Demographic old-age to working-age ratio

The evolution of old-age to working-age ratios depends on mortality rates, fertility rates and migration. Both the Asian economies and OECD countries have seen prolonged increases in life expectancy that most analysts project to continue, implying an increasing number of older people and most likely of pensioners too.

Currently, the demographically oldest Asian economy is Hong Kong (China), with an old-age to working-age ratio equal to 28.7 (meaning 28.7 individuals aged 65 and over for 100 persons of working age defined as 20 to 64) (Table 3.2). Thailand is the only other economy with an old-age to working-age ratio above 20, at 21.6. By 2050, the old-age to working-age ratio is expected to reach more than 50 in China (55.0), Hong Kong (China) (83.2), Singapore (65.1) and Thailand (59.9).

By contrast, all the other economies are currently between 10 and 20, with the exception of Pakistan (8.7) and the Philippines (9.6). In the second half of this century both of these countries are expected to remain considerably younger than the other economies, at 11.2 in Pakistan and 18.5 in the Philippines, with India and Indonesia being next at around 25. By 2080, the old-age ratio will only increase to 22.3 in Pakistan, 10 percentage points below any other economy.

For the OECD there are 30 individuals aged 65 and over for every 100 persons of working age (ages 20 to 64) on average while there were only about 20 30 years ago. Population ageing has been accelerating as this average old-age to working-age demographic ratio – computed by keeping age thresholds constant – is projected to reach 53 over the next 30 years.

Four Anglo-Saxon OECD countries – Australia, Canada, New Zealand and the United States – have relatively low old-age ratios, between 25 and 30. This is partly due to inward migration of workers and – except for Canada – to comparatively high fertility rates just below replacement level in recent decades.

For the OECD as a whole, the increase in the old-age to working-age ratio is projected to continue according to the medium forecast of United Nations Populations Prospects, from 30.2 in 2020 to 52.5 in 2050 and 65.3 in 2080. By far, Korea is facing the most rapid population ageing among OECD countries. The old-age ratio would increase from 7.4 in 1960, 23.6 in 2020 to 116.2 in 2080 and Korea would move from being the fifth youngest country in the OECD in 2020 to the oldest in 2080.

The projected working-age population (20-64) will increase by 8% in the Asian economies on average by 2060, i.e. by 0.2% per year. It will fall by 30% or more in China, Hong Kong (China) and Thailand, and also by 27% in Singapore (Figure 3.5). This will have a significant impact on the financing of pay-as-you-go (PAYGO) systems as it is closely related to their internal rates of return. Even funded pension systems might be negatively affected by rapidly declining working-age populations through its effect on labour supply, in turn potentially lowering output growth and equilibrium interest rates.

By contrast it is projected to increase by more than 15% in Indonesia and Malaysia and by 22% in India, 61% in the Philippines and by over 120% in Pakistan.

For the OECD the projected working-age population will decrease by 10% on average by 2060, i.e. by 0.26% per year. It will fall by 35% or more in Japan and Korea, and also by more than 25% in Italy. It is projected to increase by more than 20% in Australia.

The old-age to working-age demographic ratio is defined as the number of individuals aged 65 and over per 100 people of working age defined as those at ages 20 to 64.

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