Health Capacity to Work among Older Persons in Asia: Key Findings from a Regional Comparative Study

I. Introduction

Developing Asia is aging rapidly. The proportion of people aged 60 years and older will double from 12% in 2018 to 25% within 3 decades, exceeding the projected global average of 22% in 2050.¹ Average life expectancy in the region increased by 5.0 years from 2000 to 2022 and is projected to reach 78.7 years by 2050. Meanwhile, the total fertility rate in the region has gradually declined from 2.65 in 2000 to 1.92 in 2020, with projections suggesting a further decline to 1.76 in 2050. Amid such a rapid demographic transition, many countries in the region, particularly those without effective old-age insurance (through either market or nonmarket mechanisms), need policies that promote active aging while supporting the well-being of older people (World Health Organization 2020b, Ogawa et al. 2021).

The state of physical health of older persons has improved significantly over the past 2 decades. The overall burden of disease among older people aged 60 and above, as measured by the number of disability-adjusted life years, has declined significantly in developing Asia from 108,415 per 100,000 population in 2000 to 86,083 in 2019 (Figure 1). Notable declines in disability-adjusted life years occurred in East Asia (−23.7%), South Asia (−20.7%), and Central and West Asia (−15.9%), while more moderate declines were observed in Southeast Asia (−11.0%) and the Pacific (−4.9%).

Given extended life expectancy and health improvements, one might expect to see a visible increase in the labor force participation (LFP) of older people. However, the evidence is quite mixed. Healthier individuals may work longer, but greater certainty of survival until old age encourages people to save and retire at preset retirement ages (Kalemli-Ozcan and Weil 2010). Other confounding factors such as pension design and individual preference, as well as cultural norms and the demand for labor, may also influence the decision to work or retire.²

Despite steady improvements in health, LFP rates among older persons in developing Asia declined from 2000 to 2021, especially among men. During this period, the LFP rate for men aged 55–64 remained high but declined slightly from 72.7% to 70.2% (Figure 2). The LFP rate among men aged 65 and older declined more sharply during the same period, from 38.7% in 2000 to 33.1% in 2021. Meanwhile, the LFP rate among women aged 65 and older remained relatively unchanged between 2000 (18.8%) and 2021 (17.6%), while it increased slightly among women aged 55–64 from 2000 (41.7%) to 2021 (45.8%).

Subregional trends vary. In Southeast Asia and East Asia, LFP rates among older men remained relatively stable from 2000 to 2021 (Figure 3). In other subregions, LFP rates for both younger-old and older-old men experienced varying degrees of decline, ranging from 4 to 13 percentage points over the past 2 decades. Due to improved educational attainment and better access to jobs and other opportunities, LFP rates for younger-old women increased over the past 2 decades in all subregions except the Pacific. LFP rates among women aged 65 and older remained low and declined across the region, except in Southeast Asia, where they increased by 5 percentage points, and in East Asia, where they increased slightly by 1 percentage point.

As Asia enters a new era of accelerated population aging, many countries have either raised or are contemplating an increase in their statutory retirement age to access public retirement benefits.³ Working longer can benefit both the objective and subjective well-being of older people through income security, a greater sense of social participation, and self-fulfillment (Hao 2008, Schwingel et al. 2009, Sewdas et al. 2017).⁴ At the societal level, the employment of older workers for longer periods can help address the looming challenges of a shrinking workforce that are expected to intensify in the coming decades. In countries in the region where population aging is already well advanced, adjustments to the pensionable age are being adopted widely. Raising the retirement age and extending the average number of working years can be a viable and effective policy option under certain conditions. First, there must be sufficient work capacity at older ages—for example, through improvement in the health status of older people—so that they can delay retirement without risking their health and well-being. Second, the retirement age threshold must play a meaningful role in the labor supply decisions of current and future cohorts of older people.

