This is the economic impact of an ageing Singaporean workforceBy Prof Sattar Bawany
The Current Reality
First of all, this issue of ageing workforce is not unique to Singapore. From various published reports we know for a fact that the world’s population as a whole is ageing - and this is true of the Asia region too. Today Asia accounts for one-half of the world’s older population.
By 2050 this is set to increase to two-thirds. By every measure, Japan has the oldest population - not just in Asia, but globally. Singapore is not far behind with ageing populations on a par with Europe where the challenge of the ageing population is widely recognised and hotly debated.
With the highest median ages, longest life expectancy rates and among the lowest fertility rates in the region, Singapore is already facing the immediate challenges of declining populations and talent shortages.
At current birth rates and without immigration, Singapore’s citizen population will start to age and shrink. Between 2011 and 2030, the median age of the citizen population will rise from 39 years to 47 years.
Do Singaporeans want or have to work beyond 67 or 70?
Currently the retirement age is at 62. The real issue is that most Singaporeans have to and not necessarily want to work until they are 67 or 70 or beyond.
This is primarily due to the fact that with the costs of living climbing (especially healthcare cost), fewer of us can afford to stop working. Working beyond the traditional retirement age is a necessity and no longer a choice.
Just look at the recent research by the HSBC (The Future of Retirement, A New Reality: Singapore Report by HSBC Insurance Holdings Limited 2013), despite having one of the highest per capita incomes worldwide, many Singaporeans face the very real prospect of their savings running dry almost halfway through retirement. The reasons being the high cost of living and greater life expectancy.
Working longer could be the best way to improve the workers retirement years. Delaying retirement is often viewed as the surest route to financial security in old age. By working longer and earning more, older workers can boost savings, and shrink the period (that) their retirement savings must fund.
Employment at older ages also expands the nation’s labour pool, accelerating productivity, increasing national income, and raising living standards for both workers and retirees.
However, if more and more old or matured employees weren’t able to work due to forced retirement, middle-aged and younger people would have to subsidise a growing segment of society. This brings with it even bigger issues.
Economic Implications of an Ageing Workforce
According to a paper published by the National Population & Talent Division of the Prime Minister’s Office (PMO), Singapore will also find itself in the unprecedented position of having a declining number of citizens in working ages (i.e. those aged 20-64) from 2020 onwards.
As more Singaporeans retire and fewer young Singaporeans enter the workforce, our citizen workforce will start to shrink. This will have implications on our economic growth.
Productivity growth measures the growth in output produced by each worker. Productivity growth is driven by two main factors: capital and innovation.
A rapidly ageing workforce, if not managed well, may lead to a lower level of innovation. Evidence from high-income OECD countries suggests that the median age of the population is negatively correlated with total factor productivity, a measure of productivity growth associated with higher innovation and improving technology.
If the ageing population in Singapore not only leads to a shrinking workforce but also results in lower innovation, it will become even more difficult for us to support productivity and economic growth.
It is thus important that the right Government policies are put in place to allow us to leverage on our older workers by first, investing in more elder-friendly technology; second, encouraging continuing education and training; and finally, encouraging our younger workforce to tap on the wealth of experience of our older workers.
There will be impact on Singapore businesses as well where the way companies operate and the markets they serve will be immense. Yet to date the majority of companies have been slow to respond. From observations and discussions with various stakeholders, few companies have formalised strategies that take into account the ageing of the population, either in terms of their customer base or employee base.
Only a select number of companies have recognised that as the percentage of younger workers declines, older employees represent a more important component of the workforce than ever before and therefore introducing policies and programmes to reflect this and retain these older workers.
This shift in the population structure has enormous implications for governments, non-governmental organisations (NGOs), businesses as well as for the older people themselves.
Whilst this global phenomenon has long been recognised and discussed, governments around the world are really only just beginning to respond to the challenges.
We must be prepared as a nation to face the various strategic challenges posed by an ageing workforce.
However if all stakeholders (employers, workers and government) were to collaborate effectively, these perceived insurmountable challenges can indeed be overcome and our economic growth and nation competitiveness can be sustained.
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