Is age just a number, or will it shape our economic future? By 2043, Malaysia is projected to become an “aged society,” with over 15% of its population aged 60 and above. A country is classified as an aged society when at least 14% of its population falls within this age group. This silver tsunami mirrors the trend of other high-income economies such as Japan which currently tops the charts as the world’s oldest society; almost a third of its population is over 65. Propelled by advancements in social and economic development, Malaysia has seen a significant increase in life expectancy, transforming our demographic landscape. In light of this, the term ‘silver economy’ has been coined, highlighting economic activities central to serving the elderly.
Core Catalysts
What are the key factors that have contributed to this phenomenon? Thanks to advanced healthcare and improved living standards, Malaysians are leading longer and healthier lives, resulting in a higher proportion of the older population. However, this is counteracted by declining fertility levels and falling birth rates, plummeting to a low of 1.6 children per woman in 2023 from 4.9 children per woman in 1970. The demographic imbalance is compounded by the decrease in the ratio of youth to older individuals. In the era of urbanisation, increased participation of women in the workforce coupled with rising costs of living have influenced the lifestyle decisions of young Malaysians. This can be seen in the emerging trend of younger individuals choosing to remain child-free. Additionally, brain drain can also cause an outflow of the youth as they migrate overseas in the search for greener pastures.
Grey Matters
Understanding the social and economic implications of the silver tsunami is crucial. As of 2024, the Malaysian government has allocated 13.4% to subsidies and social assistance and a further 8.2% on retirement charges. The anticipated increase in government spending on aged care such as healthcare, pensions and social protection systems can place a substantial strain on fiscal resources, giving rise to budget deficits. This may also lead to a potential rise in the public sector dependency ratio. However, critics argue that these issues are not deemed immediate concerns due to a lack of concrete evidence and are more likely to be long term challenges.
Source: Cheng, C., & Zainul, H. (2020)
Furthermore, a decline in birth rate can progressively shrink the size of the workforce contributing to reduced labor force participation. Other than that, declining health such as deteriorating physical and cognitive functions common among older people may lower job productivity, a potential risk to an economy’s ability to produce at maximum productive potential. As a result, this may negatively impact overall economic output causing an underutilisation of resources.
Another prevalent issue is intergenerational financial dependency, where older adults rely on working-age children for financial support. This perpetuates a cycle of dependency where younger generations are forced to bear heavier financial burdens, particularly in times of economic fluctuations. In March 2023, only 33 percent of Employees Provident Fund (EPF) members had RM240,000 in savings, the minimum amount required to retire comfortably. Consequently, seniors have no choice but to depend on family members or tirelessly work past retirement age in order to replenish their funds. In addition, falling tax revenues may result in pension payouts surpassing the contributions from younger workers, leading to potential issues with inter-generational equity.
For many of the older cohort, staying in the workforce—whether in formal or informal roles—gives them a sense of purpose and fulfilment whilst diversifying income sources. Working allows them to share their experience and knowledge before passing the torch, benefiting both themselves and others. Additionally, staying active helps alleviate loneliness and foster meaningful connections during their later years.
Currently, there are no legal restrictions against employees past retirement age. Several organisations such as the government-linked Talent Corporation Malaysia Bhd (TalentCorp) under the Ministry of Human Resources offer a range of programmes to assist in post-retirement employment. Interestingly, the increased involvement of retirees in the workforce is reportedly said to improve the supply of labor and boost economic productivity.
With all this in mind, it is essential for all stakeholders to build an economy that supports the seamless integration of older individuals. This involves enhancing training and lifelong learning programmes, as exemplified by Japan’s “Lifetime Employment Support Offices”, which support 80% of its older population who continue working past retirement. Besides that, income tax reductions for employers hiring older workers and improved quality standards in aged care can be considered to further encourage their participation in the workforce. Moreover, urban planning and infrastructure must be inclusive and aimed at maximising mobility and accessibility for the elderly. These collective initiatives will ensure that older individuals can make meaningful contributions to the economy while enjoying a higher quality of life.
In conclusion, awareness of the implications and challenges of an aging population is important for all age groups. As we are not getting any younger, we must plan early to ensure financial security in the future. Governments must actively engage with the voices of both the younger and older generations as the fate of our later years depends on this dialogue. After all, nobody wants to face a future marked by uncertainty and impending doom. By proactive involvement of all parties, we can better create a sustainable silver economy to address this new demographic shift.
