Reaping Asia’s Silver Demographic Dividend

By Lee Jong-Wha, Project Syndicate | Feb 13, 2025

Asia’s population is aging rapidly, with significant economic consequences. But by adopting policies that keep older individuals in the workforce and boost their productivity and well-being, the region’s governments can transform the challenges of a graying society into opportunities for lasting prosperity.

SEOUL – Population aging is rapidly becoming one of Asia’s most daunting challenges. In 2023, 14% of the region’s population was aged 60 or above, and that share is projected to swell to 25% by 2050. The proportion of the over-60 population in Japan is already 35.6% and will likely reach 43% by mid-century, while in China it is set to double, to 40%, by then. Though these countries have been graying for some time, even relatively younger ones across Asia are now experiencing sharp demographic shifts.

These trends can have significant economic consequences, from a shrinking labor force and rising pension and health-care costs to a greater risk of elderly poverty and income inequality. To head off these problems, Asian governments must develop integrated policies that encourage older individuals to stay in the workforce, boost their productivity and well-being, and safeguard the financial stability of pension and health-care systems. By harnessing the full potential of elderly workers, these countries can tap an often underutilized resource to sustain economic prosperity.

Increasing seniors’ labor-market participation rate can help mitigate the effects of a shrinking workforce while slowing the rise of public expenditures. To be sure, many older adults in Asia are already working: 26% of people aged 65 and older in Japan, and 38% in South Korea, were employed in 2023 – among the highest rates in the OECD. Nevertheless, despite increases in life expectancy, it is still common for middle-aged and elderly individuals in Asia to retire even before the mandatory retirement age – in contrast to Western developed countries that have extended or abolished their retirement ages.

Concerns that older workers are not as productive as their younger counterparts are overblown. While some studies link aging to physical and cognitive declines, others show that it does not necessarily diminish productivity. Although older individuals may find it challenging to adapt to fast-evolving technologies such as artificial intelligence, they can stay productive by cultivating their human capital, whether through formal education or continuous learning.

My research on Korean workers reveals that acquiring skills in information and communications technologies and participating in job-related training significantly boost the productivity of older employees, especially those who have a university degree or work in skill-intensive industries. This implies that creating lifelong learning opportunities could help offset the productivity drop often associated with aging.

Remaining fit and healthy – a core component of human capital – also influences older people’s employment prospects, underscoring the importance of high-quality public health care. Universal coverage should address seniors’ diverse health needs, as an Asian Development Bank report recently emphasized. Employment itself has various health benefits. While retirement can alleviate job-related stress and free up time for healthy activities, it has been shown to increase the risk of being diagnosed with a chronic condition, severe cardiovascular disease, and cancer. Retirees also have less incentive to invest in their health and can experience social isolation and depression. As The Economist notes, there is meaning in being useful, and even modest amounts of excitement in the workplace can act as an “anti-aging serum.”

By promoting healthier aging through measures to extend workforce participation, increase social engagement, and improve health-care systems, Asia’s policymakers could create a “silver demographic dividend” that helps to sustain the region’s economic dynamism. Of course, the link between population aging and economic growth is complex: some research suggests aging may reduce productivity, while other studies highlight positive outcomes when the appropriate technologies and frameworks are in place. The extent to which older workers bolster productivity may well depend on factors such as the implementation of elder-friendly innovations, including AI.

Fully realizing the potential of older workers requires increasing their employment rate, but not at the expense of younger employees who may be more productive. Keeping seniors in the workplace is not enough to drive long-term economic growth in Asia. The focus should be on enhancing employment, productivity, and innovation capacity across age groups, as well as promoting collaboration among them. To that end, governments should invest in the development of digital knowledge and technical skills for all workers.

Japan, Singapore, and South Korea – among the world’s fastest-aging countries – have not resolved every challenge associated with a graying society, but they offer valuable lessons for how to confront this demographic shift. Raising the retirement age and providing flexible employment opportunities encourage older individuals to remain in the workforce, which is essential for mitigating labor shortages and ensuring fiscal stability. But policymakers must avoid rushed measures that distort the labor supply and inflate pension and health-care costs. More deliberate reforms to balance contributions and benefits – such as introducing the “macroeconomic slide,” an automatic adjustment mechanism, in pension systems – can strengthen social safety nets.

Asian countries must act more decisively and swiftly to address population aging in ways that promote overall well-being. Extending working lives while enhancing seniors’ productivity through targeted skills training would help sustain economic growth and maintain the fiscal soundness of social-security systems. By adopting policies that promote healthy, productive aging, countries can transform the challenges of a maturing society into opportunities for lasting prosperity, social cohesion, and greater happiness for individuals and communities alike.

Lee Jong-Wha, Professor of Economics at Korea University, is a former chief economist at the Asian Development Bank and a former senior adviser for international economic affairs to the president of South Korea.

Copyright Project Syndicate

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