SINGAPORE – Older populations are growing rapidly in a number of Asian countries. This unprecedented demographic phenomenon may have profoundly adverse impacts on their economies. As working people reach age milestones and exit the labor force, these questions arise: How will the traditional retirement years be financed? What will the future hold for national pension systems? How will the swelling costs of health care impact national budgets? Costs, however, are only part of the story. The greater part is creating value. Though some may mistakenly regard older workers as less productive and their skills obsolete, Asia can’t afford to waste this massive asset.
“Wisdom in the Workforce: Unlocking the Economic Value of Asia’s Aging Population,” released today by the Milken Institute, evaluates crucial skill shortages and identifies methods to harness the strength of the mature workforce. Further, it points out that with the aid of farsighted public policies and strategic private-sector employment practices, older workers can provide an effective solution that magnifies Asia’s success. The report examines trends and makes policy recommendations for five countries: China, India, Japan, South Korea, and Singapore. Each is grappling with its own unique challenges, but all can tap the power of expanding older populations.
“Our objective is to illuminate how demography is remolding Asia’s labor force,” says Anusuya Chatterjee, Milken Institute Fellow and lead author of the report. “The challenge is in incentivizing and enabling older adults to remain part of the workforce without displacing younger generations of workers.”
In addition to addressing private-sector demand, keeping people employed longer would generate a range of macroeconomic and societal benefits for these nations, including:
- Mitigating public costs for retirees and pressures on social support systems.
- Expanding the tax base and government revenue.
- Creating a healthier population, as research suggests that older people who opt to stay in the labor force have fewer ailments in the long run than those who retire.
The five nations studied are likely to confront labor shortages within a generation’s time. To overcome such challenges, each requires strategies tailored to its particular conditions:
- CHINA — As an engine of global manufacturing, China will have to satisfy escalating demand for technical and manufacturing workers as well as services of all kinds in the coming decades. A possible solution would be to raise retirement ages for Chinese women to parity with men, which could add millions of workers to the labor pool in the coming decades.
- INDIA — India’s population is younger relative to the other large Asian economies, and it will be difficult to fill positions in high-growth industries because many available workers lack university or vocational training. This is exacerbated by a dearth of teachers in higher education. Transitioning older STEM professionals into the classroom could offer a novel solution.
- JAPAN — While the Japanese are working longer than most of their peers elsewhere in Asia, it has not been enough to offset severe talent shortages. Barriers to the immigration of skilled workers mean the solutions to such shortages must come from within the country. As health professionals become scarce in the next decade, transitioning older health professionals into flexible or part-time schedules rather than retirement could help to fill the gap.
- SOUTH KOREA — Most older workers in South Korea are either self-employed or in part-time jobs. One reason few older people are working full-time is that the “traditional” pay scheme undercompensates employees in the early years of their tenure and overcompensates them in later years. Forty percent of South Korea’s population will be 65 and older in 2040, and the nation’s industries will need to harness the skills of mature workers well beyond their mid-50s. This could be achieved by modernizing compensation schemes and expanding flexible work arrangements.
- SINGAPORE — Singapore faces the challenge that its growing older population will constrict the supply of qualified labor. Policies that support immigration and a higher birth rate are not sufficient. To tackle these issues, Singapore has implemented innovative policies such as the Retirement and Re-employment Act and WorkPro scheme to integrate the aging workforce.
“The Asian economies we examined could benefit from taking a comprehensive approach to retaining and integrating older people in the workplace – and many efforts are already underway,” says Donald Markwardt, Milken Institute research analyst and co-author of the report. “Harnessing the productive potential of older citizens can turn the ‘problem’ of aging into a solution for continuing economic growth and prosperity.”
Clearly, one approach won’t suit every country, but the broad strategy of engaging mature workers has the potential to make a meaningful difference across the region. With this goal in mind, “Wisdom in the Workforce” offers six broad recommendations:
- Enable longer working lives
- Create age-neutral workplaces
- Offer flexible work arrangements
- Incentivize entrepreneurship
- Nurture a culture of mentoring and community
- Develop a sustainable model for healthy aging
“Wisdom in the Workforce: Unlocking the Economic Value of Asia’s Aging Population,” by Anusuya Chatterjee and Donald Markwardt with Perry Wong, is available for download at no charge at http://www.milkeninstitute.org/publications/view/740.
Human capital issues will be a topic at the second annual Milken Institute Asia Summit, to be held Sept. 17-18 in Singapore. The Summit will bring together 400 CEOs, major investors, heads of sovereign wealth funds, philanthropists and other leaders. Like the Institute’s annual Global Conference — but on a more intimate scale — the Summit provides an opportunity for these leaders to focus on some of the world’s most pressing challenges with a highlight on Asia. Panel topics include hyper-aging, financial technology, Indian Prime Minister Modi’s second year, Japan’s resurgence, the AIIB and multilateral lending, and China’s movie industry.
Complete information about the Milken Institute Asia Summit, including the full program and list of speakers, is available at http://www.milkeninstitute.org/events/conferences/summit/asia-summit-2015/