An Ageing Population? – Part 2

~by: Gordon Lee~

This article looks at the issues surrounding an ageing population. Is it really as terrible and as serious as politicians make it out to be?

In Part One, we saw how this Government stuck a pair of horns on the phrase “ageing population”, such that by unleashing the phrase in public, they could invoke fear and use it to justify their major economic policy of unbounded population increases.

You can find Part One of the article here: XXXXXXX

The dependency ratio

The dependency ratio is the number of dependants (young and old) per person of working age.

The rationale is that both the young and the old require support. So if the Government claims that the old (because they are dependants) are a problem, then they equally have to accept that children are also a burden.

Of course, the nature of their needs are different, but the economic aspect is similar. Does it really cost more to support an elderly person compared to a young person?

Many elderly people may have their own pension/retirement plans, savings, or might even still be working. Whereas the vast majority of children aged under 15 do not work. And increasingly, children are also more expensive to support, educate and care for.

The dependency ratio is an inadequate measure

Whereas the old are delaying retirement (just look at one infamous Singapore former PM), the young are pursuing higher education before entering the workforce. That means that the “burden” of the old compared to the “burden” of the young could well be decreasing.

For example, public expenditure on education increased from $5.9bn to $9.9bn betwen 2000-2010.^[1] Private expenditure on education also increased from $1.8bn to $4.0bn over the same period.^[2]

Given this Government’s enthusiasm for bench-marking, perhaps Old-Age Dependants should refer to the number of people above the average retirement age, and Child Dependants should refer to those under the average school-leaving age. Only then will the measure of the dependency ratio have any real meaning which takes into account changing circumstances year-to-year. And only then will we realise that the “problem” of the elderly has been vastly overstated by this Government.

What happens in a stable population

All the talk about the low fertility rate is missing the point. In a stable population (i.e. without the distorting effect of immigration), an increase in the Old-Age Dependency Ratio is offset by a decrease in the Child Dependency Ratio. In other words, the overall dependency ratio should hold largely constant – and not increase. This is even more true if you use the proposed bench-marked measure describe above in order to take into account of the fact that the old are healthier and more productive than ever before.

Simply put, so what if Singapore has more elderly to support? It means that Singapore has fewer young to support.

What happens under high immigration

Immigrants would primarily be aged between 15 to 64, and once they become residents (PR or naturalised citizens), they provide a temporary demographic dividend. That means that they contribute towards economic growth without requiring much support – until… they get old themselves. In which case, I presume, would be an excuse for another (even larger) round of immigration. The argument proposes no end to this fiasco.

In fact, this Government has been merrily increasing the number of residents of working age (as a percentage of total resident population) that not only has the dependency ratio not risen, it has actually fallen from 0.411 in 2000 ^[3] to 0.353 in 2011 ^[4]. So, for every 100 residents of working age, there are now 6 fewer resident dependants to support! All’s well and good for now, until these workers grow old. What then? Even higher levels of immigration? This is a never-ending cycle.

Part 1 HERE. Stay tuned for Part Three. 

The writer is an undergraduate student reading Economics at the University of Warwick.