A Snapshot of Asia’s Changing Demogrphics
By TJ Kim
October 5, 2012
Having its peak in 1965-1970, the population in Asia skyrocketed at 2.5% at annum, outpacing the rest of the world in growth. Today, Asia is home to 60% of the world total population, or roughly 4.2billion people. Rapid growth in its population in the past signaled that Asia was and still is a place with consumer growth and the market potential.
In the past few decades, however the population growth in Asia has slowed down, which led to rapid ageing of demographics across Asian countries. Meanwhile, labor force growth in Asian has also decreased below the world average.
Across eight major economies in Asian, the downward pattern in population growth is obvious. According to Credit Suisse Research team in Assessing Asia’s Demographic Promise,
“For our detailed demographic analysis, we selected eight Asian countries/economies that cover a wide spectrum in terms of population, labour force, economic development, social systems, etc. These are China (CN), Hong Kong (HK), India (IN), Indonesia (ID), Malaysia (MY), Japan (JP), Republic of Korea (KR), and Singapore (SG). Exhibit 7 presents population growth rates of the selected countries with Japan currently undergoing negative population growth and India and Malaysia experiencing slowing population growth over the last two decades.”
Due to the slowly growing population and expanding ageing population, the old age dependency ratio is increasing in aforementioned 8 major economies of Asia.
“Changes in fertility rates and mortality rates have led to changing population structures. The child dependency and old-age dependency ratios are two summary measures of the population age structure. In the definition used by the United Nations, child dependency ratio is the ratio of population aged 0-14 per 100 population aged 15-64, and old-age dependency ratio is the ratio of population aged 65+ per 100 population aged 15-64. These ratios reflect the number of dependents relative to the working age population. Exhibit 14 shows that the old-age dependency ratio is the highest in Japan in 2010, which makes it the oldest country in the world. Malaysia, India and Indonesia have low old-age dependency ratios. The traditional measures of dependency ratios, however, are becoming increasingly obsolete as youngsters today are spending more years in education and entering the labor force at later ages. That is, the appropriate age ranges for the working age population are shifting. As a thought experiment, we also calculate the old age dependency ratios using an alternative measure with those in the 20-64 age range as the working age population. It resulted in higher old-age dependency ratios, compared to the traditional measure”
Looking at the Demographic Transition Model which represents the transition from high birth and death rates to low birth and death rates as a country advances from pre-industrial to industrialization, we can explain in more detail what changes in demographics are occurring to each group of nations in a similar industrial transition.
“According to this framework, different Asian countries are in different stages of the demographic transition. India, Malaysia, Indonesia and Vietnam – the younger Asian countries are in stage 2 of falling death rates, high birth rates and increased population. China is in stage 3 of falling death rates and birth rates, while the Republic of Korea is in stage 4 of low birth rates and death rates. Japan is experiencing a stage where birth rates have become so low that they are lower than death rates, leading to a declining and aged population. The fact that Asian countries are in different stages of demographic transition has led to very different patterns of population growth, age structure and life expectancy in these countries.”
In changing demographics, it is crucial to understand how much working age population growth contributes to the overall GDP.
“…the contribution of working age population growth was very significant in explaining overall real GDP growth in Singapore during 1990- 2010 and in Hong Kong during 1990-1999. On the other hand, in Japan and the Republic of Korea, labour productivity growth contributed the most to real GDP growth in 1990-2010. In Japan, the working age population growth fell during 2000-2010 and dragged overall real GDP growth down. In the future, these ageing countries cannot rely much on working age population growth and will have to increase labour productivity growth.”
Demographics characteristics vary significant across countries in Asia. However, as shown above, the general trend is that birth rates are slowing down, and consequently the population is ageing more rapidly. Therefore, the challenge ahead of Asian economies is how to resolve the labor force dependency continuously shifting over to the older population. The solution will require a structural policy changes across pensions, education, labour market, etc.
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