Making the most of Asia’s aging populations

Office workers walk out for lunch at the financial district in Singapore, 2 January 2008. (Roslan Rahman / AFP Photo)

Asia is aging fast: by 2040, 16 percent of the region’s population will be older than 65, more than double the 7.8 percent share in 2015. While the rise in healthy life expectancy is a positive development, this demographic shift poses a serious threat to many economies, which are already losing vitality.

A consistent supply of young, skilled workers was an essential ingredient of Asia’s rapid economic catch-up process over the last three decades. But that process is not over, and middle-income countries like China and Vietnam are now facing accelerating population aging. In South Korea, the working-age population (15-64 years) will shrink by 10 percent from 2017 to 2030.

Against this background, the only way to sustain the labour supply – aside from immigration – is to keep people in employment beyond the traditional retirement age. The good news is that a growing number of seniors in Asia are already working. According to the Organisation for Economic Co-operation and Development (OECD), the share of working South Koreans aged 65-69 was as high as 45 percent in 2016; for 70-74-year-olds, the figure stands at 33 percent.

Unfortunately, many of the jobs performed by elderly workers are low-paid. And, as South Korea’s rising youth unemployment rate suggests, seniors may be displacing their younger counterparts, instead of working alongside them – effectively defeating the purpose of including more elderly Koreans in the labour force.

One problem is that younger workers tend to be more productive than their senior counterparts. Firm-level studies indicate that workers everywhere are most productive between the ages of 30 and 45. A higher share of seniors in the workforce has thus resulted in lower overall productivity in US states and across countries.

This makes sense: while older workers have plenty to offer, including critical job skills such as communication and problem-solving, owing to their extensive experience, their physical and cognitive capacities tend to decline. Together with a lack of technical capabilities such as ICT skills, this undermines their ability to adapt to the fast-changing technologies that are the lifeblood of today’s economies.

Against this background, it is vital not only to ensure that there are enough quality jobs for all workers, old and young, but also to boost productivity among older workers – an objective that new technologies can help to achieve. For example, advances in medical science and biotechnology are helping to stem workers’ physical and cognitive decline.

Meanwhile, technologies like robotics are displacing a growing share of manual labor, leaving less physically demanding jobs for humans. The potential of these technologies is not lost on countries such as Germany, Japan, and South Korea, where the workforce is aging the fastest, and where automation is being adopted particularly quickly.

But if seniors are to occupy high-quality jobs in the new economy, they need access to more effective lifelong learning programs that enable them to upgrade their skills continuously in response to technological change. Such training can be made available through various channels – including private firms and trade unions – with government support.

Seniors need to be encouraged to seize these opportunities, even if it requires them to take a break from full-time employment, though on-the-job training is also a desirable option. In fact, participation in on-the-job training by middle-aged and elderly workers in Japan and Korea is currently lower than in other advanced economies, such as the United States and Finland, meaning that there should be space for improvement. To that end, governments might consider providing vouchers that workers can use to pay for training that will support progress in multiple jobs, rather than focusing on specific job- or company-related skills.

It is not only seniors who need access to upgraded education and training programs. Young people, too, need to be better prepared for a fast-changing work environment. Poor-quality basic education prevents students from reaping the benefits of subsequent education and skills training. In many Asian countries, formal education systems often fail to produce graduates with adequate cognitive abilities and technical competencies to fill the labour market’s needs.

To meet those needs, all levels of education and training will have to provide students with the “skills of tomorrow.” In an era of artificial intelligence, that must include the non-routine cognitive and interpersonal skills – problem solving, critical thinking, collaboration, and communication – that many older, more experienced workers already possess.

Rapid population aging no doubt poses a serious threat to Asia’s long-term economic prospects. But it also represents an important opportunity to expand the labour pool and capitalize on older workers’ existing skills. With the right policies, Asian countries can mitigate the risks of population aging and harness their “silver dividend” to become more productive, resilient, and dynamic than ever.

Lee Jong-Wha is Professor of Economics and Director of the Asiatic Research Institute at Korea University. His most recent book, co-authored with Harvard’s Robert J. Barro, is Education Matters: Global Gains from the 19th to the 21st Century.