When populations age

In a visit to Thailand nearly 10 years ago, I learned from their government planners that even then their aging population was already a matter of concern to them. In a discussion I had with the National Economic and Social Development Board—the Thais’ planning agency and a counterpart of our National Economic and Development Authority (Neda)—I was told that, for the first time, a long-term plan spanning 25 years was in the works. And the motivation for them to do this was anticipated demographic trends implying dramatic forthcoming structural challenges for the Thai economy.

The Philippines is not new to long-term development planning. Unknown to many, Neda had already come up with a 25-year long-term plan back in the 1990s, on instructions of then President Fidel V. Ramos. Officially known as Plan 21 (not to be confused with Philippine Agenda 21, the national agenda for sustainable development, which is yet another 25-year plan), the document painted in broad strokes the vision, direction and strategies for Philippine development up to the year 2025. Currently, Neda is working on a new 25-year plan called Filipino 2040, the sequel to Plan 21 that was done under my watch as Neda chief then. Unlike in the case of Thailand, the aging population was not of any significant concern in our own Plan 21. Why is it of such concern to the Thais now?

They have been worried about the serious problems now faced by Japan and European countries like France and Germany, among many others, where birth rates have plummeted at the same time that people are living much longer. The “baby boom” generation is now in retirement age, and the far less numerous “baby bust” generation of the 1970s and 1980s are the ones now working to support the larger population of children and the elderly. The dependency ratio—the proportion of total population made up by the nonworking segment from ages 0-14 and beyond 65—is rising in the rich countries and new-rich countries like Thailand, with the elderly nonworking population contributing more to the rise.

Traditionally, the typical population profile had been one where younger people make up the bigger part, and the proportions narrow as one goes up the age scale. Thus, the age distribution bar graph typically had the profile of a pyramid. But as nations got richer, they produced a lot less babies; at the same time, life expectancies were also rising. The graph is thus turning on its head, with the base of younger people getting narrower than the upper segment of the elderly.

What’s the problem with this? Among the more critical challenges such countries now face is the severe pressure on government finances due to collapsing social security systems. Put simply, there are far more people in these countries taking money out of the system (i.e., in retirement benefits) than there are active workers paying into it. To cope with the situation, governments are being forced to cut back on benefits while raising contributions from active workers, with predictably violent reactions from retirees and workers alike, as already seen in Europe in past years.

The problem is, no one foresaw the reversal of the population pyramid when social security systems were first conceived and established. With the pyramid turning on its head, governments are incurring huge deficits with their bleeding social security systems. A common prescription has been to privatize social security and get the problem out of government’s hands. Workers are now also urged to save for their own retirement through special individual retirement accounts made attractive by tax breaks. Another approach has been to move the mandatory retirement beyond the current 65, or abolish mandatory retirement altogether.

There are numerous other economic implications for an economy where senior citizens increasingly make up a substantial portion of the population. Obviously, the nature of public services, commodities and services needed would be very different from those in an economy where younger consumers dominate the market. Retirement homes and settlements and caregiver services are among the current high-growth industries in such economies; and economies like ours, with relatively young populations, are cashing in on the trend.

There are, of course, profound social, cultural and political implications of an aging society as well. These various implications of an aging society, I was told, were what the proactive Thais wanted to plan better for.

Meanwhile, rather than turn into a reverse pyramid, the Philippine population profile is transforming into the shape of a lantern with a bulge in the middle, as our dependency ratio has been falling, rather than rising. From 64.3 percent in 2005, it is projected to drop to 46.3 percent by 2025. On the other hand, Japan’s ratio is projected to reach 68.2 by then, from the current 50.2. Thailand’s ratio will rise from 40.8 to 46.6. There has been much talk about our country’s “demographic sweet spot,” with our working age population now well outnumbering children and the elderly combined.

Do all this imply that having 36 million more Filipinos than Thais now (our countries had exactly the same populations in 1970) was not such a bad thing after all? Should we forget about population management and family planning efforts altogether? Well, not quite. There have always been compelling reasons, especially at the individual family welfare level, why Filipino families should have the option and ability to plan the proper size of their families. Family planning is still better than, as the old joke goes, “family planting.”

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E-mail: cielito.habito@gmail.com