Advanced economies appear to have met both conditions. Coile, Milligan, and Wise (2017) estimated an average of 5.5 years of extended or additional years of health capacity to work among men aged 55–69 during the period 1977–2010 across members of the Organisation for Economic Co-operation and Development (OECD). The population coverage of public and private pensions is also extensive in most OECD countries, and people routinely retired around the statutory retirement age during the period studied (Wise 2017). Whether low- and middle-income countries in Asia meet the two conditions remains an important empirical question, as healthcare improvements and social security coverage are comparatively low (Coile, Milligan, and Wise 2017; Matsukura et al. 2018; Ogawa et al. 2021; Park and Lee 2021).

However, in the context of developing Asia, there is little systematic evidence on the health capacity to work of older people. To bridge the evidence gap, this paper presents the findings of a regional comparative research project with the following objectives: (i) extract regionally comparable information on the health status and employment of older persons in seven Asian countries (Indonesia, Japan, Malaysia, the People’s Republic of China [PRC], the Republic of Korea, Thailand, and Viet Nam); (ii) assess changes in the health status of older persons over time; and (iii) quantify additional health capacity to work using well-established methodologies. To the best of our knowledge, this is the first multicountry comparative study of population aging in Asia that uses a standardized methodology and harmonized data to enable cross-country comparisons and learning. Given the wide differences in the policy environments that shape LFP rates and pensions in the countries studied, substantial variation in the health and work capacity among older Asians is to be expected. Hence, we believe that our comparative study can make an important contribution to the existing literature and provide new policy insights.

To preview the results, we find that older Asians exhibit notable improvements in health status over time, generating additional potential work capacity. However, the amount of additional health capacity to work varies significantly across countries, by gender, and by other individual characteristics. Overall, the additional work capacity of men aged 55–64 increased by 0.74 years (simple country average) over the last 15 years. The largest increase occurred in the PRC (2.24 years), followed by Malaysia (1.06 years) and Thailand (0.79 years). In contrast, work capacity declined by 0.17 years in Indonesia. The proportion of all men aged 60–64 years with untapped work capacity (i.e., not working but with the health capacity to work) ranged from 7.8% (Viet Nam) to 21.1% (Malaysia). Such a proportion is higher among men in their late 60s, ranging from about 21.0% (in the PRC) to as high as about 32.1% in Japan and Thailand. Untapped work capacity is disproportionately high among the better-educated and those living in urban areas. The “silver demographic dividend,” measured by the aggregate economic gain from putting to use the untapped work capacity of older workers, is estimated to be quite large, implying that the potential increase in the gross domestic product (GDP) of the countries studied ranges from 0.4% in Malaysia to 2.8% in Japan.

The rest of this paper is organized as follows. Section II presents the empirical approaches used in the seven country studies. Descriptive data and major findings from the comparative study of the seven country studies are presented in section III. Finally, section IV provides policy implications and recommendations.

II. Measuring Work Capacity: A Brief Survey of the Literature and Policy Context

Health capacity to work in this study can be broadly defined as the additional amount of work that is possible given one’s health status. In the literature, there are two popular approaches to measuring the health capacity to work of older persons—one developed by Milligan and Wise (MW) method, and the other by Cutler, Meara, and Richards-Shubik (CMR) method. The MW method assesses how much people with a given mortality rate could work today if they worked as much as people with the same mortality rate in the past (Milligan and Wise 2015). The CMR method examines how much people with a given level of health could work if they worked as much as their younger counterparts with similar health status (Cutler, Meara, and Richards-Shubik 2013).

A. The Milligan and Wise Method

The MW method quantifies the additional health capacity of older persons by comparing age-disaggregated employment and mortality data for the past and the present (Milligan and Wise 2015). Using Japanese data, Oshio, Shimizutani, and Kikkawa (2024) plot the employment and mortality rates of older men in Japan for 1980 and 2020 (Figure 4). The mortality rate of 1.01% for 65-year-old Japanese men in 2020 is comparable to the mortality rate for 58-year-old men in 1980, but the employment rate for 65-year-old men in 2020 was nearly 20 percentage points lower than that for 58-year-old men in 1980, providing an estimate of additional health capacity to work. Tallying these potential gains for all age groups, the area between the two lines gives the incremental gain in health capacity to work.

