Population 4 (b) – Turning Silver into Gold - How other Countries are Preparing for a Greying Population

 

-Image generated by Microsoft Bing AI

Now for some countries which have been very proactive about meeting the challenge of having declining populations.

Singapore

Singapore has taken the Japanese recipe to heart. Here’s how it is handling the transition to an older society. It too is raising its retirement age -to 64 in 2026 and to 65 by 2026, to cover the additional financial cost. And why not, if people are living longer, healthier lives and aren’t worn out by years of hard manual labour?  

To make that happen, It is spending big on health and wants each person to have a doctor who will monitor their health throughout their life to keep them in top shape.   It is also focusing on training in midlife and encouraging companies to retain workers until age 69, if they want to keep working.

It is also doubling the number of community elder care centres and doubling the number of beds in them, to ease the pressure on acute care hospitals and nursing homes.

To ensure that it has enough human resources, it is boosting salaries in the sector to attract and retain staff and spending $290 million on 1800 training places. By having a high level of salary competitiveness it also expects to be able to attract foreign workers.

Lastly, it also spending $18 million on digital transformation in order to eliminate repetitive and administrative tasks.

South Korea

Although South Korea has had the lowest birthrate in the world - it fell below replacement (1.58 children) in the 1980s, and slipped into negative territory in 2020, it doesn’t yet have an ageing problem, but expects to have a fast -growing elderly population by 2045, and as a percentage, an even bigger proportion than Japan.  For this reason, it is encouraging couples to have more children by giving them a monthly payment, childcare and paternity leave, help with fertility treatments and lower mortgage rates.

However, it is also planning to improve the lives of its elderly citizens by strengthening its pension system, both public and private, and by strengthening chronic disease management, expanding nursing services and encouraging active retirement through social and leisure activities as well as volunteer opportunities so that the elderly can continue to participate more fully in society. 

Efforts are also underway to create a safer living environment with initiatives such as mandatory safety training for senior drivers and the establishment of safe protection zones.

As far as potential labour shortages go, South Korea has had a plan in place since 2016 to encourage more female participation in the work force through part time employment and by encouraging their  reemployment after career breaks. 

To attract foreign workers in areas where South Korea lacks specialists of its own,  it is planning to offer long – term employment and opportunities for settlement. 

Interestingly, it also anticipates some savings as there will be fewer dependent children to support  and less expenditure on schools – “the third dividend” of having a smaller population. It is also actively promoting efforts to establish "age friendly” industries in areas such as medical care, food and products which incorporate user -friendly universal design.

Thailand

Thailand too is investing in human capital – lifelong health, education and  productivity, so that both its people and its economy will thrive and remain healthy for longer. Since the 1970s its life expectancy has grown from 58 years for men and 63 for women to 74 and 78 respectively today and this is expected to increase to 75 and 82 by 2030, with the number of people over 65 increasing from 10 % to 20% of the population.

Having made the transition to negative population growth and an ageing population much faster and more recently than Japan, it does not yet have the accumulated wealth – public or private, which Japan had to meet the needs of its ageing population to date. Nor does it have a well -established social security system, so it must do a great deal all at once. Here's what it plans to do.

Most of the following information comes from a 2021 report* entitled “ Thailand’s Efforts to Cope with a Rapidly Aging Population”  which offers an excellent roadmap for other countries in a similar position. Some of its key points are listed below.

1.       SOCIAL SECURITY REFORMS AND HEALTH CARE DELIVERY

Traditionally care of the elderly was left to family members, but with fewer children and increasing numbers of elderly people, plus the fact that young people are migrating to the cities and leaving elderly parents behind, Thailand realised that this would be unsustainable in future and established a National Savings Fund in 2015.

A draft policy regarding future health care costs is calling for a 500 Baht contribution per year during the peak earning years between 40 and 65. Health at Home is a private company which uses smart phones and home visits  to deliver traditional services at lower cost and a life assurance company is offering reverse mortgages on houses and land. However, there is the risk of people outliving their assets, changes in property values and interest rates, and the cost remains high for those on low incomes.

