1. Economic Consequences of Ageing Population Aris Ananta Institute of Southeast Asian Studies Presented at the “Eleventh ASEAN Gerontology Course”. Singapore: INIA-SAGE ASEAN Centre on Aging (ISACA), the International Institute on Ageing, United Nations- Malta (INIA), and the Singapore Action Group of Elders (SAGE), 26 July – 3 August 2010

2. Who are We? Easy to Enter, Difficult to Rise Up

3. Why Do We Study Older Persons? We, the Young, Are Still Suffering

4. Very Heavy Financial Burden  The older persons live longer  They are fragile  They cannot finance themselves  Their number is getting larger  Can the government take care of them?

5. Financing Everybody, Regardless the Age, Shoulders the Cost

6. Outline  Session 1  Learning from past debates on population and development  Current Issues: Ageing  Firm level: open discussion  Session 2  A broader issue: migration, ageing, and development  Demographic window of opportunity  Reflection on the Debate  Firm level: open discussion

7. LEARNING FROM PAST DEBATES ON POPULATION AND DEVELOPMENT

8. Is a High Population Growth Bad or Good?

9. Malthus on Population and Development: Gloomy Prospects  People have two main desires: food and sex.  When prosperous, they have more children  More children means demand for more food  Results in scarcity of food  Rising prices of good, war, disease  Population growth declines, number of children born declines  Demand for food declines  Prosperity—More Children

10. Malthus’ Recommendation Postpone Marriage or Do Not Get Married (At that time there was no family planning)

11. What Really Happened  No enthusiastic response from the society  Industrial revolution not long after Malthus showed that a high population growth had even been an important source of economic growth and prosperity  As a result: no food scarcity

12. So, Is a Large Number of Children a Liability for Economic Development?

13. Economic Advantages of Having Children (1)  In the absence of modern economic infrastructure, children are the most readily available factors of production  They are also cheap factors of production  Working to get food or earn money  Working at the household, to take care of the family/ household

14. Economic Advantages of Having Children (2) Children are the most reliable pension, when modern economic pension/ financial system does not exist, high inflation is common, filial piety is a standard norm

15. Economic Disadvantage of Having Children  High consumption, low saving  At individual level: inability to invest in quality children, quality labour force  At macro level: spending too much for children and their needs, such as clothing, education, and health  Not enough money for productive activities, which can bring economic growth

16. (Young) Population Explosion  Starting from high fertility and mortality  With the advance of public health and medicine, mortality declined relatively quickly- thing that happened about 200 years in the currently advanced European countries  Norms on family size did not change  Fertility remained high, though mortality had been already low  Results: explosion of (young) population

17. High Population Growth is Good  In 1950s, 1960s and 1970s  The first Indonesian president, Sukarno, during 1945-1965, believed that a high population growth was good for Indonesia. He believed that Indonesia could feed an ever growing number of population.  A huge number of population was also believed to be a huge political power.  A large number of population is good for the economy—large market and factors of production

18. High Population Growth is Bad  Others, including Lee Kuan Yew, believed that high population growth rate was bad for the society.  How to finance the increasing number of children? They already consume, and in an increasing number, but they have not produced  Too many children means to much consumption, too little saving  Then, it is difficult to invest  It is better to have a smaller number of population with high quality of population  Note: it does not mean to reduce the number of population, but it aims to have a trend of smaller future number of population.

19. Then, the Consensus: reduce population growth by reducing fertility rate  Everybody agreed to enhance the quality of the children, so that they become high quality labour force and hence contribute to the economy.  The disagreement was on whether government should actively promote family planning— whether through family planning program or let it be done by economic development itself.

20. Debate on Family Planning  Some opposed family planning from religious point of view  Some opposed from “human rights” perspective  Some defended the provision of family planning program, to reduce the number of children, from religious and human rights points of view.

21. Family Planning Program or Economic Development?  Late 1960s, 19670s  Almost all countries in Southeast Asia believed that a slower population growth rate was good for the society  The question is how to do it?  Through a strong national family planning program and/ or through rapid economic development?

22. Various Policies  Singapore adopted a very strong national family planning program and a rapid economic growth  In one decade, in 1975, fertility rate achieved replacement level  Thailand and Indonesia adopted a strong family planning program.  Vietnam followed, though relatively late, in 1980s  Philippine was not strong in family planning program because of religious believe  Malaysia believed in the power of a large number of population

23. Mixed Results of Population- Development Interaction  Negative, if assumed that a larger number of children/ population does not bring an increase in national income  Positive, if larger number of children/ population can bring a larger number of income.

