2 DATA AND ESTIMATION 3 4 CONCLUSIONS AND WAY FORWARD 1 MALAYSIAN DEMOGRAPHIC PATTERNS FINDINGS AND...

Sharifah A. Haron, Tengku Aizan Hamid, Maliki Achmad, Jariah Masud, M. Sofi Ali & Alim Jihen Institute of Gerontology, UPM; BAPPENAS, Indonesia; DOSM, MOF

Email: [email protected]

10-14 November 2014, Beijing, PRC

Demographic Changes and Economic Lifecycle Deficit for Malaysia

mailto:[email protected]

NTA Training 16-20 June, 2014

Contents

2 DATA AND ESTIMATION

3

4 CONCLUSIONS AND WAY FORWARD

1 MALAYSIAN DEMOGRAPHIC PATTERNS

FINDINGS AND IMPLICATIONS


6.83 6.946.72

5.94

5.15

4.16 4.244.00

3.47

3.102.85

2.582.35

2.162.00

1.87 1.85 1.85 1.85 1.85

0

5

10

15

20

25

30

35

40

45

50

1950-1955

1955-1960

1960-1965

1965-1970

1970-1975

1975-1980

1980-1985

1985-1990

1990-1995

1995-2000

2000-2005

2005-2010

2010-2015

2015-2020

2020-2025

2025-2030

2030-2035

2035-2040

2040-2045

2045-2050

Period

Cru

de

Bir

th &

Cru

de

De

ath

Ra

te (

pe

r 1

,00

0)

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

To

tal F

ert

ility

Ra

te

Crude birth rate

Crude death rate

Total fertility rate

Source: UN, 2009, World Population Prospects (The 2008 Revision)

Fertility, Mortality & Total Fertility Rate, Malaysia, 1950 - 2050

Anti-natalist policy (1960s)

Pro-natalist policy (1980s)


TFR, Median Age and Life Expectancy for Malaysia, 1970 - 2050Year TFR (children per

women)Median age (yr)

Life expectancy at birth (yr)

Life expectancy at 60 (yr)

Male Female Male Female

1970 5.94 17.5 57.8 61 - 1

1980 4.16 19.7 63.5 67.1 3.5 7.1

1990 4.00 21.5 67.5 71.6 7.5 11.6

2000 3.1 23.6 69.6 74.5 9.6 14.5

2010 2.58 26.3 72 76.7 12 16.7

2015 2.35 28.0 72.9 77.6 12.9 17.6

2050 1.85 36.3 77.8 82.4 17.8 22.4

Source: DOSM, various years; United Nation (2006; 2012)


Source: DOSM, Pala, 2005

48.2%

48.4%

47.7%47.3%

49.4%52.2%

51.6%

52.3%

52.7%

50.6%47.8%

51.8%

5.2

5.75.5

6.2

7.4

9.9

0

500

1000

1500

2000

2500

3000

3500

4000

1970 1980 1991 2000 2010 2020

Year

Nu

mb

er

of

Old

er

Pe

rso

ns

60

Ye

ars

or

Ov

er

('0

00

)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Pro

po

rtio

n o

f O

lde

r P

ers

on

s t

o T

ota

l Po

pu

lati

on

(%

)

Female

Male

%

Population Ageing Trends in Malaysia, 1970 - 2020


Age Composition of Malaysian Population, 1970 - 2050Year Number of Persons (million) Percentage of total

population0-14 15-59) 60+ Total 0-14 15-59 60+

1970 4.8 5.4 0.59 10.9 44.5 50.0 5.4

1980 5.5 7.6 0.76 13.9 39.9 54.6 5.5

1990 6.8 10.3 1.0 18.1 37.4 56.9 5.6

2000 8.0 14.0 1.45 23.5 34.1 59.8 6.2

2010 9.2 17.6 2.1 28.6 31.7 60.9 7.4

2015 8.2 19.0 2.8 30.0 27.3 63.4 9.3

2050 7.2 23.6 6.4 37.3 19.4 63.3 17.3



The speed of AgeingFrance (1865 - 1980)

