ASIA has reaped benefits from a demographic transition in the last decades. But now, its population has been aging and is affecting economic growth through various channels, like employment, dependency burden, capital accumulation and labor productivity. The graph below from an Asian Development Bank study in 2011 shows the population aged 65 and older as a share of total population in 11 Asian economies from 1950 projected till 2050. In the same graph, the Philippine trajectory shows an increase from around 4 percent in 2010 to around 13 percent in 2050. According to the Philippine Statistic Authority (PSA), the proportion of population in the older age group (65 and over) has increased from 2.9 percent in 1970 to 4.3 percent in 2010, but in terms of absolute number, this age group has increased at a faster rate of 3.4 percent per year (Castro, 2015).
Today, while the aging issue is not as urgent, the Philippines has already around 7 million individuals in this age bracket. According to the United Nations Fund for Population Activities (UNFPA), this will balloon to around 24 million by 2050.
According to the Population Commission life expectancy for males in 1970, the life expectancy for Filipino males and females were 57.3 and 61.5 years, respectively. Now it is 67 for males and 72 years for females.
A major problem in the country, though, is that a relatively substantial portion of the elderly fall below the poverty line. In the official poverty statistics for the basic sectors compiled by the PSA, senior citizens had poverty incidence of 16.1 percent in 2009 and 16.2 percent in 2012. Old-age dependency ratio has also increased from 5.6 percent in 1970 to 7.0 percent in 2010, but this will increase at a faster rate in 40 years.
The elderly are challenged with various constraints when it comes to employment activities because of their diminishing strength and lack of agility. There is also strong age bias as the elderly finds it tough to access the labor market. At the same time, the lack of adequate retirement funds where they can source their daily needs is also a major concern.
Many also do not have access to any form of social protection (e.g., health insurance and pension system), which can assist them in confronting these concerns. While culturally, the children of an elderly takes charge of their basic needs, the changing economic landscape, which requires husband and wives to work, has left many senior citizens to fend for their own.
The Philippine government has already initiated policies and programs that deliver services and benefits to the elderly.
Through the Senior Citizens Act, they are granted benefits and privileges that range from a 20-percent discount and value-added tax exemption to mandatory membership in the government’s health-care system, Philippine Health Insurance Corp.
The Department of Social Welfare and Development (DSWD) provides residential care services for the elderly but only in three regions—National Capital Region, Region 9 and 11. There are, however, some other private institutions providing similar services, which are granted fiscal incentives by the government through the Expanded Senior Citizens Act.
The DSWD also provides social pension of P500 per month for senior citizens who are indigents. While all these programs are definitely welcome, senior citizens’ groups hope to be provided better access to and additional services from the government.
An aging population also has several economic consequences. First, labor force participation will decline but possibly be mitigated by extending legal retirement ages or opening the labor market to foreign workers.
Employment must be maintained because contributions to social security must be sustained to be able to cover the costs of the increasing number of retirees.
Second, domestic savings and capital accumulation may decrease but again the country needs to welcome more foreign investments to be able to minimize the impact of this problem.
Health and social-welfare expenditures will also increase because of the need to care for them but these will have to compete with other important expenditures like education and infrastructure.
Thus, it is strategic for the Philippine government to already begin comprehensive planning for the steady increase in elderly population in terms of crafting key policies and programs for the elderly and for the sustainability of social security and pension funds.
With actions implemented now, today’s young population can all benefit from the longevity dividend in the next decades, as they may also continue to contribute to a more inclusive economic growth for the country.
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Fernando Aldaba is a professor of Economics and dean of the School of Social Sciences, Ateneo de Manila University. Aldaba is also senior fellow of Eagle Watch, Ateneo’s macroeconomic forecasting unit.