How ageing population affects employers in Asia - Pacific
The ageing population is one of the most powerful forces now
affecting employers in Asia-Pacific. The number of employees eligible
for retirement is rising each year, and fewer young workers are entering
the market in the more developed countries.
In 2004, more than 9 percent of Asia-Pacific's population was 60 or
older. By 2050, that figure will reach 23.5 percent. The business
implications of this demographic shift are now a priority in many
companies and government-linked enterprises.
Preserving the knowledge and experience of the senior workforce while
creating and implementing talent management programs for the next
generation of workers has become the focus of many HR executives. As a
result, adapting clients' HR programs to the new reality is becoming an
integral part of Watson Wyatt's work in Asia.
Japan - In perhaps the most dramatic example of the demographic
shift, Japan's birth rate is 1.29 and falling, while its own baby
boomers will reach the retirement age of 60 in 2007.
If organizations fail to transfer employee skills to the new
generation, their global competitive ability will be compromised. With
longer life expectancy in Japan, employers are extending employment to
65 and possibly even 70. In addition, the number of women in the
workforce has risen sharply in recent years and continues as a trend.
Korea - The government recognizes the seriousness of the ageing issue
and has implemented a new pension law and new programs supporting birth
benefits. On the corporate side, organizations also are taking action:
They are preparing for new retirement systems that encompass the new
pension law.
They are working to change the HRM system to one based on job value
rather than seniority. (Under the current system, older workers receive
automatic compensation increases, making them too expensive to keep on
the job.) Finally, companies are turning to Work-Life Balance (WLB)
benefit programs, which help women stay in the workforce.
Watson Wyatt is working with Korean enterprises to creatively
integrate these policies into their legacy systems.
Australia - Since the government introduced the AU$3,000 baby bonus,
the birth rate has increased from 1.73 to 1.77 and may even exceed 1.8
as the bonus increases to AU$4,000 this year.
However, this is still well below the generally accepted replacement
rate of 2.1. Although mandatory occupational superannuation - and
tightening of the social security means test - will help the government
control costs, health care costs could soon escalate.
Australia now spends 9.3 percent of GDP on health care, which could
dramatically increase during the next 30 years, when the retirement-age
population is expected to double to more than 24 percent of the
population. In the same period, growth in the working-age population
(15-64) is set to slow from 1.3 percent annually to 0.6 percent.
As the labor supply contracts and older workers retire, this will
slow productivity growth.
Participation rates have increased in recent years, but mainly
through the increased number of women in the workforce, which is now
reaching its limit.
All governments and employers facing this issue should review
migration and guest worker schemes as a labor supply solution and
consider more flexible working arrangements, including working from
home. They must also focus on "transition to retirement" programs and on
educating and retraining older employees.
Pensions play a critical role in the effort to retain these workers.
To help manage the financial impact of our clients' retirement plans,
Watson Wyatt's Pension Risk Management solution quantifies the risk that
pension schemes face now, and helps each client determine the right
amount of risk to take going forward.
Our Phased Retirement research provides insights and strategies to
help companies adapt and align their programs with worker preferences.
force reaching retirement age.
And we are working with clients to revamp their HR systems to cope
with dramatic changes in retirement policy.
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