East Asians Getting Old before They Can Get Rich, World Bank Warns

China and other East Asian, middle-income countries face an interesting new quandary: they are getting old before they are getting rich. As a result, according to the World Bank, these nations must ask themselves how to overhaul their health care and pension systems to compensate.

China and other East Asian, middle-income countries face an interesting new quandary: they are getting old before they are getting rich. As a result, according to the World Bank, these nations must ask themselves how to overhaul their health care and pension systems to compensate.

As reported by Bloomberg Business, East Asia hosts one third of the world’s 65 and older population. Unfortunately, due to the demographics of this region, these nations’ residents reach retirement age faster than any other region in history, according to a World Bank report released Wednesday. Nations that fall into the “developing” category, such as China, Indonesia, and Vietnam, while populous and economically powerful by sheer scale, lack the wealth of other Asian nations like Japan or the young work force of a nation like the Philippines. As a result, these developing nations will have to ask their citizens to work longer into their golden years to avoid abject poverty, the report says.

Alex van Trotsenburg, World Bank vice president for East Asia, wrote a forward to the report addressing this issue. “It will be possible to manage rapid aging in East Asia and Pacific while sustaining economic dynamism,” he said. “This effort will require politically difficult policy choices, including dealing with associated fiscal risks.”

By the year 2040, China will have netted a loss of 90 million workers from its work force, the report says. This realization may reside at the heart of China’s decision earlier this year to abandon its one-child policy. Nevertheless, this change of policy may come too late, and may actually work against the nation’s hope of having the youth support the elderly thanks to the rising cost of raising a child.

Failing to take action to address these issues will prove catastrophic. Pension payments expect to reach the equivalent of 12 percent of Chinese Gross Domestic Product (GDP) by the year 2070. As a result, the World Bank’s report includes a number of recommendations. It proposes that wealthier nations, such as South Korea and Singapore, counteract the decline of labor force by encouraging more women to go into the workplace. Countries with a younger population, like Cambodia, should encourage job creation and build pension systems that can sustain the aging while still providing for the future of the existing workers. As for the main bulk of middle-income East Asian countries, the report says they “will need to sustain high productivity growth and undertake structural reforms of social security, health and long-term care, and labor market policies.”

Still, the report notes, “there are reasons for cautious optimism, because more educated cohorts will be better prepared for the prospect of longer working lives than previous generations.”