The Asian Development Bank (ADB) began its 50th birthday meeting in Yokohama this May brooding about growing old. And where better to discuss “Aging Asia” than Japan: where adult diapers outsell baby diapers and pensioners commit more petty crime than youths.
Japan’s super-aging – one in four Japanese is 65 or older – is well documented. What concerned ADB delegates was the unwelcome news that other Asian countries are aging even faster.
The shock of the old
Hiroyuki Okajima laid bare Asia’s predicament. While Japan took 24 years to double the over-65s population share to 14%, the counselor from Japan’s Office of Healthcare Policy explained, Korea took just 18 years, China will take only 22 years and Vietnam and Indonesia will age faster still. By comparison, the UK took 45 years to grow old, the US 70 years and France 126 years.
Besides aging more abruptly than anywhere in history, many Asian countries will grow old before getting rich. “The demographic dividend that drove economic growth will turn into a demographic tax,” warns the ADB. Moreover, modern urban life is eroding traditional family support structures. Could demography stall the world’s growth engine?
Societies age because of greater longevity and reduced fertility. Greater longevity increases healthcare and social security commitments. Reduced fertility makes those promises contingent on receipts from a shrinking workforce. The World Bank forecasts China and Thailand will lose more than 10% of working age adults. Public finances deteriorate, the young have fewer children and the vicious cycle continues.
Japan’s experiences evidently resonate. Thailand will introduce an elderly care system “using lessons acquired from Japan” said Jadej Thammatach-aree of the Thai National Health Security Office. “Thailand is due to become an aged society by 2021 so we have no choice but to act fast and act now.”
A model for Asia?
“Japan is an example to avoid,” warns Naoko Nemoto, financial economist at the ADB Institute. Speaking at an S&P-sponsored seminar, she noted Japan’s “over-generous” healthcare, social welfare and elderly care systems have led to annual deficits of 4% and public debt of 240% of GDP.
Built on the demographic assumptions of another era, the system’s ballooning costs have hobbled government, she told PROJECT M. “It has lost the flexibility to invest in education and infrastructure to improve productivity. I don’t think many Asian countries will follow Japan.”
Her hosts were more sanguine. “Despite its debt levels and fiscal deterioration, remember Japan has been preparing for aging by running a current account surplus of nearly 3% of GDP for 35 years,” said Paul Sheard, chief economist at S&P Global. “Japan has dealt with aging by saving.” Savings rates fall in aging societies but have held up in Japan thanks to overseas investments and corporate savings, concluded Kim Eng Tan, senior director at S&P: “Japan is a decent model for Asia”.
That model will improve when Japan’s retirement age increases from 62 to 65 (by 2025) but Japanese gerontologists have bigger ideas. Because Japanese seniors are so healthy, they say “elderly” should be redefined as 75. This would halve the ratio of senior citizens from 27% to 13% of the population.
Managing greater longevity
Hiroyuki Okajima was promoting Japan’s “Asian Health and Wellbeing Initiative”, which encourages Asian countries to emulate Japan’s universal long-term elderly care and insurance system.
Once Japanese turn 40, they start paying long-term care insurance contributions. Seniors’ payments are deducted from their pensions. The system is also funded by national and local taxation. To moderate demand, service users (bar the poorest) make co-payments.
The system provides an allowance of services (rather than cash) on the basis of need. Elderly people apply, are assessed and assigned a ‘care level’. They then choose between competing providers offering services ranging from help with bathing and household chores to daycare to shared housing.
Japan’s lesson is to limit costly institutionalized care, said Okajima. “Our message is to skip the facilities-based model and go back to family-based informal care backed up by social support.” That requires integrating long-term care with medical and other services. Japan’s Ministry of Health, Labour and Welfare oversees both medical and long-term social care.
A 2010 assessment found that Japan’s long-term care insurance provided stable financing and relieved pressure on the healthcare budget, as well as providing “major improvements” for beneficiaries.
While the system is equitable, says Naoko Nemoto, it is too generous. “Because my father is 85 and lives alone, despite being healthy and having assets he would get support.” She suggests wealthier people should use ‘reverse mortgages’ on property or future income to pay for long-term care.
Managing reduced fertility
On Day 2 of the ADB meeting the Japan Times revealed Japan’s population of children had fallen to a record low of 15.71 million – just 12.4% of the population.
Working mom Yayoi Amano is at the sharp end of Japan’s fertility crisis. She lets rooms in her Tokyo home to help her qualify for daycare. “Full-time workers qualify but I am an irregular worker so to earn ‘points’ I applied as a self-employed Airbnb business,” she explains.
It worked, and now her daughter Yuna gets 9-to-5 care for just Y35000 a month (E280 / $315). “Japanese daycare is surprisingly cheap and good quality,” says Yayoi. “Otherwise I would be pessimistic about having children.”
Her ambivalence underscores the high barriers to entry. By awarding points according to the parent working fewer hours – usually the mother – the system pressurizes women. Large gender wage gaps, inadequate parental leave and irregular employment also hinder women. “Many working mothers have to compromise or even give up their careers,” Yayoi says.
Fewer mothers are giving up; government data show the rate of women continuing to work after having their first child recently passed 50% for the first time in five years. Japan’s birth rate has also increased to 1.44 from a record low of 1.26 in 2005. The government credits better, cheaper childcare.
But policies only go so far. “The most important thing to increase fertility is to change the lifestyles of men,” says Naoko Nemoto, highlighting Japan’s culture of punishing working hours and male chauvinism. In countries like the Philippines, she explains, as women have earned more they have had more children but in Japan and Korea it is the opposite. “It is a reaction against Confucianism, which says women should obey their fathers and husbands. Young women with good jobs think: ‘I don’t want to look after a husband’”. Her point is underscored by Japan’s declining marriage rate.
One Japanese retiree is supported by just 2.1 working-age people. In sectors like elderly care there are not enough workers so Japan is importing them. Under the Asia Health and Wellbeing Initiative, Japan will admit Asians for on-the-job training for up to five years. The idea is they will return home to help establish long-term care systems. But some may stay longer because Japan now allows certified foreign care workers to apply for long-term residency.
“Demographic realities are forcing policymakers to court immigrants,” writes David Green, a political scientist at Nagoya University, noting foreign resident workers have increased 40 percent since 2013. To sustain its healthcare and pension systems, he sees more immigration as “inevitable.” Young migrants’ taxes will finance those systems, their children will swell the ranks, and they will provide the childcare and elderly care that enables Japanese to work and raise families.
“Even though the level of foreign workers is still miniscule, about 1.3% of the workforce, it is a breakthrough,” says Yoichi Funabashi, chair of Tokyo think tank Rebuild Japan Initiative Foundation. The Foundation recommends Japan admit 150,000 new immigrants every year for 30 years. That such a proposal, once unthinkable, will get a hearing in Tokyo policy circles suggests times have changed.
While aged societies in America, the UK and Europe appear increasingly hostile to immigration, super-aged Japan may be opening up; having belatedly realized that closing the door has hastened its demographic decline.
Source: Project M
Written by: James Tulloch