Sweden (1890 - 1975)

Australia (1938 - 2011)

United States (1944 - 2013)

Hungary (1941 - 1994)

United Kingdom (1930 - 1975)

Japan (1970 - 1996)

115

85

73

69

53

45

26

Developed countries

Azerbaijian (2004 - 2037)

China (2000 - 2026)

Sri Lanka (2002 - 2026)

Malaysia (2020 - 2043)

Thailand (2002 - 2024)

Columbia (2017 - 2036)

Singapore (2000 - 2019)

South Korea (2000 - 2018)

33

26

24

23

22

19

19

18

Developing countries

source: Kinsella and He, 2009


Dependency and support ratio, 1950 - 2050

85.088.0

94.997.5

92.3

84.6

75.473.6

69.766.2

59.6

55.6

51.649.6 48.2 47.7 47.6 47.7 48.6

50.352.9

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Year

Rati

os

Total Dependency Ratio

Child Dependency Ratio

Old-age Dependency Ratio

Potential Support Ratio

Parent Support Ratio


1965: 10: 102000: 7: 102030: 5: 10


Age-Sex Pyramid for Malaysia, 1970, 2000, 2030


10 8 6 4 2 0 2 4 6 8 10

0- 4

5- 9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

85+ Males Females

Percent

Age Group

1970

2000

2030


Number of labour force by age group, Malaysia, 1985 – 2012


Year Total 15–19 20-59 60–64

No % No % No %

1985 5,990.1 662.8 11.1 5,184.5 86.6 142.9 2.4

1990 7,000.2 748.4 10.7 6,084.6 86.9 167.1 2.4

1995 7,893.1 642.4 8.1 7,075.3 89.6 175.4 2.2

2000 9,556.1 637.6 6.7 8,704.2 91.1 214.5 2.2

2009 11,315.3 452.4 4.0 10,600.7 93.7 262.2 2.3

2010 12,303.9 528.4 4.3 11,491.6 93.4 284 2.3

2011 12,675.8 521.8 4.1 11,842 93.4 311.9 2.5

2012 13,119.6 519 4.0 12,248.8 93.4 351.8 2.7

Household Expenditure Survey (HES) 2009

• A nationwide survey covering 21,641 private households in urban and rural areas.

• Information on income, expenditure and the debt burden

• The expenditure data are reported at the household level

Household Income Survey (HIS) 2009

• Involve 184,447 individuals living in 43,026 households

• Information on income and basic amenities

• Income from employment and self-employment are reported in the HIS at the individual level.


The Data:

• Used the National Income Account data 2009 to calculate the public consumption and macro control

• Used household survey (HES and HIS) and administrative record from the Ministry of Education and Health to estimate the per capita-age profile.

• Per capita-age profiles are estimates of per capita values by single year of age (0 94+).‐

• All consumption (private and public) and labor production can be assigned to individuals.


3 FINDINGS AND IMPLICATIONS

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 940

2000

4000

6000

8000

10000

12000

14000

16000

18000

Private other Private Health Private EducationPublic Health Public Education Public other

Per C

apita

, Rin

ggit

(RM

)

Public Education

Private Edu-cation

Public other Public Health

Private Health

Per capita consumption profiles for Malaysia, 2009

H2: 33 H3: 57H2: 95H1: 15, 20

The Consumption profile• Public consumption is significantly higher at young

(education) and old age (health). • The contribution of private health and education

were small, so age profile of private consumption is driven by its “other” component – i.e. especially during adulthood

• The total consumption profile for Malaysia shows a special feature - i.e. it has four humps in different age cohort: (1) adolescent, (2) young adulthood, (3) near elderly and (4) elderly.


• First hump: Primary school age up to adolescence (peak at 15 and 20)• Mostly due to educational cost. • Malaysia has allocated a significant amount of budget on education

where Malaysians children receive free education from primary up to high school level. Therefore, public consumption is especially high during the school age of 6 through 19 and/or 20.

