Ethos Issue 1, October 2006
The Real Challenges of
an Ageing Population
Opinion: Andrew Kwok
The ageing of populations worldwide
has had national governments scrambling to stave off looming
economic decline and fiscal disarray. Common policy measures
to this effect include raising the retirement age, encouraging
savings, and tightening the eligibility criteria on social
security. The underlying principles are sound: extend the
working life of healthier, longer-lived individuals, exercise
prudence, and reduce the burden on fiscal and social support
systems.
Yet policy makers will need to address more
fundamental issues to be truly effective in the long term.
For instance, is raising the retirement age helpful if there
are no new jobs to fuel demand for elderly workers? What causes
over-consumption and hinders people from saving? What is the
extent of the Government’s responsibility for retirement
financing, vis-à-vis the individual’s?
Singapore faces challenges on each of these
fronts. Economic and job growth can be limited by a small
population size and talent pool. A longstanding policy stance
encouraging home ownership, coupled with high property prices,
may reinforce over-consumption. In addition, the Singapore
Government, having shunned the Western social security model,
needs to find ways to care for an increasing pool of low income
elderly, without eroding the work ethic or undermining familial
and community support structures.
The Race For Growth
In tackling the challenges of an ageing population, oft-mentioned
factors such as social security, elderly-friendly infrastructure
or healthcare provisions are clearly valid concerns. Nevertheless,
developed countries have been able to sustain increasingly
elderly populations primarily because rising productivity
has outweighed the costs on society. Economic growth –
sustained by a highly competitive and innovative economy and
a well-trained workforce – is the best defence against
any potential crisis arising from an ageing population. Part
of the energy devoted to examining the implications of an
ageing population may be better spent on strengthening the
fundamentals for a strong and vibrant economy.
An ageing population with a shrinking workforce
calls for stronger economic growth to compensate for the increased
costs to the economy. Ironically, to grow its GDP by an average
of 3% to 5% annually, the Economic Review Committee estimates
that Singapore needs to increase its labour force by 1% to
2% a year.
Furthermore, Singapore’s current population
size limits the extent of expansion possible. Global cities,
centres for international commerce, trade and finance like
New York, London and Tokyo average a population of 7 to 8
million. With a large talent pool to draw from, these cities
can support diverse industries and services. Singapore cannot
rely indefinitely on a few key industries to drive growth,
as increasing global competition will make it harder for Singapore
to maintain its market share. Furthermore, dependence on a
few key sectors leaves the entire economy vulnerable to the
cycles of these industries.
Singapore’s current sub-replacement
Total Fertility Rate (TFR) of 1.24 offers little hope of kindling
population growth. If Singapore is to grow its workforce,
it will have to increase the current stock of non-citizens.
However, citizens must be able to accept a larger pool of
migrants than they have been accustomed to.
This policy is clearly challenging. Migration
is not a tap that one can turn on and off at will. More notably,
it can be difficult to garner public support, as the Government
may be viewed as catering to the interests of foreign talent
at the expense of locals. It will be tough, but crucial, to
persuade citizens of the need to grow the population in good
time. The Government should capitalise on the current cycle
of healthy economic performance and high employment to introduce
aggressive immigration policies that will boost its population.
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