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Economy

Seeking sustainable social security in an aging Asia

What does the future of social security hold for Asia? Answers to this difficult question are increasingly important as the region's population ages quickly. The sustainability of such systems remains insecure in most countries regardless of the differences and levels of services on offer. Tough challenges await the Asian countries wanting to bolster their social security systems and continue economic growth. These challenges include more thorough analysis of the complex systems in question, drawing up blueprints for reform, and gaining the support needed from citizens and political leaders to implement the reforms.

     Social security is now the focus of much new research and forums aimed at solving the recent social problem. In Tokyo last weekend, a pan Asia-Pacific conference, titled "Social Security in Aging Asia," brought together about 25 top-level scholars and experts from nine countries to discuss and debate the issues at hand.

     Six major research papers were presented. They examined the issue from a range of positions including a region-wide examination of social security and a cutting-edge analysis of public pension fund management. All papers were followed by intense discussion.

Aging data

Data can provide insights into the impact of rapid aging across the region. One example is the ratio of elderly dependents within a society. This refers to the proportion of the population aged 65 or over in relation to the working-age population aged between 15-64, which will rise sharply. These ratios for Vietnam and Indonesia are expected to rise from the current rates of less than 10% to over 30% in 2050, according to a U.N. forecast. This means that while over 10 workers currently support one elderly person, in 2050 this will number be reduced to just three workers supporting each retiree in the next generation. Japan's figure is already more than 40% and will become 70%. The figures for Korea and Singapore will also surpass 50%. It is obvious that the pressure on national social systems will worsen if no effective measures are taken.

     Professor John Piggott from the University of New South Wales in Australia stressed the differences between social security systems within the region. Looking at retirement income systems which include national pensions and private plans, countries including China, India, Japan and South Korea have defined benefit schemes at the core of their plans while Australia, Singapore and Malaysia and others do not. Income levels are very different depending on the country. The statutory pension age is 55 in Indonesia and Malaysia while it is 60 in the Philippines. Health care and social assistance, both major aspects of any social security system, also differ markedly by nation.

     The history and social structure of each nation play a large role in the development of social security systems. In 1958, China introduced a unique household registration system, one that separated those in urban and rural areas. It "significantly affects the design and implementation of social programs", said Dr. Yang Du from the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences. Eventually, the country's pension, health insurance and social assistance systems were offered as separate programs depending on whether recipients lived in urban or rural areas.

     Even social welfare specialists do not know the intricate details of systems in other countries. Conference participants repeatedly commented on the abundance of new information they had gained from fellow speakers.

     Another difficulty with information sharing is that Asia's social security systems are changing rapidly. Most of China's current social protection programs were introduced over the last two decades. The health insurance system for rural people, known as the New Cooperative Medical System was introduced after 2000 and managed to cover almost all rural residents, over 800 million people, in 10 years. However, while the service coverage is very high, the level of service is not.

The Asian stage

Many other topics were also discussed. Family support was mentioned as an important element unique to Asia. Domestic and international migration are expected to balance any labor shortage or surplus, but some participants found it difficult to imagine Japan and Korea opening their doors wide for a global workforce. Urbanization, the role of central and local governments, integration of different social security programs and the role of the private sector were among topics discussed.

     Speakers stressed the connection between social security and other areas of policy such as macro-economics and labor. These two areas will affect the level of care able to be offered by any government due to budgetary revenue and other channels.

     How to learn from other countries was also of great interest to participants. Recent developing economies can learn from the experiences of advanced economies. Japan's experience was discussed in this context.

     Professor Yasushi Iwamoto from the University of Tokyo analyzed the financial conditions of health care and long-term care insurance. He concluded that a considerable premium hikes are necessary. He also suggested a transition from the current pay-as-you-go system to a partially-funded system. Waseda University Professor Haruko Noguchi presented an analysis of the impact of revisions in hospital management policy.

     Welfare related systems are not always efficiently run and management was stressed as important. Dr. Mukul Asher, Professorial Fellow at the National University of Singapore analyzed public pension systems in six major Southeast Asian countries. He pointed out the significance of "professionalism" in management and also made other suggestions.

     Andrew Rezanov, former managing director at Permal Group analyzed public pension fund management from both theoretical and case-study perspectives, referring to the overhaul of the Government Pension Investment Fund of Japan.

     It is often said that Europe and other major nations moved became aged societies over the span of a century, but Asian countries must do the same in 30 years. Anxieties about aging before becoming affluent remain, but it is possible to learn from the those with experience. A wide range of studies, exchanges of ideas and shifts in public opinion are necessary at both the domestic and global level, but especially on the Asian stage.

     The conference was held as part of a series of biannual meetings to publish the "Asian Economic Policy Review", sponsored by the Japan Center for Economic Research, one of the nation's leading think tanks. AEPR aims to be an intellectual voice that speaks to the world about Asia's economy. The latest conference was the 20th since it began in 2006. The proposed working papers can be found at  http://www.jcer.or.jp/academic_journal/aepr/index.html.

     The final version of the journal will be published in July, 2015.

 

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