In consequence, Thailand is also increasing the number of people who can access retirement schemes. Previously only civil servants (10%) and around 30% of employees in private industry had access to pensions and it only applied to companies with more than 20 employees. It also excluded the self -employed which formed a majority of small businesses. As of 2022 it will apply to all businesses.

Salary and promotion structures will be revised to take this into account and retirement age -currently set at a very low 55, will rise to 60, while that for public servants who enjoy bigger pensions and more comprehensive medical care for themselves and their families, will rise to 63.   

Employees who stay less than 15 years will not receive a pension but a lump sum payout. Surprisingly, surveys showed 70% of workers were in agreement with the new retirement age, because they would receive larger payouts. 

Thailand is also providing tax incentives for companies to hire older workers, not only to keep revenues up, but to offset potential labour shortages.

2.       PROVISION OF CARE FOR  SENIORS

In 2019 Thailand had 180,000 bedridden elderly people, a number which was expected to rise to 300,000 by 2030. So far private care services have only existed for wealthy residents and foreigners, but as companies are starting to rush in to fill this gap, the Thai government is beginning to establish safety and service standards. Price controls are being considered with respect to pharmaceutical products to prevent health care costs from spiralling.

However, with the cost still too high for most low -income people and with the cost of specialised medical care rising, Thailand is making major changes to its tax structure. These changes are not just to raise revenue but to promote better health and to reduce inequality because it is believed that the latter contributed to political unrest and the 2014 military coup which sent Thailand’s economy into a tailspin.

 3.       TAXATION CHANGES

Due to pressure from wealthy segments of the population, Income Tax remains at a modest 10%, however new measures include the following:

·         As of 2016, there is a 10% Inheritance Tax on assets worth over 2 million Baht (Approx  $USD 56,000)

·         A Gift Tax of 5% on amounts over 20 million Baht has also been applied as of 2016

·         A Land and Building Tax  from 0.01% to 0.7% depending on whether it is used for agriculture, housing or commercial purposes applies as of 2020

·         Increasing Tax on Dividends from bond investments and trusts  from 10% to 15% (May, 2018)

·         The Taxation of Virtual Currency and Digital Currency at 15% of sales or profits in order to control speculation  (May 2018)

·         Tightening of the Single Ledger Policy which allowed banks to offer credit based on one set of books which often differed from those submitted to the Tax Revenue Department. Since this usually involved a form of Tax evasion, as of 2019, banks can only give credit based on financial data submitted to the Revenue Department

·         Changes to improve efficiency and reduce Tax evasion by international corporations and their subsidiaries was under consideration at the time of publication

·         Taxation of Content Streaming on platforms such as YouTube was also being considered

·         As was a CommodityTax on the purchase of Motor Cycles of 150 – 200 Baht depending on their CO2 emissions, to help protect  the environment

·         An increase in its Goods and Services Tax (VAT/GST) from 7-10% was to have taken effect in 2016 but has been deferred, due to political uncertainty. It has been estimated that an increase of 1% will be enough to cover increased health care costs.

·         Lastly, public services such as Transportation, Public Utilities, Housing and Telecommunications presently owned by the Government which are currently being run primarily for the benefit of the public by having low prices (but still manage to return a modest profit), will seek further efficiencies. New infrastructure projects will be funded through public private partnerships (PPPs) in order to avoid large outlays for new projects such as port upgrading, while restructuring the economy.

 Health Promoting Measures

·         As of 2017, a Sugar Tax of 0.1 Baht, rising to 1.00 Baht is being introduced in stages but companies have had two years to comply

·         An increase in the cigarette tax  from 20% - 40% on cigarettes which cost less than 80 Baht ( $USD 2.27) (from 2021)

·         In future taxes will also be introduced on foods containing fat and salt because of their contribution to heart disease. At this stage, Thailand is asking companies to reduce salt content so that consumption will reduce by 30% per Capita a year.

·         Not a Tax, but Thailand is also prohibiting the sale of food containing trans fats and the importation, manufacture and processing of trans fatty acids because of their contribution to heart disease and other diseases

4.       RESPONSE TO ANTICIPATED LABOUR SHORTAGES

Thailand already has a very tight labour market with only 1% unemployment since it decided to ban and prosecute illegal migrants in the early 2000s. This is expected to lead to some shortages in areas such as food service and construction and also in forestry, fishing and farming as older workers in those segments reach retirement age.

