Singapore faces ‘double blow in labour supply’ due to ageing population: study
Country will be among worst hit by shrinking workforce due to ageing population, says study
Singapore has the most to fear from an ageing population among Asia-Pacific nations, a new study shows.
It noted yesterday that the country faces a double whammy: a shrinking workforce coupled with slower progress than its Asian neighbours in getting more people into the labour market.
The report by Oxford Economics said Singapore's labour supply will shrink by 1.7 percentage points in the 10 years through 2026, and by 2.5 percentage points in the following decade, after accounting for changes to the participation rate.
This will make the country the worst hit out of a dozen economies in the report, even though it was Japan that has recorded the biggest workforce decline over the past 10 years.
The report said almost all Asian nations will face demographic challenges over the next two decades, while policy measures or efforts to boost labour participation rates - such as by drawing more women or the elderly into the workforce - will only partially limit the impact.
Singapore, Taiwan and South Korea came up the worst on a metric that looked at the amount by which the decline in growth of the working-age population cannot be offset by higher labour participation rates.
The massive decline expected in Singapore's working-age population growth from 2027 will be due in part to less immigration after a recent policy shift, added the report.
It will take a while before the pain affects some countries.
Thailand's workforce, for instance, will barely shrink over the next 10 years, but is expected to drop by 1.1 percentage points each year in the decade after.
Japan's workforce is likely to remain unchanged from now until 2026, due to labour market reforms that include more women and higher participation by senior citizens, even as its working-age population shrinks by 0.7 per cent a year.
But there are limits to how much the various groups' participation rates can rise, and so its labour supply growth is expected to fall in the following decade.
Mr Louis Kuijs, head of Asia economics at Oxford Economics, who wrote the report, noted its projections can be used to provide an indication of how much economic growth will come under pressure in Asia in the coming decades.
A 1 percentage point decline in workforce growth would mean a fall in gross domestic product growth by 0.5 to 0.67 percentage point.
"With the demographic challenge looming on the horizon, Asian economies better start preparing," said Mr Kuijs.
Singapore's ageing population has long been flagged as a major challenge to the economy.
It means higher healthcare expenditure and a decline in the domestic labour force, which will affect growth, said Finance Minister Heng Swee Keat at an event last month.
DBS economist Irvin Seah told The Straits Times the key thing for Singapore to focus on is to "change the way we grow the economy".
"It shouldn't simply be driven by labour or capital injections, but by innovation. We have to grow the economy in a smarter way, and the Government has been taking steps to do that, to restructure the economy," he said.
Mr Seah believes Singapore remains attractive as a destination for human capital and businesses, given its status as an international hub for finance, shipping and other activities.
It also helps that Singapore has more flexibility in terms of immigration policy compared with other countries in the region.
"Simply focusing on the demographic trend doesn't paint the whole picture (for Singapore's future).
"Much will really depend on how we plan ahead and how we take action today to mitigate against the challenge of an ageing population."