- China, Hong Kong, Taiwan, Thailand, South Korea, and Singapore fall in the aging cohort.
- Bangladesh, India, Indonesia, Malaysia, and the Philippines have projected favourable trends ahead.
- An aging nation can keep prospering through productivity enhancement and wealth transfers.
- China, though not wealthy, will tackle aging with a well-educated and healthy population.
- While a youthful nation can stagnate without investments in health, skills, and infrastructure.
Commentary: Asia’s demographic dynamic
There is little controversy about where Asia’s demographics are heading. There is one cohort of population that has been aging for a while and will continue to do so for decades to come. Another cohort has a relatively larger share of working age population compared to the sum of those in the sub-15 and over-64 categories.
The first cohort includes China, Hong Kong, Taiwan, Thailand, South Korea, and Singapore. Among these, China and Thailand are aging even as they remain far from high income on a per capita basis, while the high-income economies of Asia are following predictable paths. Two factors tend to drive the aging dynamic: first, as economies prosper, savings and financial safety nets deepen, the social security imperative for families to have many children declines. Second, as income rises, so does the cost of raising children, which discourages large families. We suspect the latter factor has been instrumental in China, in addition to the much-discussed one-child policy. Beyond these economies, it is also striking to see aging projected to pick up rapidly in Vietnam in the coming years.
Then there are those with highly favourable trends: Bangladesh, India, Indonesia, Malaysia, and the Philippines. These economies have at least a couple of decades of expanding working age population growth ahead. But aging societies can continue to prosper; youthful societies can stagnate. Dependency ratio is an important factor, but not by far the only one that drives economic growth. Without job creation, job seekers, young or old, become chronically unemployed, sapping economic vitality. Without adequate infrastructure and logistics, even a cheap labour force can be insufficient in driving competitiveness.
Case in point is China. Contrary to common perception, its labour force did not keep pace with working age population during the decades when the demographic dynamic was favourable. Increase in tertiary education enrollment and early-retirement age kept many out of the labour force. And now, China is endowed with an aging but well-educated and healthy work force. The converse is the case for India; to live it up to its aspirations, India needs a healthy and well-educated work force. Only then demography becomes destiny.
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