 In consequence, large factories are already automating with one company, CP Foods, reducing its labour component by 70%.  With smaller enterprises lacking the resources to do so, Thailand has established  a new Industry Transformation Centre to help small to medium enterprises with training and introduction of automation and digital technology. It will also offer low interest (2 -4%) loans to smaller enterprises.

Digital technology is already being applied to retail and ecommerce but is expected to rise from 1% to 15%. Subsidies of between 10, 000 and 1 million Baht are being given to hasten this transition with banks already closing branches and shedding staff. Other beneficiaries include Smart Medical, retailers and food services.

The Thai government has partnered with Microsoft to train over 1 million workers in the digital technology field and has established a Robotics Research Institute in conjunction with Chinese and  Japanese partners. The Federation of Thai industries is establishing the Manufacturing and Automation Robotics Academy.

While large companies will receive generous tax incentives with respect to high value -added industries, as will those who locate their regional headquarters in Thailand, labour intensive industries such as clothing manufacture will be relocated to regions such as Cambodia, Myanmar and Vietnam.  

To meet the anticipated shortfall in Agriculture - which still employs 30% of the population, subsidies are available and trials are already underway such as using drones to scatter seed and fertiliser, along with automated weather systems to maximise yields. Consolidation of small holdings is also occurring to allow greater use of farm machinery.

While Thailand anticipates some shortages in skills development where it does not yet have expertise, it is collaborating with its trading partners to overcome them. Although the demand for youth -oriented products is likely to decline, Thailand expects that growth in other sectors such as healthcare, nursing and aged care, health foods and fitness, financial services and Tourism for the “active senior” population will keep the economy growing. Tax deductions of up to 15,000 Baht are available to support tourism in the 55 provinces which presently see little.

What truly impresses me about Thailand's plan is that it doesn't place too much of the economic burden onto workers and the poor which would make them even less inclined to have children, especially in the current cost -of -living crisis which seems to be affecting so many countries. It also recognises that growing inequality contributed to social unrest and the overthrow of the previous regime and has therefore sought to avoid adding to it. Leaving its citizens with more disposable income is also less likely to strangle its many small businesses.

Every country's circumstances are different of course, but there is no reason to panic over the greying of the population any more than there is about declining birthrates. There is however, an urgent need to plan. By changing our thinking and perceptions around ageing, demographic change doesn't need to be an obstacle to economic stability and growth.  It's essential stop referring to the ageing of the population as a  "Silver Tsunami" and other derogatory names when it could in fact be a new Gold Rush. 

And let's not forget the children. Even though there will be fewer of them in many countries, there are still large numbers and they will continue to need new shoes every year for a very long time. It's also a time when societies could give them the best of health and education - smaller class sizes, better nutrition and more preventative health, than they ever could before and they will be more treasured than ever. And trust me, the human race is unlikely to die out, unless in its shortsightedness on narrow economic ends, pushes the climate crisis beyond bounds.

 ------------------------------------------------------------------------------------------------------------------------------

PS: Some 54 countries have already introduced sugar taxes, not only to prevent diabetes, but also obesity. Sugar has also been linked to a variety of other diseases including kidney disease, heart disease and some types of cancer. Canada and Ireland are also rewriting their policies about alchohol, following findings that it is linked to seven types of cancer. Taxes on both have been recommended by the World Health Organisation following its 2015 report into maintaining health and preventing premature mortality. It has been estimated that taxing alcohol, sugar and tobacco would not only increase revenues by $US 20 trillion, but result in 50 million preventable deaths around the world over the next 50 years and greatly reduce medical costs, despite strong opposition from manufacturers and their allies. The USA is relying on voluntary initiatives for companies to reduce the sugar and salt content of their products.

*Full Title: Thailand’s Efforts to Cope with a Rapidly Aging Population —Can Thailand Become a Trailblazer for Other Middle-Income Countries Struggling with Demographic Aging?—By Shotaro Kumagai Economist Economics Department Japan Research Institute

-Thanks to Microsoft Bing AI for image and references