Ensuring people are prepared to thrive in the global workforce of the future is a top concern of most nations. Technology continues to rapidly shift skilled labor requirements, but social and demographic shifts are equally dramatic realities. The aging population raises the critical questions of continued workforce participation, retirement sufficiency and health care for this growing group. For China—the world’s most populous nation and second largest economy—the issue calls for vision and action, especially in the face of the latest data.
Julio Portalatin, President and CEO of Mercer
Published on 29 April 2016 on BRINK
For example, by the year 2050, China’s older population—those over age 65—will likely swell to 330 million, or nearly three times as many as now. Complementing this statistical reality is another one: A recent report from the Chinese Academy of Social Sciences said the fertility rate in China is 1.4 children per woman, close to the global warning line of 1.3, the so-called “low fertility trap,” or the point at which no country has been known to return to population replacement level. This is an even more concerning number because most experts believe Chinese data on this issue to be highly conservative.
China’s older population—those over age 65—will likely swell to 330 million by 2050.
It’s no surprise then that only 6 percent of China’s workers expect to receive income support from their children when they retire, as might have been traditionally expected, according to a study on East Asia retirement by the Global Aging Institute. Meanwhile, the global shift toward defined contribution pension plans further places the problem of retirement income adequacy—or, to put it another way, financial independence—in the hands of individuals who are generally not well-equipped to manage the financial challenge just yet.
Indeed, the outcomes of tomorrow are absolutely determined by the actions taken today, although the answers are not simple. Nobel Laureate William Sharpe, a leading economist, in discussing retirement research—specifically, “decumulation,” or the conversion of pension assets accumulated during an employee’s working life into pension income to be spent during retirement—declared it “the hardest problem I’ve ever considered.” In China and other Asian nations, the focus is shifting from the accumulation of funds to the drawdown phase.
But that doesn’t mean there are no answers, and, in our increasingly interconnected world, we would do well to focus on the opportunities and solutions this presents. While there are few more significant issues in our lifetime than the aging population, I, for one, refuse to look at this as a “longevity catastrophe.” The fact that people are living longer is a positive thing, with upsides for consumer markets, and opportunities for older workers to contribute for longer, and in new and productive ways, to society.