Growing old before growing rich

Growing old before growing rich

The recent relaxation of the one-child policy in China recognises that demographics play a major role in a country's economic fortunes.

Asian fast growth was built on favourable demographics, growing labour supply at relatively cheap rates and open economies. But in many parts of Asia, as the population begins to age rapidly, there is genuine concern that Asians may grow old before they become rich.

Last year nearly 450 million or 11 per cent of Asia's population were 60 years and over. By 2050, these numbers will more than double to 1.2 billion persons or 24 per cent of the population, not far behind projections of 27 per cent in North America and 34 per cent in Europe. Old-age dependency ratio will rise rapidly in Japan, South Korea, Greater China, Singapore and India.

There is, however, a major difference between being old in Asia and being old in the advanced countries. In 2011, private pension funds in nine Asian economies had assets of US$663 billion or only 5.3 per cent of GDP in 2011, way below the OECD average of 70 per cent of GDP.

In the past, when families were large, the young were the "pensions" of the old, because it was taken for granted that the young will take care of the old. Today, when many urban families have only one or two children, this dream is no longer possible.

In fact, the reverse is happening. In Japan, single children in their twenties who still live with their parents are called Parasite single (parasaito shinguru). A single Chinese child today is showered with gifts and love from six adults (four grandparents and two parents). But when he or she becomes an adult, one cannot take care of at least four to six old ones.

The old-age dependency ratio (the number of elderly people aged 65 and above against the number of people in the working age group of 15-64 years) is getting impossible in some countries. Currently, two Japanese workers support one retiree. By 2050, there will be two retirees for each worker. By 2050, China's ratio will be one retiree supported by one and a half workers.

The lack of pension coverage or under-funding of pensions is a serious problem in Asia.

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