http://csr-asia.com/weekly_detail.php?id=11912
Aging Singapore – a business issue
by Marie Morice, 13 Jan 2010
In my two years living in Singapore, I’ve had many opportunities to exchange with local taxi drivers. One of my first questions is always to find out how long they’ve been a cabbie for. It’s by no means statistical but I’ve noted that most of them are male, in their sixties (and sometimes seventies) who started in the taxi trade after being retrenched from their last job, as a result of the past or current economic downturns. For a lot of them, it seemed the best option as they were finding it hard to get new employment because of their age. Most of them are working to earn an income as they feel their existing personal savings, assets and Central Provident Fund (Singapore social security savings plan) are not sufficient to cover their financial needs.
This is an interesting anecdote, which reflects to some extent the emerging issue of an aging population in Singapore. A recent report from UBS (UBS’s Q-Series® reports on Asian Structural Themes, www.ubs.com) found that Singapore is set to be the world's third- fastest ageing nation, as the proportion of those aged 65 and above will double to 20 per cent in 2020. Singapore may suffer the most among Asian economies from an ageing population, with the average growth in economic output falling more than 40 per cent over the next 25 years.
This has major implications for Singapore as a country and for its businesses, especially in terms of impacts on overall economic output, investments, social welfare benefits for the elderly and human resources management policies.
Overall population in Singapore has been steadily growing over the last few decades. Singapore’s total population as at end June 2009 was 4.99 million (Compared with a total of 227,592 persons as recorded in the 1901 Census). 3.73 million Singapore residents and 1.25 million non-residents. (www.singstat.gov.sg) were recorded.
However, the annual growth rate of the population is dropping, as shown by the blue line (fertility rate) in the above graph. Factors such as a relatively low birth rate and high-quality health care, which helps people live longer, contribute to the ageing population.
In 1966, the government established the Family Planning and Population Board, which was responsible for providing clinical services and public education on family planning, along with policies and incentives intended to further reduce the birth rate. Fertility declined throughout the 1970s, reaching the replacement level of 1.006 in 1975, and thereafter declining below that level. By 1977, Singapore’s total fertility rate had dropped below replacement level, and has continued to stay below replacement level despite recent government efforts to increase fertility. (www.country-studies.com)
As illustrated in the above graph, the overall decline in the proportion of people who are economically productive is becoming an increasing problem, in terms of economic growth. The UBS report estimated that this demographic change would slice 3 percentage points from long-term economic growth. In Singapore, the sharp reduction in labour growth could cause average GDP expansion to slow to 3.9 per cent between 2006 and 2030, down from 6.9 per cent from 1981 to 2005.
It might also become more difficult for Singapore to continue attracting investments as foreign investors might favour countries where more youthful and growing populations can support long-term growth, including India, Pakistan, Vietnam, Indonesia and the Philippines.
Beyond economic growth and investment, the ageing of Singapore’s population is also likely to impact public finances, as the UBS report estimates that potential government support for the elderly through mandatory public pension plans cost the country more than 7 per cent of gross domestic product (GDP). This could have a direct impact in raising corporate and individual income tax, in to accommodate additional public spending for elderly support.
A recent publication by the Asian Meta Centre called “The Relationship between Formal and Familial Support of the Elderly in Singapore and Taiwan” (www.populationasia.org), examines the impact of aging on old age dependency ratio: “As a result of this rapid aging of Singapore’s population there will be a parallel increase in the old age dependency ratio. In 2000, approximately ten working age adults supported one older person. By 2030, only three working age adults will support one older person “
The paper concludes that the majority of older Singaporeans rely on private support (81% in 1999) and that the availability a CPF account (Singapore’s Central Provident Fund (CPF) was instituted in 1955 as a mechanism to provide Singaporeans with financial security in old age, a mandatory savings scheme for all employees and employers in Singapore) does not significantly affect older individual’s probability of switching away from family support.
An increase in the old age dependency ratio will create a “double burden” for working adults who will not only have to contribute to their own CPF but also support their aging family members – this increasing financial constraint could have a major influence on individuals when looking for a job.
Beyond mitigating recruitment and staff retention problems due to a shrinking labour force, businesses will also need to evolve as their workforces continue to age. Human resource management practices will need to be adapted to ensure the skill levels of older workers are continually updated and that discrimination is not condoned.