Japan’s large, potentially untapped health capacity to work among older persons, as estimated by the MW method, is equally evident in many other developed economies. Let us describe the main assumptions of the MW method. First, mortality is considered a good proxy for health status. The country papers attempt to verify the validity of this assumption by comparing mortality rates by age group with other measures of health such as self-assessed health status. Second, the MW method is calculated relative to a given base year (e.g., 1980 in Figure 4) and the results are likely to vary depending on what base year is selected. Third, the MW method implicitly assumes that all increases in life expectancy translate into additional years of work. For this reason, it is best to interpret the results as an indication of how long people can work rather than of how long they should work. Applying the same method to 12 OECD countries shows that the improved health status of older people aged 55–69 leads to an average of 5.5 years of additional work when comparing the 1977 and 2010 cohorts, and up to 8 years of additional employment capacity in France (Coile, Milligan, and Wise 2017).

B. The Cutler, Meara, and Richards-Shubik Method

The CMR method quantifies the health capacity of individuals by examining how much people with a given level of health could work if they worked as much as their contemporaneous younger counterparts (Cutler, Meara, and Richards-Shubik 2013). The estimation involves the following steps:

Step 1. We use a regression-based identification of health status and other determinants of employment among adults who have not yet reached retirement age but are close to it, for example, 50–54-year-olds. The following regression model of an individual i’s employment status, $y_i$, is used :

where $y_i$ is a binary variable that takes a value of 1 if an individual was employed, self-employed, or an unpaid family worker in the past 30 days, and 0 otherwise. $X_i$ is a set of determinants, including health status, risk factors, and other individual characteristics; and ${\epsilon }_i$ is an error term.

Step 2. The estimated coefficients, $\beta$, of the employment status covariates are used to simulate the health capacity to work of older cohorts of workers whose age is above retirement age.

Step 3. Based on the information on the actual work status of the individuals, the total health capacity to work is estimated separately for the older persons who are actually working and for those who are not. The latter are regarded as having untapped or “additional” health capacity to work.

The CMR method is based on two key assumptions. First, the method assumes that there is no difference in how health status and other factors should affect employment status between the reference cohort and the older cohort. The second assumption is that the reference group is not affected by social security policy. The typical retirement age in the target countries of this regional study is 60, and most countries have used the reference age group of 50–59. In other countries where the retirement age is 55, the reference age group is set at 50–54, which is the case for both men and women in Indonesia and only for women in Viet Nam.⁵ The advantage of the CMR method is that it allows simulating health capacity to work by subgroups such as educational attainment or place of residence.

In this regional study, we developed a baseline parsimonious regression model for employment status that can be commonly supported by the available data from all study countries. Such a model includes a set of the following covariates, $X_i$:

(i)	self-reported health status (indicator variables: excellent, good, fair, or poor);
(ii)	activities of daily living (ADLs; 1 if any of the four key activities—walking, dressing, bathing, and eating—cannot be done independently, 0 otherwise);
(iii)	morbidities (1 if diagnosed with diabetes, hypertension, or heart disease; a separate indicator variable for each morbidity);
(iv)	depressive symptoms (1 if the respondent was diagnosed with elevated depressive symptoms using the CES-D-10 or other standard assessment tools);
(v)	smoking (1 if currently smoking, 0 otherwise);
(vi)	educational attainment (indicator variables: primary, middle school, high school, and college);
(vii)	marital status (1 if married); and
(viii)	residence type (1 if urban, 0 if rural).

Studies show that additional work capacity among older people in the OECD is quite large (Coile, Milligan, and Wise 2017). Untapped work capacity is greater in continental European countries such as France, where additional capacity among men aged 60–64 stands at 63% of the total population in the same age group, followed by Belgium (59%) and Italy (58%). The authors point to the presence of a large “implicit tax,” such as reductions or discontinuation of pensions for the working old, as a disincentive to work beyond retirement age in these countries (Börsch-Supan and Coile 2020).

C. Literature on the Silver Dividend among Older Asians

Using the CMR method, recent studies have estimated the additional health capacity among older Asians as well as the so-called silver demographic dividend, which refers to the potential economic gain from utilizing the untapped work capacity of older people.

