Ethos Issue 1, October 2006

Ageing Repositioned: Singapore in the New Global Demography
Sarah Harper

Singapore will soon be one of the demographically oldest countries in East Asia, as measured by the proportion of the population aged 65 and over. The median age of Singapore residents has increased over the past quarter-century, from 24.4 years in 1980 to over 35 today. This has been fuelled by a fall in Singapore’s Total Fertility Rate, which now stands at 1.24 per resident female, one of the lowest in the world.

There has been a corresponding increase in longevity, with life expectancy at birth now 77 years for men and 81 years for women.¹ Within 25 years, Singapore will be second only to Japan in demographic age, if current trends continue.

Many governments might be alarmed at such statistics. There is a general perception that such a shift would lead to a dramatic decline in the ability of government systems, social structures, and the economy to support an ageing population. The reality, however, is far more complex and susceptible to policy changes.

An ageing population alone does not account for pressure on healthcare services. As Leeson² has pointed out, although a number of cross-national studies have considered the determinants of healthcare costs, only one has found that the age structure of the population – where the proportion of population aged 65 years and over is taken as the age structure indicator – is the explanatory factor. Instead, it is the wider effects of income, lifestyle characteristics, and new technology, alongside environmental factors, which drive demand for advanced medical applications. Indeed, analysis of OECD data³ by Seshamani and Gray⁴ reveals that in developed countries at least, per capita healthcare costs for those aged 65 years and over have increased at the same rate as for those aged less than 65 years.

Several studies do suggest that the ageing of industrial populations will add greatly to the burden of public expenditure through an increase in real spending on pensions. However, as Heller⁵ has pointed out, while this in part may be attributed to the slowing of real economic growth accompanied by a shrinking labour force, the main fiscal pressures originate from the existing framework of social insurance in many countries. Any economic burden is more likely to arise from labour markets, which have used retirement as a regulating mechanism in times of labour oversupply and social discrimination against older workers, than from large numbers of older people who are unable to work due to their age per se.

Indeed, the three major concerns of demographic ageing – public spending on pensions, high dependency ratios between workers and non-workers, and a slow down in consumption due to an increase in older people and a decrease in younger people – are dynamics of the current time period and not fixed. Critically, they are all concerns which can be addressed by policy.

It is thus important for policy makers to take a holistic approach by considering the changing population structure as a whole, and not just the micro picture of elderly dependency ratios and support for the growing numbers of older people. Here is not a simple increase in numbers of older people, but a shift in the population structure of the country, away from a society with many young and few old, to one with a far more balanced ratio of young to old. Indeed, fears over the dependency ratio of the old to those of working age should also take into account a fall in the dependency ratio overall from 48 per 100 in the 1980s to just under 40 by 2003, due to a rapid fall in the number of those aged under 15 years.

For example, early retirement in Singapore is becoming common. Any economic challenges posed by rapid population ageing in Singapore will thus be compounded by low labour force participation rates among those aged 55 years and over.⁶ Male labour force participation rates in Singapore fall after age 55 years, and are very low compared to other nations in the region after that age. Among women, labour force attachment rates in Singapore are much lower than those of men. Similarly, female labour participation at older ages is lower than both male and female employment rates in Western nations. These trends raise questions about the kinds of policy options available both to encourage greater labour force participation, and to enhance retirement security for those who retire out of necessity, for example, through ill health.

Page 1 I 2 I 3