In 1999, the retirement age in Singapore was raised to 62 to encourage senior people to stay in the labour market longer. Wage systems were restructured to separate salary and tenure so that long tenure (and thus being older) was no longer closely associated. Re-education was encouraged, funded largely by government subsidy, and employers were encouraged to introduce flexible work arrangements and partial retirement options. (www.usq.edu.au)
The recent National Survey of Senior Citizens (MCDYS, 2005, www.mcys.gov.sg) found that 28.2% of senior citizens aged 55 and above are working, out of which 74% are employed, 24% self-employed and 2% work in a family business. So is this a trend that is here to stay? As yet, it is still too soon to evaluate the effectiveness of these initiatives. Taxi drivers are now allowed to drive until they’re 73 years old. What should be the limit to retiring age? Will limits eventually be replaced by simply an ‘ability to work’ criteria?
The greying of the population will most probably create new opportunities for business to meet the needs of this growing elderly community. The healthcare industry, special housing, trained professionals like nurses and social workers as well as life insurance and asset management firms should also get a boost from a growing need for wealth management for retirement.
Companies are increasingly investing in research on ageing issues so they can understand the new population dynamics and adapt accordingly. Yesterday, I was invited at an event organised by the Mistui Sumitomo Insurance Group (MSIG) in Singapore who was awarding research grants through their Foundation (The Mistui Sumitomo Insurance Welfare Foundation) on senior citizen welfare and traffic safety, topics of great relevance to MSIG’s core business in insurance. Reflecting on the event, partnerships between businesses and academics seemed like a good way forward to provide research leadership in ageing subjects, which is key to business preparedness.
Singapore’s National Research Foundation has issued a scenario-planning paper for Singapore in 2020 looking at some examples of technologies for an ageing society, ranging from robotics technology to bioengineering tools, highlighting a new potential market for Singapore as a “a world-class originator of innovative, aged-friendly technology, products and devices” (rita.nrf.gov.sg)
Since the city’s founding in 1819, the size and composition of Singapore's population has been determined by the interaction of migration and natural increase. Singapore’s population is the fastest aging in Southeast Asia. The proportion of the population aged 65 and above is expected to increase from the current 7% as of 2000 to 19% by 2030. This dramatic increase in the proportion of the aged in the population is a result of an extremely effective family planning policy introduced in the 1970s. With fertility below the replacement level, the population would after some fifty years begin to decline unless supplemented by immigration.
In 2007, the Singapore government announced that it was gearing up for 40 percent surge in population to 6.5 million from the current 4.5 million with urban redevelopment plans to accommodate its new population projection. (National Development Minister Mah Bow Tan – Straits Times). How the government will achieve this has generated many heated debates around immigration issues in the past few months which are not for discussion here but this seems to be unavoidable if Singapore wants to address this emerging challenge in the long term.
Aging Singapore – a business issue
by Marie Morice, 13 Jan 2010
In my two years living in Singapore, I’ve had many opportunities to exchange with local taxi drivers. One of my first questions is always to find out how long they’ve been a cabbie for. It’s by no means statistical but I’ve noted that most of them are male, in their sixties (and sometimes seventies) who started in the taxi trade after being retrenched from their last job, as a result of the past or current economic downturns. For a lot of them, it seemed the best option as they were finding it hard to get new employment because of their age. Most of them are working to earn an income as they feel their existing personal savings, assets and Central Provident Fund (Singapore social security savings plan) are not sufficient to cover their financial needs.
This is an interesting anecdote, which reflects to some extent the emerging issue of an aging population in Singapore. A recent report from UBS (UBS’s Q-Series® reports on Asian Structural Themes, www.ubs.com) found that Singapore is set to be the world's third- fastest ageing nation, as the proportion of those aged 65 and above will double to 20 per cent in 2020. Singapore may suffer the most among Asian economies from an ageing population, with the average growth in economic output falling more than 40 per cent over the next 25 years.
This has major implications for Singapore as a country and for its businesses, especially in terms of impacts on overall economic output, investments, social welfare benefits for the elderly and human resources management policies.
Overall population in Singapore has been steadily growing over the last few decades. Singapore’s total population as at end June 2009 was 4.99 million (Compared with a total of 227,592 persons as recorded in the 1901 Census). 3.73 million Singapore residents and 1.25 million non-residents. (www.singstat.gov.sg) were recorded.
However, the annual growth rate of the population is dropping, as shown by the blue line (fertility rate) in the above graph. Factors such as a relatively low birth rate and high-quality health care, which helps people live longer, contribute to the ageing population.
In 1966, the government established the Family Planning and Population Board, which was responsible for providing clinical services and public education on family planning, along with policies and incentives intended to further reduce the birth rate. Fertility declined throughout the 1970s, reaching the replacement level of 1.006 in 1975, and thereafter declining below that level. By 1977, Singapore’s total fertility rate had dropped below replacement level, and has continued to stay below replacement level despite recent government efforts to increase fertility. (www.country-studies.com)
As illustrated in the above graph, the overall decline in the proportion of people who are economically productive is becoming an increasing problem, in terms of economic growth. The UBS report estimated that this demographic change would slice 3 percentage points from long-term economic growth. In Singapore, the sharp reduction in labour growth could cause average GDP expansion to slow to 3.9 per cent between 2006 and 2030, down from 6.9 per cent from 1981 to 2005.
