private sector raised from 55 to 60.

In Singapore, the retirement age is set at 62. By 2012, employers would be obligated to re-employ workers aged between 62 and 65, and subsequently, 67 years of age and beyond.

According to data compiled by various government bodies in Singapore, including its Department of Statistics, the increasing life expectancy and low fertility rates had caused the proportion of residents in the country aged 65 and above to rise to 9.3% in 2011 from 7.2% in 2000.

A Singapore-based analyst says raising the retirement age was an obvious choice, given the increase in the country's aging population and life expectancy.

“With Singaporeans having an average life expectancy of over 80 years old, those who still can actually prefer to continue working as they need the money.”

According to Singapore's Department of Statistics, its average life expectancy in 2010 was 79.3 years and 84.1 years for males and females respectively.

Meanwhile, the retirement age in countries such as Thailand, Brunei and Indonesia is 60 years old.