The sight of 60-year-old cleaners at McDonald's outlets in Singapore is vivid evidence of the greying of Asia. The demographic transition of the city-state is in an advanced stage, similar to that of Japan and South Korea, and other countries will soon follow suit.
The median age in Singapore is close to 40, compared with 35 in Thailand and China, and around 26 in Malaysia, according to a research report by Credit Suisse Group. The United Nations projects that the number of people aged 65 and older in Singapore will jump from 460,000 in 2010 to 1.4 million in 2030.
Fed by low birth rates and longer life expectancies, the rise in the ageing population will make it harder to sustain economic growth as the number of workers declines while the costs of caring for the elderly increase.
"China and Thailand are the ones that are likely to become old before they get rich, unlike Singapore which has already achieved developed market status," said Santitarn Sathirathai, a Singapore-based economist at Credit Suisse.
"Since an ageing population can weaken long-term economic growth rates, this is a serious issue for countries that have not yet achieved high-income status."
Population ageing could further worsen labour shortages that already are a headache for business operators in Thailand, analysts warn.
According to the National Economics and Social Development Board (NESDB), Thailand currently has an estimated 6.4 million elderly people, accounting for 9% of the population. By 2040, the number of Thais aged over 60 will be 20.5 million or 32% of the total population, with the workforce falling to 35.2 million from around 40 million at present.
The UN forecasts Thailand's working-age population will peak in 2017 before starting to drop. The decline will affect manufacturing, with a possible knock-on effect on export revenue.
"While importing unskilled workers from neighbouring economies has been helpful in alleviating the constraints so far, this strategy also has an expiration date," said Mr Santitarn.
"As neighbouring economies grow, the demand for labour in their own countries will rise as well and gradually wages will rise, making it less attractive to migrate to work in Thailand."
An International Monetary Fund (IMF) study shows that the contribution to long-term growth from expansion of the working-age population would decline to zero in the period from 2013-32 from around 0.8% between 1990 and 2012. In other words, said Mr Santitarn, "The weaker growth of the workforce over the next 20 years, if left unchecked, would lower our annual GDP growth rate by around 0.8 percentage point."
Thailand's labour productivity, meanwhile, has improved very slowly since 2009, said Therapong Vachirapong of Phatra Securities, citing government data.
"Labour migration to the service sector has also been very slow. An ageing population could also have effects on productivity growth. Effectively, the stagnant growth of the labour force could imply slower medium-term growth for Thailand," he added.
A man arranges oranges at a fruit store in the People's Park area of Singapore, on Tuesday, Jan. 6, 2015. In a culture that traditionally expects children to look after elderly parents, Singapore's employment rate for those between ages 55 and 64 is now 66 percent. The government has made it mandatory for companies to offer three more years of work to those turning 62, the official retirement age, and plans to extend that to five years by 2017. Photographer: Nicky Loh/Boomberg
GROWING PAINS
Population ageing means an increased fiscal burden for governments as the number of taxpayers is smaller relative to the number of people requiring support, such as healthcare.
"Taking care of the elderly — both pensions and healthcare — will impose a large fiscal burden on Asean and other parts of Asia," said Donghyun Park, principal economist at the Economic and Research Department of the Asian Development Bank (ADB).
The elderly in Asia traditionally have relied on their children for support although this is changing as traditional values wane, said Jayant Menon, lead economist for trade and regional cooperation in the ADB's Economic Research and Regional Cooperation Department.
"In addition, many developing countries in the region face the prospect of ageing at low levels of income. Unfortunately, only a small number of developing countries in Asia currently have public support systems in place. Not all existing pension systems provide universal coverage," he said.
Mr Park said Asia's pension systems were still underdeveloped but developing economies could learn from advanced countries.
"One thing to avoid is over-generous pension systems with too-low contribution rates, too-high benefit levels, and too-early retirement ages that plague many advanced countries, especially in Western Europe," he told Asia Focus.
Mr Santitarn of Credit Suisse said Singapore had a well-established defined contribution pension scheme in which part of the financial burden is borne by individuals' own savings over their lifetime rather than other taxpayers' contributions.
"Singapore and Malaysia both have national pension funds that have accumulated significant wealth. The coverage of the current pension scheme in Thailand for the private sector is still too limited, partly due to the large informal sector," he said.
Thailand, he said, should consider setting up retirement savings instruments including an efficient defined contribution pension scheme and various long-term saving funds. The accumulation of wealth must then be used to finance productive investment — whether it be capital goods for industrial upgrading or education and training to make workers more productive.
Across all of Asia Pacific, the number of older people is forecast to triple from 438 million in 2010 to 1.26 billion by 2050, according to the UN Economic and Social Commission for Asia and the Pacific (Escap). By then, almost two thirds of the world's elderly will be living in Asia Pacific, with one in four people in the region over 60 years old.
The proportion of "oldest-old", those above 80, will surge and constitute 19% of all older people in the region by 2050. The majority will be women, who typically have longer life expectancies than men.
"Thailand in particular is ageing much faster than its counterparts in Southeast Asia," said Mr Menon. "While developing countries in Asia still have a bit of time on their side, they need to use that time wisely buy putting all of the necessary reforms in place."
SOLUTIONS
After reporting a decline in its working-age population for a second straight year in 2013, China relaxed its controversial one-child policy introduced in the 1970s.
Analysts expect China's workforce will decline modestly from 853.7 million this year to 848.9 million by 2020, but will then drop sharply to 781.8 million by 2030, 743 million by 2040 and 650.9 million in 2050. The median age is projected to rise to 42.1 by 2030 from 34.6 in 2010, compared with 31.3 in rival India.
Meanwhile, Singapore late last year raised its retirement age from 65 to 67 and also provided government incentives to encourage couples to have more children, but the latter so far has done little to lift the fertility rate.
Mr Santitarn from Credit Suisse and Mr Park of the ADB agreed that extending the retirement age could be an option for Thailand.
"Lengthening the retirement age would also help to increase savings accumulation for retired workers as more of them work longer. In fact, more than half of Thais aged 60-64 continue to work anyway," Mr Santitarn said.
To encourage more births, Mr Park said more and better child-care facilities would be needed.
"There is no single magic bullet, and all policy options should be explored. However, in the case of Thailand, one policy option towers above all the rest. Thailand needs better workers to compensate for the prospect of fewer workers," he said.
Training, retraining and improving productivity are essential, he added.
"Population ageing simply makes it even more urgent for Thailand to address its biggest strategic challenge — achieving a more skilled and more productive workforce. For example, university education reform to produce graduates who actually have the skills and knowledge that employers want, rather than just a piece of paper like a degree," he said.
Mr Menon proposes another far-reaching shift.
"In both Cambodia and Thailand, agriculture still employs a big share of the population. This suggests that labour shortage issues can still be addressed by reallocating labour from low-productivity agriculture to higher-productivity manufacturing or services, and by ensuring that workers have the skills both basic education and specialised knowhow necessary to make this transition," he said.
Massive productivity gains could also be gained through sectoral diversification, innovation, and improvements in the quality of human and physical capital including infrastructure, he added.
"Where possible, labour force participation rates could be increased by removing barriers to female employment and increasing the mandatory retirement age, among others," he said. "More importantly, we need to keep in mind that Asian countries are ageing at different speeds, and that cross-border interactions can help mitigate many of the negative impacts that ageing will have at the domestic level."
Singapore, for instance, has sought to address labour shortages by importing workers from countries with much younger populations.