24. CURRENT ISSUE: AGEING

25. Results of Successful Family Planning

26. GERIATRIC WAVE — DEMOGRAPHIC ICEBERG FINANCIAL EXPLOSION

27. RISING HEALTH EXPENDITURE PER OLDER PERSON RISING NUMBER OF OLDER PERSONS EXPLOSION OF TOTAL HEALTH EXPENDITURE FOR OLDER PERSONS

28. Percentage of Older Persons (60 +) Singapore Thailand Vietnam Philippines Laos PDR

29. Ageing: an Emerging Issue in Economic Development  Singapore is the first to achieve replacement level fertility, in one decade.  Low fertility and mortality, a rising number of older persons.  Values on older persons have not changed much.  How to finance the growing number of older persons?  They still consume, and in increasing number, but have stopped producing

30. Cost of Older Persons: direct cost  Expenditure per older person keeps rising as they suffer more from chronic diseases  Chronic condition is more expensive, also for a long time.  Need capital intensive diagnosis, protracted therapy, and long term support  Older persons impose burden on health care and infrastructure

31. Cost of Older Persons: indirect cost  They cannot work, income lost from being sick.  With better education of the older persons, the indirect cost of having sick, unhealthy, older persons will increase.

32. Debates on “Explosion” of Older Persons

33. Financial Collapse?  Fertility and mortality rates have declined very rapidly  No more depending on children and grand children  Expecting modern financial institution and government  Suddenly finding the demographic iceberg and geriatric wave

34. We “Cannot” Reduce the Number of Older Persons, unlike what we did to the number of young children. No debate on how to shorten the life of the older persons (except on euthanasia)

35. However, We “Can” Reduce It  We avert the number of babies born by contraception  We avert the growing number of older persons by postponing them from being “old”.  Make them still young even at age 70, 80, 90, or even forever

36. Who Are Older Persons?  By redefining and postponing being older, we will have a smaller number of older persons.  We define someone as an older person only when s/he is already unproductive, not healthy— rather than depending on her/ his age

37. Another Way: Older Persons as an Emerging Asset  Seeing older persons as asset, we are not worried about the explosion of older persons  Older person does not necessarily mean liability, unproductive

38. Firm Level: Open Discussion

39. Session 2

40. MIGRATION, AGEING, AND DEVELOPMENT

41.  Slowed down ageing population in rich economies  Accelerated ageing population in poor economies  Deferred ageing population in rich economies THREE PATTERNS

42. Slowed Ageing Process in Rich Economies  This happens in rich economies such as Singapore and urban areas in Sarawak, Malaysia  Fertility and mortality have been low, and percentage of older persons rises fast  In-migration has helped slowing down the ageing process  It raises social and political tensions.

43. Accelerated Ageing in Poor Economies (1)  This is particularly found in relatively poorer economies of a country  Fertility and mortality have been low  Because of relatively poor economy, the young population leave the areas.  Ageing process is then accelerated by the out- migration  Examples are rural areas in South Korea, the district of Pacitan (Indonesia), and Kelantan (Malaysia)

44. Accelerated Ageing in Poor Economies (2) This acceleration of ageing process worsens the poverty if the out-migrants do not send remittances to the area: the area loses its young, productive, labour force

45. Deferred Ageing in Rich Economies  This pattern is also found in relatively rich economies, often at sub-national levels, particularly cities.  A long history of in-migration has deferred the ageing process despite the relatively low fertility and mortality  Current trend of out-migration from these cities may fasten the ageing process in cities such as Jakarta and Kuala Lumpur

46. Reflection on the Debate: Is a High Population Growth Rate Bad or Good?

47. BRIC or BRICI? Brazil, Russia, India, and China People start mentioning BRICI, adding Indonesia to the list RISING ECONOMIC POWER

48. A Rapidly Growing Economy A Huge Political Power A Large Number of Population + =

49. Firm Level: Open Discussion

50. Active Ageing The Solution

51. Being Active Since Young, Even Embryo Being Active for Everybody, Regardless the Age

52. From Family Planning To Planning Active Ageing

53. Firm Level Open Discussion

54. Thank You