Large parts of Asia are getting old before they get rich

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Large parts of Asia are getting old before they get rich

The Economist | October 12, 2023

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A bulge in a country’s working-age population is a blessing. Lots of workers support relatively few children and retired people. So long as the labour market can absorb a surge of job-seekers, output per head will rise. That can boost savings and investment, leading to higher economic growth, more productivity gains and developmental lift-off. Yet for countries that fail to seize this opportunity, the results can be grim—as many developing countries may soon discover.

Consider Thailand. It is rapidly greying. In 2021 the share of Thais aged 65 or over hit 14%, a threshold that is often used to define an aged society. Soon Thailand will, like Japan, South Korea and most.  In Asia, where the problem is most advanced, Indonesia and the Philippines are also likely to become aged societies at lower income levels than was the case in the rich world. Sri Lanka, where the average income is a third lower than Thailand’s, will become aged by 2028.

Countries that age before growing rich have failed to seize their demographic opportunity, or aged out of it too rapidly, or suffered both problems.  Rapid ageing and slower growth are widespread in the developing world. 

One conclusion is that countries with a working-age bulge need to wring more growth out of it.  Another conclusion is that developing countries need to start planning for old age earlier. They should reform their pension systems, including by raising retirement ages. They should nurture financial markets, providing options for long-term saving and health insurance. They should create conditions for well-regulated private social care. And they should try harder to increase female participation in the labour force.

Finally, developing countries should learn from the errors of rich ones by taking a pragmatic view of immigration. Hard as this can be politically, it is often the easiest way to extend the transition.

3 key takeaways from the article

1. A bulge in a country’s working-age population is a blessing. Lots of workers support relatively few children and retired people. So long as the labour market can absorb a surge of job-seekers, output per head will rise. Yet for countries that fail to seize this opportunity, the results can be grim—as many developing countries may soon discover.
2. Consider Thailand. It is rapidly greying. In 2021 the share of Thais aged 65 or over hit 14%, a threshold that is often used to define an aged society.  Indonesia, Sri Lanka, and the Philippines are also likely to become aged societies at lower income levels than was the case in the rich world. 
3. Countries that age before growing rich have failed to seize their demographic opportunity, or aged out of it too rapidly, or suffered both problems.  One conclusion is that countries with a working-age bulge need to wring more growth out of it.  Another conclusion is that developing countries need to start planning for old age earlier.  Finally, developing countries should learn from the errors of rich ones by taking a pragmatic view of immigration. 

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Topics: Asia, Population, Aging, Productivity, Growth