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Live Long and Prosper WORLD BANK EAST ASIA AND PACIFIC REGIONAL REPORTS Known for their economic success and dynamism, countries in the East Asia and Pacifi c region must tackle an increasingly complex set of challenges to continue on a path of sustainable devel- opment. Learning from others within the region and beyond can help identify what works, what doesn’t, and why, in the search for practical solutions to these challenges. This regional fl agship series presents analyses of issues relevant to the region, drawing on the global knowledge and experience of the World Bank and its partners. The series aims to inform public discussion, policy formulation, and development practitioners’ actions to turn challenges into opportunities. TITLES IN THE SERIES Live Long and Prosper: Aging in East Asia and Pacifi c East Asia Pacifi c At Work: Employment, Enterprise, and Well-being Toward Gender Equality in East Asia and the Pacifi c: A Companion to the World Development Report Putting Higher Education to Work: Skills and Research for Growth in East Asia All books in this series are available for free at https://openknowledge.worldbank.org /h andle/10986/2147 World Bank East Asia and Pacif c Regional Report Live Long and Prosper Aging in East Asia and Pacif c © 2016 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 18 17 16 15 This work is a product of the staff of The World Bank with external contributions. The fi ndings, interpre- tations, and conclusions expressed in this work do not necessarily refl ect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifi cally reserved. Rights and Permissions This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) http:// creativecommons.org/licenses/by/3.0/igo. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Please cite the work as follows: World Bank. 2016. Live Long and Prosper: Aging in East Asia and Pacifi c. Washington, DC: World Bank. doi:10.1596/978-1-4648-0469-4. License: Creative C ommons Attribution CC BY 3.0 IGO Translations—If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an offi cial World Bank translation. The World Bank shall not be liable for any content or error in this translation. Adaptations—If you create an adaptation of this work, please add the following disclaimer along with the attribution: This is an adaptation of an original work by The World Bank. Views and opinions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are not endorsed by The World Bank. Third-party content—The World Bank does not necessarily own each component of the content con- tained within the work. The World Bank therefore does not warrant that the use of any third-party-owned individual component or part contained in the work will not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If you wish to re-use a component of the work, it is your responsibility to determine whether permission is needed for that re-use and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, fi gures, or images. All queries on rights and licenses should be addressed to the Publishing and Knowledge Division, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: Contents Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Understanding the rapid demographic and epidemiological transition . . . . . . . . . . . . . . . . . 3 Situation and sources of support of older people . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Managing the effect of aging on growth and its drivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Developing pension, health, and long-term care systems for aging societies . . . . . . . . . . . . 13 Addressing cross-cutting challenges in aging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 I T he Demographic Transition and Well-Being of Older People in East Asia and Pacifi c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 1. The Demographic and Epidemiological Transitions in East Asia and Pacifi c . . . . . . . . . . . 23 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 The demographic transition in East Asia and Pacifi c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 The epidemiological transition in East Asia and Pacifi c . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 2. The Welfare and Labor Market Behavior of Older People in East Asia and Pacifi c . . . . . . 47 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Poverty among older people in East Asia and Pacifi c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Other measures of well-being . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Living arrangements and access to support among older people . . . . . . . . . . . . . . . . . . . . . 54 v vi C O N T E N T S Sources of fi nancial support and labor market behavior of older workers . . . . . . . . . . . . . 57 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 II Aging and the Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 3. Aging and the Macroeconomy in East Asia and Pacifi c . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Aging and growth in East Asia and Pacifi c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Channels to augment the labor force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Labor force quality and productivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Saving in East Asia and Pacifi c: Will aging play an infl uential role? . . . . . . . . . . . . . . . . . . 91 Fiscal effects of aging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 4. Labor Market Policies to Address Aging in East Asia and Pacifi c. . . . . . . . . . . . . . . . . . . 109 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 Fertility incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 Enhancing female labor force participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 Extending productive working lives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 Promoting immigration into aged East Asian and Pacifi c economies . . . . . . . . . . . . . . . . 122 Policy effects on the labor force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 Upgrading skills of older workers and integrating strategies . . . . . . . . . . . . . . . . . . . . . . . 129 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 III Preparing for an Aging East Asia and Pacifi c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 5. Pension Systems and Aging: Reforms for Winning the Race. . . . . . . . . . . . . . . . . . . . . . . 141 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Overview of East Asian pension systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Assessment of the performance of East Asia’s pension systems . . . . . . . . . . . . . . . . . . . . . 147 Reforms to date and options looking forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 6. Population Aging and Health Services in East Asia and Pacifi c . . . . . . . . . . . . . . . . . . . . 185 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 Population aging and health service delivery challenges in East Asia and Pacifi c . . . . . . . 185 Universal health coverage in the context of population aging and NCDs . . . . . . . . . . . . . 195 Population aging and health expenditures in East Asia and Pacifi c . . . . . . . . . . . . . . . . . 195 Health policies and strategies for an aging population . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 7. Long-Term Care in Aging East Asia and Pacifi c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 LTC demand and expenditures: Current trends and projections . . . . . . . . . . . . . . . . . . . . 228 C O N T E N T S vii Providing LTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231 Financing LTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236 Coordinating LTC services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241 Ensuring capacity and quality for LTC provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 IV Looking Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251 8. To Live Long and Prosper: Looking Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253 Demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254 Macro and fi scal issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254 Labor markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256 The situation of older people and households in East Asia and Pacifi c . . . . . . . . . . . . . . . 258 Health and long-term care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259 Pensions and social security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261 Cross-cutting issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263 Boxes 1.1 Uncertainty and assumptions in United Nations population data . . . . . . . . . . . . . . . . 30 1.2 Alternative measures of dependency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 1.3 Is longevity accompanied by more good health or less? . . . . . . . . . . . . . . . . . . . . . . . . 35 1.4 Very high prevalence of smoking and related death rates in the region . . . . . . . . . . . . 41 1.5 Indonesia: Increasing and often unequal exposure to risks . . . . . . . . . . . . . . . . . . . . . 41 1.6 Malaysia: Undiagnosed noncommunicable disease risks and modest social economic status differentials in management of risk . . . . . . . . . . . . . . . . . . . . . . . . . . 42 1.7 Adverse childhood socioeconomic conditions and increased mortality risks later in life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 3.1 The scope for improving skills of an aging workforce . . . . . . . . . . . . . . . . . . . . . . . . . 88 3.2 A labor productivity paradox? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 4.1 Fertility and public policy in East Asia and Pacifi c and the OECD . . . . . . . . . . . . . . 113 4.2 The lump of labor fallacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 4.3 Employment services targeted to older workers in Japan and the Republic of Korea . . . 117 4.4 Reforming seniority wage systems in the Republic of Korea, Singapore, and Japan . . . 120 4.5 East Asia and Pacifi c’s distinctive approach to retirement age and continued work . . . . 121 4.6 Assumptions underlying labor force scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 4.7 Second Basic Employment Promotion Plan (2012–16) for the aged in the Republic of Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 5.1 Automatic adjustments for changes in life expectancy in defi ned benefi t schemes . . . 170 5.2 Integrating noncontributory and contributory pensions: Chile’s solidarity pillar. . . . 174 6.1 Poor qualifi cations of staff to provide effective diagnosis and treatment . . . . . . . . . . 190 6.2 Limited supply-side readiness to manage and treat noncommunicable d iseases at the primary health care level in Indonesia . . . . . . . . . . . . . . . . . . . . . . . . 192 6.3 The role of technological change and interactions with aging in health care cost escalation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 viii C O N T E N T S 6.4 Care coordination strategies in Organisation for Economic Co-operation and Development countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 6.5 The effect of care coordination on key health system outcomes . . . . . . . . . . . . . . . . . 212 6.6 Cost containment through provider payment and purchasing reforms in Thailand and Turkey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215 6.7 The power of smart purchasing: Pharmaceutical procurement in the Republic of Korea, Sri Lanka, and Thailand versus Vietnam. . . . . . . . . . . . . . . . . . . 217 6.8 Good examples of decision-making processes for new technologies in East Asia and Pacifi c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 7.1 LTC hospitals and LTC facilities in the Republic of Korea: In direct competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233 8.1 The Active Aging Index: A tool for monitoring the situation and potential of older people . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260 Figures O.1 East Asia and Pacifi c has more older people than any other region . . . . . . . . . . . . . . . . 3 O.2 East Asian and Pacifi c economies are aging more rapidly than economies elsewhere . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 O.3 Three distinct aging patterns are apparent in East Asia and Pacifi c . . . . . . . . . . . . . . . . 5 O.4 In the richer economies of East Asia and Pacifi c, the working-age population is projected to shrink between 2010 and 2040 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 O.5 Labor force participation rates in East Asia and Pacifi c vary, but across the region, rural people work signifi cantly longer than urban people . . . . . . . . . . . . . . 7 O.6 W ork remains the primary source of old-age support in most countries in East Asia and Pacifi c . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 O.7 Attitudes on the preferred source of fi nancial support in old age and on the expected source of personal care are shifting in East and Southeast Asian economies . . . . . . . . . 9 O.8 East Asia and Pacifi c’s developing economies are getting old before getting rich . . . . . 10 O.9 G reater participation by women, older people, and migrants can mitigate the projected decline in the labor force in richer East and Southeast Asian economies . . . 12 O.10 Across APEC, pensions will eat up a larger and larger share of GDP in coming decades without reforms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 1.1 East Asia and Pacifi c is a diverse region in terms of the share of older people . . . . . . . 24 1.2 East Asia, led by China, has more old people than any other region . . . . . . . . . . . . . . 25 1.3 East Asian and Pacifi c economies are aging more quickly than other economies in the past . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 1.4 The share of elderly population in East Asia and Pacifi c will converge with that of OECD countries by 2060 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 1.5 The population of “oldest old” will increase more in East Asia and Pacifi c between 2010 and 2060 than in any other region . . . . . . . . . . . . . . . . . . . . . . . 27 1.6 Three distinct aging patterns are apparent among East Asian and Pacifi c economies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 1.7 People in aging East Asian and Pacifi c countries see aging as a major c hallenge for their countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 1.8 Fertility rates have declined signifi cantly across all East Asian and Pacifi c economies but are projected to fl atten in orange and red economies. . . . . . . . . 29 B1.1.1 U N population projections for East Asia and Pacifi c have been subject to signifi cant uncertainty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

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