In Japan, Usui, Shimizutani, and Oshio (2017) found that based on the MW method, the projected additional work capacity among men aged 55–69, using 1975–2010 as the reference period, is 3.7 years. Based on the CMR method, they estimate a large untapped work capacity, 40.2% for men in their late 60s and 56.0% for men in their early 70s, with a larger untapped capacity for the better-educated groups. Similarly, Matsukura et al. (2018), based on the CMR method with pooled data from 2007 to 2011, found that additional health capacity is large among Japanese men, and it increases with age: 31.6% for 65-year-olds and 43.8% for 70-year-olds. Using the same method with more updated data through 2015, Ogawa et al. (2021) estimated that the silver dividend in Japan, arising from the untapped work capacity of 4.12 million men and women aged 60–79, could increase GDP by 3.2%–6.0% annually. The study also estimated the silver dividend in Malaysia, with estimates ranging from 2.5% to 4.2% of GDP.

Similarly, Park and Lee (2021) estimated the untapped health capacity to work in the Republic of Korea and the PRC, and assessed how it could translate into economic gains in each country. They estimated the untapped potential work capacity of individuals aged 60–79 to be equal to 23% of the labor force in the same age group in the Republic of Korea, while the comparable number for the PRC was 21%. By tapping the estimated health capacity to work of older persons, both countries could augment their economic support ratios by 2100, with a gain of 2.0 percentage points in the Republic of Korea and 1.5 percentage points in the PRC. However, these estimated economic gains are smaller than those estimated for Japan (7.1 percentage points) and the United States (2.8 percentage points).

Variations in additional health capacity among countries in the region may be due to differences in the availability and quality of health services, as well as variations in social security measures, including pensions, and other policies. By comparing the results of analyses based on consistent data and methodologies across countries in the region, it will be possible to gain insights into the factors that help explain differences in the relative magnitude of health capacity to work across countries and the policies that could encourage healthy older adults to work longer. However, existing studies are based on empirical models that use different sets of variables and different specifications, making straightforward comparisons difficult. Previous comparative studies of the region are generally limited to comparisons of two or three countries at most, which cannot adequately capture the wide range of country circumstances, especially when considering developing countries (Ichimura et al. 2017, Ogawa et al. 2021, Park and Lee 2021).

There are at least two important institutional and policy contexts relevant to developing Asian countries that influence the expected size of incremental gains in health capacity to work and the silver dividend. The first relates to the health status of the region’s older people. While overall health and life spans are increasing, much of this improvement can be attributed to a significant decline in mortality among children under the age of 5 (Kikkawa and Gaspar 2022). In contrast, the health status of older people in developing Asia has not improved dramatically, with some economies experiencing significant inequalities and even deterioration in the average health of older people. As life expectancy increases, the incidence of noncommunicable diseases and disabilities also grows. Therefore, a detailed and regionally comparative study is needed to accurately measure the potential gains (or losses) from the health capacity to work.

The other important policy context is the pervasive informality in the labor market and the implications for social security and pension coverage in developing economies. The International Labour Organization (ILO) (2018) reported that about 1.3 billion people, or 62.8% of total workers in the Asia and Pacific region, are employed in the informal economy, with many of them working as farmers in rural areas. Consequently, a large proportion of older people in developing Asia do not have adequate pension or social protection, forcing them to work as long as possible even if their health is compromised. For these people, reforms that involve adjusting the pensionable age may have a limited impact on labor supply decisions (Kikkawa and Gaspar 2022), and reforms that expand pension or social protection coverage may actually reduce the labor supply among older people.

III. Descriptive Data and Key Findings from the Seven Country Studies

This section summarizes the findings of seven country papers: Chen and Park (2024) for the PRC; Giang, Kikkawa, and Park (2024) for Viet Nam; Lee et al. (2024) for the Republic of Korea; Mansor, Awang, and Park (2024) for Malaysia; Oshio, Shimizutani, and Kikkawa (2024) for Japan; Suriastini, Wijayanti, and Oktarina (2024) for Indonesia; and Zhao et al. (2024) for Thailand. The country teams worked together to derive standardized empirical models that allow for accurate and standard comparison of country-specific results and better represent the region when aggregated.

