Abstract

Singapore’s population has been ageing rapidly with estimates showing that between now and 2030, more than a quarter of the population (900,000 people) would have reached retirement. Starting from the year 2020, it is estimated that Singapore will not be able to keep up with the replacement of retiring workers due to inadequate number of working age young people. This will negatively affect the economy in terms of its key drivers; productivity, labour supply, savings, and consumption. The study proposed in this paper will examine the effects the ageing population will have on Singapore’s economy in terms of rate of GDP growth, productivity rate, and labour supply rate. Census data from the Department of Statistics and GDP data from the IMF and World Bank will be used undertake the study.

Introduction

The world is experiencing a rapid aging of its population and it is estimated that by 2020, the number of individuals aged over 60 will hit 1 billion and nearly double to 2 billion by the year 2050 – a 22% representation of the world’s population (Bloom, Canning, & Fink, 2011). Singapore’s population is not only among the fastest aging populations in Asia but also in the world as a whole. Over a decade ago, Singaporeans aged 65 and above were approximately 235,000 in number (7.3% of the then population) and it was predicted that they would reach around 796,000 (19% of the population) in 2030 (IMC, 1999). However, a recently released population white paper estimates that between now and the 2030, over 900,000 Singaporeans (comprising more than 25% of the population) will have already retired from the workforce (National Population and Talent Division, 2013). These latest figures indicate that Singapore’s population is aging faster than was projected over a decade ago. Coupled with the aging population is a falling birth rate caused by a declining Total Fertility Rate (TFR) which has been below the 2.1 replacement rate for over three decades (National Population and Talent Division, 2013). In 2011 and 2013 for instance, TFR stood at 1.2 and 1.19 respectively. It is projected that beginning the year 2020, there will be a decline in the number of working-age Singaporeans due to inability of working-age younger citizens to keep up with the replacement of older retiring citizens (National Population and Talent Division, 2013).

Statement of the Problem

The rapidly aging and retiring population and declining birth rate indicate that Singapore will face a serious problem of inadequate workforce. As the older population retires, there will be inadequate young people to replace them at the workplace. As indicated previously, this will happen from the year 2020. The inability for Singapore to meet its labour demands will no doubt negatively affect its economic growth. This is because; a country that has a higher proportion of non-working population i.e. the elderly compared to the working age population will experience problems in meeting the key economic growth drivers such as productivity, labour supply, savings, and consumption (Bloom, Canning, & Fink, 2011). Additionally, based on the lifecycle perspective, the consumption to production ratio is normally high among the non-working population compared to the working-age population.

Purpose and Significance of the study

This paper is a research proposal of a study that will be conducted to determine the implications of Singapore’s greying population on its economic growth. The study’s findings will be important in understanding the seriousness of the problem and perhaps trigger mobilisation of interventions to address the problem. At present, no study has been conducted to investigate the effects of the ageing population on Singapore’s economy and this study will be important in bridging this knowledge gap.

Research Questions

The following research questions will guide the study:

• At what rate does an increase in ageing population cause a decrease in GDP?
• At what rate does labour supply decrease with an increase in the ageing population?
• At what rate does productivity decrease with an increase in the ageing population?

Literature Review

Many studies (Sobotka et al., 2010; Bloom et al., 2001; Alders & Broer, 2004) have identified and analysed the main mechanisms through which the economy is affected by an ageing population and these mechanisms include; public expenditure, saving and consumption patterns, and human capital. Public expenditure is affected when a country has a higher old age population as funds that could have been allocated to development are channelled to medical and social security expenses (Eiras & Niepelt, 2012). Additionally, when the ageing population increases, savings decline as the retired population starts using their savings. The demand and consumption patterns of certain goods also tend to decline as the aged show a preference for different goods (Walder & Dorring, 2012). According to Lee et al. (2011), human capital is also negatively affected as a country’s aged population retires and there is lack of enough young people to replace them.

Despite the above associations that have been made between an ageing population and various mechanisms of economic growth, the associations are largely supported by anecdotal evidence and very little empirical evidence. One empirical study that was conducted to determine the effect of an ageing population on the economy was conducted in the United States by Masteas, Mullen, and Powell (2014). The study found that an increase of 10 per cent in the population aged 60 and above led to a decrease of 5.7% in GDP per capita (Masteas et al., 2014).  This was to a big extent caused by the resultant decrease in labour supply and to a smaller extent by the resultant decrease in productivity. This study will use empirical procedures to determine the effect on an ageing population on Singapore’s economy by focusing on three main areas, GDP growth rate, productivity rate, and labour supply rate.

Methodology

Census data of the year 2000 and 2010 will be obtained from Singapore’s Department of Statistics. The Census data will be used to obtain information regarding the population’s ageing population demographics as well as information on labour earnings and employment. The study will also use data from the International Monetary Fund and the World Bank regarding Singapore’s GDP from the year 2000 to the year 2010. All of these data will be subjected to various statistical procedures to determine how the rate of Singapore’s GDP growth, productivity, and labour supply is affected by an ageing population. As it has been noted before, Singapore’s ageing population has been increasing from 235,000 in 2000 to 900,000 by the year 2030.

Research Timeline

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