Southeast Asia is on the brink of a demographic shift that could upend its economic landscape.
The region, known for its dynamic workforce, is aging rapidly, with a predicted decline in the working-age population starting this year.
This trend poses a significant threat to the economic growth spurred by demographic dividends in past decades.
Vietnam’s Ho Chi Minh City exemplifies the imminent labor challenges, forecasting a shortfall of 320,000 workers by 2024.
This shortage threatens to stifle economic activities, impacting major projects like a U.S. semiconductor facility.
The Impending Labor Shortage and Its Economic Impact
The structural nature of this labor shortage suggests long-term economic repercussions across Southeast Asia.
The proportion of working-age individuals has already peaked in countries like Thailand and Vietnam, and Indonesia is next in line.
As the population ages, with those 65 and older exceeding 7% in 2019, Southeast Asia is transitioning towards becoming an “aged” society.
This change mirrors Japan’s past demographic evolution but with varying speeds across different countries.
Despite these shifts, Southeast Asian nations are ill-prepared. Public pension coverage is alarmingly low, with less than 30% covered in countries like Indonesia and Vietnam.
Even Singapore’s coverage falls below the OECD average. Early retirement ages further exacerbate the challenges facing social safety systems.
Aging populations strain finances, increasing burdens from inadequate elder care and pension systems.
Southeast Asia, learning from Japan’s experience, faces the urgent task of strengthening its social safety nets.
Moreover, the demographic changes have broader international implications, particularly affecting labor migration patterns.
As countries like Vietnam and the Philippines, major labor sources for Japan, confront their own workforce shortages, the region’s capacity to contribute to global growth may diminish.
Thailand’s advanced aging scenario predicts a slowdown in economic growth, a trend likely to affect the entire region.
As Southeast Asia faces aging demographics and economic growth, strengthening social safety nets becomes crucial for older people’s care and economic stability.