ETHOS Issue 01, Oct 2006
To what extent can government policy effectively influence long-term population trends?
When it comes to population and government policy, it is very important to distinguish between the three components of population change: fertility, mortality and migration.
Moreover, ageing may also result in slower technological adoption as more age-related health complications reduce worker productivity. The rapid pace of technological progress means that many of today’s jobs may disappear even as new ones get created. As our seniors age, declining cognitive and physical ability may constrain their abilities to take on these jobs.
Government policy can be very effective in reducing mortality, for example, by immunising people against disease and so on. It can also change migratory patterns, with programmes, infrastructure and incentives. Laws — for instance, the legal age to drink, drive, vote or retire and receive social security —can also affect age structure and behaviour.
Fertility is a more difficult matter. In most societies, it is generally up to the couple to decide on the number and spacing of their children, based on their own calculation of the benefits and the costs. When fertility is high, governments can facilitate the reduction in fertility that normally comes about with urbanisation, lower mortality and increased education, with incentives and investments in schools, jobs and so on. But when fertility declines to very low levels, what can governments do?
Incentives to bring down fertility have worked well in the past. But it is evidently much more difficult to bring up fertility rates. Can Singapore, with one of the lowest Total Fertility Rates in the world at 1.24, hope to improve its situation?
Very low fertility will be a big preoccupation for societies in the 21st century: is this a temporal phenomenon that will correct itself or is it something that is going to be the case for all countries in the coming decades?
The ideal of countries, of course, is to have a transition to replacement levels. We can look at countries by their Total Fertility Rate (TFR) – the ones above 1.5 and the ones below. Countries that have 1.8 or 1.9 children per couple, such as France and the UK, may be able to maintain their population size by trying to raise it slightly or bringing in migrants.
There are also many countries with a TFR below 1.5: Japan, Russia, Korea, Italy, Spain, Greece, Ukraine, Georgia, Lithuania and Singapore. The research I have been doing indicates that government policy may have some modest impact. However, it is very unlikely that countries with fertility rates below 1.5 will get back to replacement level any time soon. The Swedish have been able to increase the fertility rate for a cross section of the population at a certain point in time, but then it has come back down again. So to get the current 1.24 up to perhaps 1.8 for Singapore will be a major challenge.
In the coming years, however, Singapore’s TFR may stay at 1.2 to 1.24, but then it is likely to go up to perhaps to 1.5 or 1.6. The mean age of childbearing has been rising, but this rise will cease, resulting in 10% to 20% increase in the fertility rate. Public encouragement, media and benefits may also have some small effect. There are also people who are having difficulty conceiving, who may be helped by new means. All these factors could increase fertility.
The French, with a fertility rate at 1.9, may be a useful example to consider. They have been able to create a culture where women and men believe that they can have a family and children and still work — so they have preschool and after school assistance and so on. But in many countries, couples are finding it hard to raise a family with two or three children when both husband and wife are working outside the home.
While Singapore is trying to encourage births, we are also opening our doors selectively to migration in order to boost the resident population. How effective is this as a means of tackling a shrinking population?
Our studies on replacement migration show that if you are at a TFR of 1.2 or 1.3 and want to bring in migrants in order to stabilise the size of the population or labour force, the migrant population would have to be so large that it becomes politically and economically very difficult. You would be changing the ethnic composition and age distribution of your country.
How do you assimilate or integrate so many? This may create problems in countries, such as observed in Germany even after 30 years of immigration. In addition, migration policy for a small country like Singapore may be very different than for a large country like the United States, Japan or Russia.
Singapore is in many ways blessed because you have a large pool of potential migrants from which to draw. The question is how you will proceed: will you bring in people for two to three years and then have them leave, or will you bring them in and have them stay for 15 to 20 years and then leave or stay and become citizens? You have to be careful not to bring in so many transient people that they have no investment in the society. Also, if you bring in many migrants and they stay, it is going to have an effect on your ethnic distribution and political system.
Compared to Japan, Singapore is in a more favourable position to benefit from migration. The Japanese have a history of being somewhat isolated and not as welcoming of foreigners, although they have established national commissions recommending that Japan be more open and use more English in order to welcome people coming from abroad. Singapore, on the other hand, has a history of diversity and immigration, and can benefit from the very large populations surrounding it.
In the past, America was also not considered to have a very cohesive national identity, because it was so diverse. But now in the 21st century, diversity can be a strength, especially in the context of low fertility. In a globalised world, diversity means you work in different environments, not just one environment.
The question is: can you maintain your integrity as a country with increasing diversity? In France, Great Britain and Netherlands, we have seen immigrants whose children do not feel that they are part of the country, and have staged protests. So the people who migrate in must feel that they have a vested interest and equal opportunities.
