Live Long and Prosper: Ageing in East Asia and Pacific World Bank East Asia and Pacific regional flagship report Kuala Lumpur, September 2016
Presentation outline Key messages of the report Some basic demographic and labor force facts on EAP and Malaysia The living situation of older people in EAP Policy observations and implications 2
Key messages of the report EAP already has more old people than any other region globally & is aging at an unprecedented pace but the picture across countries is diverse The challenges posed by rapid aging are real, but public policy & behavioral responses by households and employers can promote healthy & productive aging and EAP is (mostly) better placed than most regions to manage The most pressing risks from rapid aging are fiscal & require urgent reforms in some EAP countries of pensions, healthcare, and long-term care systems The policy responses needed to manage rapid aging are not just about old people it requires policy reforms across the life cycle For countries with time to prepare for aging like Malaysia, it is important to take policy action now & also learn from policy experience of older EAP countries by factoring in changing demographics in current policy formulation
EAP has more older people than any other region will increase to around 500 mln by 2040 (UN 2015) 4
The transition from aging to aged societies is faster in EAP than seen previously in history (years to move from 7 to 14 percent population 65+, 5 year rounded) 5
Resulting in rapid decline in working age population in some EAP & end of demographic tailwind in others (Projected % change in population, 15 64 Years, 2010-2040. UN) 6
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100 Malaysia has two dynamics at play rising working age population in absolute terms but also rising aged share (Malaysia, UN 2015 revision) Population by age (thousands), annual: 1950 to 2100 30,000 25,000 20,000 15,000 10,000 5,000 0 0 to 14 15 to 64 65+ 7
GDP per capita ($2005 PPP) Developing EAP is getting old before getting rich (GDP per capita & elderly dependency ratios, 1960-2010, WDI) $60,000 Singapore $50,000 China, Hong Kong SAR United States of America $40,000 United Kingdom $30,000 Republic of Korea France Japan Mexico $20,000 Brazil Malaysia Poland $10,000 South Africa Philippines Thailand Russian Federation $- Timor-Leste China Indonesia Cambodia Viet Nam 0.00 0.05 Lao PDR 0.10 0.15 0.20 0.25 0.30 0.35 0.40 Mongolia Elderly Dependency Ratio 8
What are some features of the living situation of older people in EAP? 9
Percent of population In most EAP MICs, poverty increases steadily from middle age Poverty rates by age, WB 2016 Indonesia, Susenas 2015 Korea, KLOSA 2010 Thailand, 2013 SES 16 14 12 National average 14.5 10 10.2 8 6 7.0 4 2 3.2 0 15-30 31-49 50-64 65+ 10
In contrast, poverty rates of elderly-headed households below average in Malaysia (HIS 2012) 11
In terms of health status, there is good and not-sogood news NCD is the key story The good news EAP people are living longer, especially in low-income countries They also have more years of healthy life expectancy In much of EAP, communicable diseases are no longer the primary case of death and morbidity The not-so-good news Non-communicable diseases are exploding: more middle aged people have them & older people have multiple NCD often undiagnosed or untreated Years of living with disability are rising as healthy life expectancy increase lags total life expectancy increase In much of EAP, unhealthy behaviors are high, including smoking, salt intake and alcohol consumption + urban lifestyles Aging is leading to new health challenges such as dementia (x5 in Malaysia till 2050)
Malaysia is part of the regional NCD epidemic - 63% of adults 18+ have at least one risk factor NCD dominates mortality burden (mortality by cause, 2012, IPH) Prevalence of NCD high & often at young ages (NHMS 2015 % with condition by age) 13
For much of EAP region, many work till advanced ages, especially in rural areas (WB 2016) Indonesia China Philippines Thailand Rural men Rural women Urban men Urban women 14
Those who work in old age continue to work hard across Asia Hours worked among rural men working Hours worked among urban men working 15
Elderly people in EAP rely mainly on their own work for financial support (primary source of support 60+. Rural top; urban bottom. Giles et al, 2015) 16
Proportion of Income by Sourvce MYR perannum Proportion of Income by Source MYR perannum Work also an important source of income for older Malaysians, though less so for women (Men LHS & women RHS, HIS 2009) 100% 4% 3% 3% 2% 2% 30,000 100% 2% 3% 3% 3% 2% 30,000 90% 90% 80% 70% 60% 25% 31% 41% 47% 55% 25,000 20,000 80% 70% 60% 52% 52% 59% 64% 67% 25,000 20,000 50% 44% 15,000 50% 15,000 40% 48% 40% 30% 20% 10% 0% 48% 44% 39% 26% 18% 8% 7% 3% 60-64 65-69 70-74 75-79 80 & over 10,000 5,000 0 30% 20% 10% 0% 33% 35% 33% 31% 29% 13% 10% 5% 2% 2% 60-64 65-69 70-74 75-79 80 & over 10,000 5,000 0 wages self employment transfers other gross income (RHS scale) wages self employment transfers other gross income (RHS scale) 17
Contrary to the current reality, expectations of the State are high for old age financial support 0.7 (expected primary source of support in old age proportion of total respondents Jackson & Peter, 2015) 0.6 0.5 0.4 0.3 0.2 0.1 0 South Korea Taiwan, China Singapore Malaysia China Indonesia Philippines Thailand Vietnam Retirees Themselves Government Grown Children or Other Family Members 18
