Asia is graying rapidly. From 2020 to 2050, the region’s share of the senior population aged 65 or above will double from 9.2% to 18%, exceeding the 16% global average by 2050.
Many economies in developing Asia face the risk of growing old before they become rich. Some will experience a drastic reduction of their working age (15-64) population, as well as aging of the current workforce. The productive population in Hong Kong, China and the Republic of Korea will shrink by 10% between 2017 and 2030. From 2015 to 2050, the average age of the region’s workforce is expected to increase from 37 to 40.
Compressed and premature aging raises the concern that some countries will struggle to provide adequate social services and income support programs for the elderly while continuing to stimulate economic growth through large-scale investments in infrastructure and human capital development.
One way to reignite productivity growth for rapidly aging Asian economies is to tap technology. Experience from “aged” advanced economies suggests that technology can help improve health and longevity, transform jobs and the workplace, and improve the performance of the labor market by training workers and upgrading job matching services that pair job candidates with the right kind of roles.
The first driver of this process is advancements in the medical sciences and biotechnology, which contribute to longevity and healthy life span, leading to a longer and healthier work life. For example, the estimated work capacity of adult men (55-69) increased by an average of 5.5 years in OECD countries during 1977-2010. Evidence shows healthier workers are also more productive.
Second, technology is encouraging labor participation of elderly workers, and also enhancing their productivity. Automation has transformed jobs by reducing the number of manual and physically demanding tasks performed by humans. Adoption of industrial robots in the region is projected to grow 120% from 2016 to 2020. Technology also allows firms to implement flexible work practices.
Third, job-matching and training services assisted by new technology have great potential to bring more seniors into the workforce. Innovative, customized, and interactive training using modern technology will likewise help build their skills.
Experience from advanced economies that have already made the demographic transition shows that taking advantage of the longevity dividend is feasible, given greater policy attention and proactive, innovative measures. Studies show that the growth of these advanced economies has moderated (compared to some fast-growing middle-income economies) but is nevertheless sustained.
For example, the share of working age population has been shrinking in the EU from 67% to 65% between 2006 and 2016, with the share of older persons (aged 65 or over) reaching 19% of the total population. The EU’s growth has moderated from around 3% to 2% over the same period.
A greater number of seniors above the normal retirement age of 65 are now employed in OECD countries. The average labor force participation in the 65-69 age group increased from 20% in 2006 to 26% in 2016, and the rate for those aged 70-74 also climbed from 12% to 15 % in the same period. Notably the share of employed seniors in the 65-69 age bracket grew from 28% to 43% in New Zealand, from 18% to 26% in Australia, and from 35% to 43% in Japan.
Technological change is a key factor that can enhance labor force participation above current retirement ages, as well as the productivity of these workers. For example, automation and artificial intelligence supplement and complement labor, and make jobs and tasks less physically demanding and more precisely executed.
Developing Asia needs to harness technology to overcome the negative consequences of a contracting and aging workforce, while maximizing the benefits of longevity for inclusive and sustained growth. However, the gains are not automatic. Here are three ways they can be realized.
First, technological innovation and adoption must be actively promoted through sufficient funding for research and development. Those regional economies most at risk from aging should do what it takes to foster innovation and the adoption of age-related technology and lifelong learning, as well as provide working environments conducive to senior workers.
In particular, efforts to bridge the “gray divide” can be strengthened by accommodating seniors’ specific needs and concerns. For example, customizing digital devices to accommodate the needs of the elderly, as is done in Japan through user-friendly senior smart phones, can promote seniors’ access to digital technology. Seniors also prefer learning about new technologies and devices through informal training (from their families and friends) rather than through formal training programs.
A second way to engage more seniors in productive work is to provide lifelong learning and continue upgrading their cognitive and non-cognitive skills. It is important to provide workers of all ages with opportunities to continually upgrade their skills and reskill throughout their careers while developing human capital and allocating resources to promote technological innovation and adaptation.
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Finally, a third step is to enhance cross-border mobility for workers, which can help reduce labor shortages and the skills mismatches experienced across much of developing Asia. Young and populous countries can complement the demographic transition in aging countries.
To gain from potential complementarity across economies with varying demographic profiles, countries need to invest in connectivity and skills development, reduce barriers to labor mobility and migration, and strengthen regional cooperation to address their common challenges.
Asia is aging, but it can continue to achieve strong, inclusive growth. Longevity gains can be obtained from harnessing the older demographic, in ways that leverage their talent, skills and experience.