If fertility rates cannot be restored nor compensated for by migrants, is a shrinking, greying and declining society inevitable? What adjustments will countries have to make?
What is happening in Singapore, Japan, Europe and other places with low fertility, may be the trend for the entire world. For instance, the Republic of Korea has benefited from the demographic dividend in the past –small number of children, small number of elderly. Their economy blossomed with good policies and hard work. But now their favourable age structure, where you had 10 or 12 people in the working age for every retired person, is getting considerably older and it will soon be looking more and more like the Japanese and the European age structures.
Adjustments will have to be made. In countries with pay-as-you-go pension systems — not the fully-vested individual pensions that you have in Singapore – there are going to be heavy costs because the burden on the contributing workforce will increase as the population gets larger. I sometimes refer to this as a “red ink” society, where more and more resources are being spent as ageing occurs, so you go from black ink to red ink in order to cover the increasing costs for the elderly.
What is happening in Singapore, Japan, Europe and other places with low fertility, may be the trend for the entire world.
In this situation, there are basically three variables you can adjust. You can increase the age of retirement, increase taxes or reduce retirement benefits — or you can have a combination of these three. Increased productivity may help, but then again, the aged and elderly would want to draw added benefits from increased productivity as well, such as through better healthcare.
Baby boomers, in particular, will make a deep impact as they go through retirement. And this may have significant impact on investments, as older people draw down their savings and spend. You may move from a situation where the cohort was saving, to a period of spending.
Some of the adjustments that will have to be made are obvious, such as active ageing: encouraging the elderly to stay on working much longer, keeping them well-trained, competitive, physically active, healthy, etc., and as a result, reducing the costs of the ageing process, and the burden on healthcare. One thing that is common in the US and Canada but less so in other societies, is volunteering, where retirees say: “I have my pension and now I’m going to volunteer my time.” All these things could help make retirement much more rewarding and much more fulfilling for the individual, as well as helping the society at large.
Has the nature of ageing changed over the years? How might a greying population alter the complexion of society?
Throughout most of history, people did not have “golden years”. You worked your whole life and then depended on your children to take care of you when you were elderly and frail. In exchange, you took care of the grandchildren or dispensed advice. The government did not get involved. But now the level of income and the well-being of the elderly have improved tremendously because of economic structures, private investments and government policies to provide social security and healthcare. So these people now look forward to what we call the “golden years” — that is relatively recent.
When governments permitted structures to be created so that the elderly had their own income and were self-sufficient, it also helped to dismantle the extended family. In the past, retired grandparents would look after the children, freeing up working mothers and fathers to work and to have more children. Now people are saying, “I raised my children. I don’t have to raise another generation. I have my own income and I want to travel, do my hobbies or volunteer.” With greater mobility, people are moving further away from their families. They are also older — as people marry and have children later in life, they become grandparents at perhaps 60, not at age 50. Socio-economic circumstances in industrialised societies have brought about a situation where grandparents are no longer necessarily available to raise the grandchildren.
When the elderly became self-sufficient, it also helped to dismantle the extended family.
There have been studies by social psychologists about what happens when the population ages. I think there is some correlation between age and the type of productivity, innovativeness and behaviour you have in a democracy. As people become older, they often change their political views and positions on those policies and programmes that directly affect them. In the United States, for example, an official who tries to change existing policies for social security and pensions has to be very careful because if the elderly do not like it, they will try to vote him out of office. So the ageing of the population will have an effect on politics and democracies — we see that in France and in America.
The elderly can feel that they have an entitlement, that the government owes them retirement income and healthcare, for example. However, in the end, someone has to pay these costs. So, you need policies and structures that encourage economic independence, self-reliance and planning for old-age, not dependency on the government. In many Asian countries, including Singapore and Japan, there is a balance between societal needs and individual rights and responsibilities. The question for policymakers is this: What areas should be left to individual decision-makers? What issues are basically outside the domain of government involvement and should be left to individuals to manage for themselves?
In brief, the ageing of humanity is likely to be among the most significant events of this century. The expected ageing of populations is unprecedented, a worldwide phenomenon affecting every household, and a major challenge for all societies..
Third, we need to confront the ageist mindsets that persist in society. These are reinforced both by explicit anchors (such as the retirement age) and ambient anchors (such as the labels for senior-specific schemes). We need to create a new narrative around what it means to grow old in Singapore.
This article is excerpted from an interview conducted in Singapore (May 2006) by Andrew Kwok, a research associate at IPD, and Alvin Pang, the Editor of Ethos.