It might also become more difficult for Singapore to continue attracting investments as foreign investors might favour countries where more youthful and growing populations can support long-term growth, including India, Pakistan, Vietnam, Indonesia and the Philippines.
Beyond economic growth and investment, the ageing of Singapore’s population is also likely to impact public finances, as the UBS report estimates that potential government support for the elderly through mandatory public pension plans cost the country more than 7 per cent of gross domestic product (GDP). This could have a direct impact in raising corporate and individual income tax, in to accommodate additional public spending for elderly support.
A recent publication by the Asian Meta Centre called “The Relationship between Formal and Familial Support of the Elderly in Singapore and Taiwan” (www.populationasia.org), examines the impact of aging on old age dependency ratio: “As a result of this rapid aging of Singapore’s population there will be a parallel increase in the old age dependency ratio. In 2000, approximately ten working age adults supported one older person. By 2030, only three working age adults will support one older person “
The paper concludes that the majority of older Singaporeans rely on private support (81% in 1999) and that the availability a CPF account (Singapore’s Central Provident Fund (CPF) was instituted in 1955 as a mechanism to provide Singaporeans with financial security in old age, a mandatory savings scheme for all employees and employers in Singapore) does not significantly affect older individual’s probability of switching away from family support.
An increase in the old age dependency ratio will create a “double burden” for working adults who will not only have to contribute to their own CPF but also support their aging family members – this increasing financial constraint could have a major influence on individuals when looking for a job.
Beyond mitigating recruitment and staff retention problems due to a shrinking labour force, businesses will also need to evolve as their workforces continue to age. Human resource management practices will need to be adapted to ensure the skill levels of older workers are continually updated and that discrimination is not condoned.
In 1999, the retirement age in Singapore was raised to 62 to encourage senior people to stay in the labour market longer. Wage systems were restructured to separate salary and tenure so that long tenure (and thus being older) was no longer closely associated. Re-education was encouraged, funded largely by government subsidy, and employers were encouraged to introduce flexible work arrangements and partial retirement options. (www.usq.edu.au)
The recent National Survey of Senior Citizens (MCDYS, 2005, www.mcys.gov.sg) found that 28.2% of senior citizens aged 55 and above are working, out of which 74% are employed, 24% self-employed and 2% work in a family business. So is this a trend that is here to stay? As yet, it is still too soon to evaluate the effectiveness of these initiatives. Taxi drivers are now allowed to drive until they’re 73 years old. What should be the limit to retiring age? Will limits eventually be replaced by simply an ‘ability to work’ criteria?
The greying of the population will most probably create new opportunities for business to meet the needs of this growing elderly community. The healthcare industry, special housing, trained professionals like nurses and social workers as well as life insurance and asset management firms should also get a boost from a growing need for wealth management for retirement.
Companies are increasingly investing in research on ageing issues so they can understand the new population dynamics and adapt accordingly. Yesterday, I was invited at an event organised by the Mistui Sumitomo Insurance Group (MSIG) in Singapore who was awarding research grants through their Foundation (The Mistui Sumitomo Insurance Welfare Foundation) on senior citizen welfare and traffic safety, topics of great relevance to MSIG’s core business in insurance. Reflecting on the event, partnerships between businesses and academics seemed like a good way forward to provide research leadership in ageing subjects, which is key to business preparedness.
Singapore’s National Research Foundation has issued a scenario-planning paper for Singapore in 2020 looking at some examples of technologies for an ageing society, ranging from robotics technology to bioengineering tools, highlighting a new potential market for Singapore as a “a world-class originator of innovative, aged-friendly technology, products and devices” (rita.nrf.gov.sg)
Since the city’s founding in 1819, the size and composition of Singapore's population has been determined by the interaction of migration and natural increase. Singapore’s population is the fastest aging in Southeast Asia. The proportion of the population aged 65 and above is expected to increase from the current 7% as of 2000 to 19% by 2030. This dramatic increase in the proportion of the aged in the population is a result of an extremely effective family planning policy introduced in the 1970s. With fertility below the replacement level, the population would after some fifty years begin to decline unless supplemented by immigration.
In 2007, the Singapore government announced that it was gearing up for 40 percent surge in population to 6.5 million from the current 4.5 million with urban redevelopment plans to accommodate its new population projection. (National Development Minister Mah Bow Tan – Straits Times). How the government will achieve this has generated many heated debates around immigration issues in the past few months which are not for discussion here but this seems to be unavoidable if Singapore wants to address this emerging challenge in the long term.