• Second hump: Age 21 to 44 (peak at 33 years old)• High private consumption at this stage may be contributed to

lifestyle-related expenditure such as recreation. • Third hump: Dissipates until early 80s (peak at 57)

• High private consumption may be due to cultural expenditures such financing children wedding. Public and private consumption on health start to pick up at this stage.

• Fourth hump: started at the age of 80’s but reaching its peak at 95 may due to health cost.



1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 930

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

22000

24000

26000

Earning Self employment Labor Income

Per C

apit

a, R

ingg

it (R

M)

Per capita labour income for Malaysia, 2009

The Income profile• Has four phases, where:

I. a sharp increase between 19 to 33 years old II. a slow growth with a peak at age 44III. a sharp decline until around age 61 IV. a gradual dissipation until around age 90s.

• A small proportion of total lifecycle income earned by persons under age 20 (1.4%) or ages 60 and over (4.38%).

• Very small portion of elderly who are employed continued working after age 70. • The self employed continued to work even after age 70s.• Many shifted from wage-based to self-employment upon

retirement– self-employment peak around age 57



1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 930

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

22000

24000

26000

Labor Income Consumption

Per C

apita

, Rin

ggit

(RM

)

The most important graph for Malaysia, 2009


The Life Cycle Deficit for Malaysia, 2009

1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93

-12000

-10000

-8000

-6000

-4000

-2000

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

The lifecycle : Deficit • Child dependency: the first 26 years of life; Older

person dependency started at 57 and over• Those age 57 onwards can refinance their

consumption using other means than their labor income.

• The total deficit for 2009 is RM410,249.83 to be financed either by asset reallocation and/ or familial or public transfers.


The lifecycle : Deficit • The most critical issues on financing the lifecycle deficits:

• How the intertemporal reallocation can benefit the economy with good investment.

• Efficient public transfers consider the efficient reallocation system from the public taxes to the government services that can benefits development of human capital, reducing poverty or inequality.

• Private transfers from family is critical, especially if there is no other means of elderly to finance their consumption.


The lifecycle : Surplus• A productive/surplus period of 31 years (between 26 to 57

years old)– The duration of education on average are relatively long and a relatively high

numbers of persons in the 55 and over age group who are outside the labour force.

• The retirement age was recently extended to 60 years old, so the life time income for wealth accumulation can be improved.

• But, EPF fears that many Malaysians in retirement will be in poverty due to insufficient saving (The Malay Mail, 5 October 2014) which mainly caused by: • Premature withdrawal for housing, health and education • the relatively low income of the employees which affects the amount

that could be saved for their old age.


The lifecycle : Surplus

• The Government is well aware if this issue and has developed several programmes to improve saving for old age. • The Private Retirement Scheme is a new initiative to

promote voluntary savings for old age• The Government has also created 1Malaysia Retirement

Scheme for self-employed workers to save with the EPF and the government contributed RM 60 to investor.


• The Malaysian Government is heavily investing in its people through public expenditure on health and education: The universal health programmes and free education for all Malaysians up to high school.

• Malaysian consumers are heavily spending on other consumption especially on housing, most likely driven by the rising cost of living and prices of housing.

• The amount of surplus may indicate that Malaysians are not saving as much as well. As such, it has raised the following question:• The possibility of bad financial behaviours and lack of preparedness of

Malaysian for their retirement. Thus, the need to intensify financial education intervention programmes for all ages to rectify the financial misbehaviour and improve the financial well being of Malaysians.

• The sufficiency of efforts in capturing the second demographic dividend• The sustainability of public expenditure on health and education • The adequacy and effectiveness of the current social protection system in

Malaysia.

4 CONCLUSIONS AND WAY FORWARD

2 DATA AND ESTIMATION 3 4 CONCLUSIONS AND WAY FORWARD 1 MALAYSIAN DEMOGRAPHIC PATTERNS FINDINGS AND...

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