A Population Is Considered Ageing
A population is considered ageing when the proportion of people in the older
age groups increases, resulting in more elderly and fewer young people. In less than 10 years, Singapore will become a country with 21% of our population aged 65 years and above (Population team, 2016) due to the increasing life expectancy and low fertility rate. With increasing life expectancy, citizens now can live up to an average of 83.1 years old (Today, 2017) and with low fertility rate, the total fertility rate has dropped to 1.16 in 2017, resulting in a greater population of elderly and a smaller population of children.
With the median age of Singaporeans increasing at a rapid rate, there will be
an increasing need for healthcare services, quality infrastructure and support for seniors and their families. Furthermore, due to most elderly retiring, the workforce will also shrink in size. Hence, this will impact the economy such that the economy needs to restructure to be more elderly-friendly and solve the problem of the shrinking workforce in a short span of time as Singapore is ageing faster than other developed countries.
With this rapidly aging population, the ageing population will bring about a
few negative implications to Singapore’s economy.
Due to the ageing population, government spendings will increase, causing
income taxes to increase, slowing down the economy. As mentioned earlier, with more elderly in the country, there will be an increasing need for medical services and elderly-friendly infrastructures such as wheelchair ramps and multiple railings on pathways. As the demands grow, the need to provide for those demands will also grow. In fact, it is predicted that Singapore will spend at least $13 billion on healthcare services for the ageing population from 2020 (Heng Swee Keat, 2017). Hence, in order to cover up for the increased spendings, the government would have to resort to increasing income tax in order to increase tax revenue. This would mean that working adults have to give a larger portion of their pay to the government so that the government will have enough money to account for all the new facilities and services. With more income tax deducted from their salaries, there will be a decrease in their disposable income. Subsequently, the amount they spend will most likely decrease, especially with the saving culture prevalent in Singapore’s society. When consumers spend less, rate at which money is circulated in the economy decreases, demand weakens and economic growth will slow down.
Furthermore, an ageing population would cause the workforce to shrink, which
may lead to a decrease in overall economic output. As our society ages, more workers tend to retire, causing the workforce to shrink. With the smaller work base, both local and overseas companies would no longer want to expand their businesses in Singapore, especially if there is a lack of talent. Hence, the government would not be able to tax these companies if they decide to locate their operations overseas, causing the tax revenue to decrease. Also, with a smaller pool of workers, unless productivity per person improves, the overall productivity rate will decrease, resulting in a lower output. This would cause Singapore to lose its customers in the business field to overseas competitors, causing us to become a less competitive economy. This is shown in the Great Depression in the past, when the large fall in output caused deflation and prices fell quite significantly. Once the economy become less competitive, the tax revenue will start declining and the vicious cycle repeats itself again – income tax increases, decreasing disposable income, lowering consumers spending and ultimately slowing down economic growth.
Another impact that the shrinking workforce will have is the increase in the
responsibility each working adult has to take up as compared to 14 years ago, which may cause their productivity to decrease even further, slowing down the economic growth. This is because with more of Singapore’s population growing older, more people tend to retire, resulting in a smaller workforce. Hence, there will be much fewer working adults to support each elderly in Singapore. In 2011, every 6 working adults supports 1 elderly aged 65 and above. However, by 2025, there will only be 3 working adults supporting each elderly (Singapore Department of Statistics, 2015). With the decrease in the difference in ratio of working adults to each elderly, there will be more responsibilities placed on the shoulders of each working adult as compared to 14 years ago, which may become a burden and even cause stress in the long run. Since 72% of employers in Singapore consider stress and mental health an issue affecting productivity, it is most likely that productivity rates will decrease even greater than what was mentioned earlier (ITR). With an even lower productivity rate, there will be a greater decrease in economy outputs.
However, the ageing population could lead to positive implications as well.
The ageing population could create more job opportunities, which would help
the economy in the long run. With the ageing population, there will be an increased need to build more hospitals and elderly-friendly infrastructures (eg. railings and ramps) since elderly require more healthcare and support. This would present itself as a golden opportunity for unemployed citizens as there are now more job positions (eg. medical and infrastructure sector) available for them. When the unemployed citizens are able to find jobs, not only will the overall productivity rate in Singapore increase, consumers spendings will also increase. If this increase in the amount they spend is enough to cover for the decrease in consumers spending due to increased income tax, then there will no longer be an overall decrease in consumers spendings. This would mean that our economy can still function as per normal. Therefore, it is possible that the economy will not slow down.
Also, even if people would spend less with higher income tax as mentioned
above, there is a higher chance that they would not be able to put off treatment for the elderly if they have health issues. Hence, most of the time, they would pay for health services if the elderly needs them. This would mean that the economy may not necessarily experience a decreasing growth if the health sector earns enough money to cover up for the losses in other sectors.
In conclusion, the ageing population is like a double-edged sword — it may
cause the economy to slow down with the shrinking workforce and the increase in government spendings, but it could also improve the economy by creating more job opportunities. That being said, there are both positive and negative implications of the ageing population on Singapore’s economy. Nevertheless, we should always be prepared to face with those implications – positive or negative – and solve the challenges with a positive mindset.
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