Fast-depleting labour force likely to cause significant social and economic cots.
THAILAND should urgently review its policies, as it is “getting old before getting rich” with a rapid increase in the elderly population, according to the World Bank.
Philip O’Keefe, lead author of the bank’s “Live Long and Prosper: Ageing in East Asia and Pacific” report, told a briefing on Friday that Western countries were also ageing rapidly, but have had decades to prepare for that.
It took France 115 years for those aged 65 and over to move from 7 per cent to 14 per cent of its population. In other OECD countries, the transition took 50 years or more. In Thailand and some middle- to low-income countries in the East Asia and Pacific (EAP), it was just 20 years.
“Thailand and other developing countries have a shorter time to adjust attitudes,” O’Keefe said.
“It’s challenging to adjust people’s thinking and realisation [of lower-than-expected support from governments]. Importantly, their income is much lower [than Western countries].”
The “getting old before getting rich” dilemma is going to be true in Thailand, China, Vietnam and Myanmar.
The shrinkage of Thailand’s labour force of those aged 15-64 is forecast to be over 10 per cent from 2010-40, the sharpest among developing economies and compared to just 4 per cent in Vietnam.
In the same period, other middle- to low-income countries are expected to still be experiencing an expansion in that demographic – from 2 per cent in Malaysia to nearly 10 per cent in Laos and Timor-Leste.
This requires Thailand to review its economic strategy – how it will compete with other countries.
The ageing population structure amid a depleting labour force is putting pressure on EAP countries’ fiscal foundations and economies.
In most defined benefit schemes in developing EAP countries, cash-flow deficits are expected to emerge at between 1.4-4.5 per cent of gross domestic product by 2040.
Ageing populations account for about one-third of the projected increase in public-health spending in several developing countries in the region.
The situation is particularly grave when most of the elderly rely on their own income and are not supported by their families or the government. Despite that, most people have high expectations for states supporting the elderly.
Thailand’s labour force is now at its peak, suggesting that without acting now, the country could slide into serious financial problems.
When many Thais grow old, they will need state support since the household savings rate is below 10 per cent of gross domestic product versus household debt of 80 per cent of GDP. Thailand also launched its pension system late – 1998.
“Thailand’s demographic dividend is exhausted right now … Thailand is more vulnerable than most countries. It’s very urgent,” O’Keefe said.
Thailand should take into consideration “from womb to tomb” care, with a policy that covers a person’s lifecycle.
The focus should be on four areas – boosting the fertility rate, increasing female labour participation, raising the retirement age and welcoming more migrant workers.
The fertility rate could rise if there were a policy that combines work with family formation, and higher productivity could be achieved if education quality was improved. Incentives for training among young adults are needed.
“Thailand is weak in its lifelong learning system. Developing the system is significant for countries in the region, rich or poor,” O’Keefe said.
The contribution rate may need to be revised up. The healthcare system must also be reformed to address the ageing issue, with the inclusion of more home- and community-based care.