Live Long and Prosper - World Bank

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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: [phone]; Internet: www.worldbank.org
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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