Some policy observations & implications 19
1. Growth and aging In East Asia, demographic dividend contributed significantly to growth in 1960s-1990s: 30-40% of growth by various estimates (e.g., Bloom+) But does this mean a demographic tax with aging? Report argues that risks to growth are real but manageable and EAP better positioned than most due to work, savings and human capital factors Standard growth accounting models show mixed picture - for Malaysia no negative growth impact till the 2030s, while negative demographic impact from 2020s for China, Thailand, Singapore, Korea, Vietnam (ADB) Overlapping generations models have more mixed results, e.g. human capital deepening from lower fertility; high capital to labor ratios & positive productivity effects Contrasting impacts on household savings of behavioural effects (as people save more for longer old age) and compositional (from more older people to total population). Predictions mixed but behavioural expected to outweigh compositional. 20
2. While the share of working age population in Malaysia declines only slowly, it is important to prepare the labor market Focus areas to prepare the labor market for rapid aging include: Increase female labor force participation to prepare for the structural reversal in demographics, including through greater investment in public childcare and aged care Align official retirement ages with the new demographic realities & link them automatically to future longevity evolution Adjust labor market institutions & policies to encourage longer formal sector work of older people, e.g. abolish seniority wages; increase flexi-work to promote glide into retirement Enhance the emphasis on educational quality and develop systems for lifelong learning to promote sustained skill upgrading across the life cycle & keep people productive for longer 21
For Malaysia, increasing female labor force participation and remaining open to immigration best channels to prepare for ageing Malaysia lags regional average & economic competitors on FLFP (2014, WDI) Converging female to male LF participation major mitigation for aging 80% 70% 60% 50% 40% 30% 20% 10% 0% China Indonesia Malaysia Myanmar Singapore Thailand Vietnam EAP 22
3. Across EAP, major challenges for many countries in expanding contributory pension coverage (contributory pension coverage of active labor force, early 2010s) 23
At same time, often significant fiscal pressures on current formal sector schemes Projected increase in pension spending, 2014-2050 (WB 2016) 24
While coverage expansion challenge remains in Malaysia, pension adequacy also major challenge EPF balances low at retirement despite reasonably high contribution rate (EPF Chair in 2014: 69% with < RM 50,000 balance at 55) Early withdrawal rules not helping & even new retirement age of 60 is low No redistribution in EPF B40 largely uncovered by EPF & efforts with matching schemes nascent and offering modest incentives 25
4. Aging will put significant cost pressures on health systems, but policy choices remain crucial OECD + China, Hong Kong SAR China, Indonesia, Philippines, and Thailand findings: Ageing per se accounts for around one third of increase in health spending even in older countries, though some estimates for China higher Policy and technology choices remain the most critical factor in driving health expenditure growth For Malaysia, the best study predicts health spending will increase 0.7% of GDP from 2010-2030, with ageing accounting for less than one third of that growth (Rannan-Eliya et al, 2013) 26
Aging & NCDs require a whole of healthcare system response Reduce exposure to risks in adulthood (e.g. higher tobacco taxation as in Philippines) and earlier in life (malnutrition), and promote healthier lifestyles Manage key risks better (CVD risk factors; cancer), including improved selfmanagement and medication adherence Transform delivery systems in particular reducing over-reliance on hospital care & putting primary care in the driver s seat and emphasizing coordination of care Get better value for money from health systems reforming provider payment mechanisms; get better value for pharmaceutical procurement; prioritizing new drugs & technologies transparently (e.g., Korea and Thailand) Preparing for the specific challenges of ageing bridging health and long-term care; increasing community-based care; preparing for functional & cognitive decline among elderly (e.g. dementia care)
Aged and long-term care remains a challenge in Malaysia and across developing EAP Public sector support for long-term care remains nascent in developing EAP including Malaysia, though health systems are taking some of the brunt at high cost With strains on traditional networks, there is a need for proactive policy measures from governments in EAP but government cannot do it all, and needs markets, families & individuals to play a role Aging in place should be the guiding approach, with a strong reliance on home- and community-based care both more affordable and giving higher quality of life Financing LTC will be a challenge, with no definitive model who should State prioritize for public subsidies and how to finance those? 28
For comments or questions, please contact Philip O Keefe (pokeefe@worldbank.org) The report is available at World Bank Open Knowledge Depository at www.worldbank.org Live Long and Prosper: Aging in East Asia and Pacific TERIMA KASIH 29