A. The Milligan and Wise Method

Figure 5 plots the death rate as a percentage of the population and the employment rate for men aged 40 and older in two periods spanning either 10 years (Viet Nam), 15 years (Thailand and the PRC), or 20 years (Indonesia, Malaysia, Japan, and the Republic of Korea), based largely on data availability. Following the MW method, the vertical distance between the two lines captures the additional health capacity to work.

What is notable from the chart is the significant decline in mortality among older men in Asia during the period. The horizontal shift of the plot is especially apparent among the older age groups (i.e., 60- and 70-year-olds). The exception is Indonesia, where the mortality rate for certain age groups has increased. It is noteworthy that the decline in mortality rates is relatively small in Japan, Viet Nam, and Indonesia.

The chart also shows that the employment trend among older persons varies by country, age group, and gender (Figure 5) when looking at the vertical shifts in the different plots. Overall, employment rates for men remained at a high level with a downward-sloping age profile, especially for older age groups in countries such as the PRC, Thailand, and Malaysia, where retirement age appears to have a greater impact on employment status. Among older women, engagement in the workforce increased in many countries, albeit not in the PRC and Thailand (Figure 6).

Among older women, the negative relationship between employment rates and mortality, and its change over time, appears to be consistent with the pattern observed among men, particularly in Thailand and the PRC. In these countries, a significant decline in mortality is accompanied by a decrease in employment rates. Other countries do not necessarily follow a straightforward pattern. In Japan and Malaysia, declines in mortality are accompanied by surges in employment rates, reversing the relative position of the reference and comparison lines. This may reflect changes in society and cultural norms that allow women greater access to education and the labor market.

By calculating the area sizes between the two lines shown in Figures 5 and 6 in each country, we next present the aggregate additional work capacity for men and women aged 55–64 (Figure 7[a]) and those aged 55–69 (Figure 7[b]). The PRC is excluded from Figure 7(b) due to data constraints. Since the individual estimates from the reporting countries are based on different baseline and endline years, the results have been standardized to measure the additional work capacity generated over the past 15 years. This standardization assumes that additional work capacity increases linearly over time.

Five main findings emerge from the comparisons in Figures 7(a) and 7(b). First, a positive additional work capacity was seen among older men over the past 15–20 years in all countries except Indonesia. When normalized to reflect the duration of the last 15 years (i.e., using mortality risk in 2005 as the baseline), men aged 55–64 in the PRC gained 2.24 years of additional work capacity, while their counterparts in Malaysia gained 1.06 years. In the Republic of Korea and Thailand, the gains were 0.75 and 0.79 years, respectively. In other countries, the gains during the 15-year review period are very limited (Japan and Viet Nam) or even negative (Indonesia), indicating that many individuals remained employed during the review period, and in some cases, were already working more than those with equivalent health status in the past.

Second, as shown in Figure 7, the additional work capacity of women compared with men in the same age range is high in the PRC (2.86 years) and Thailand (1.11 years), but relatively low in the Republic of Korea (0.09 years). Low or negative additional health capacity to work for women could be due in part to increased employment rates among women in the region over the years, which could also be due to reasons unrelated to health conditions. In Japan, for example, the mortality rates for both men and women continue to decline, but additional health capacity is low or negative. This does not necessarily mean that older adults are working beyond their health capacity. Rather, it likely reflects the continued increase in voluntary LFP among older people and more notably among women (Oshio, Usui, and Shimizutani 2020).

Third, when comparing the two reference age groups in Figure 7, additional health capacity to work increases with age in all countries except for older men in Indonesia and older women in Japan. This observation may simply reflect the fact that mortality rates in these countries have declined across almost all age groups.

Fourth, the additional work capacity, whether positive or negative, is larger for each country in Figure 7(b) compared to Figure 7(a). In other words, the absolute value of additional work capacity is greater in each country when the cohort at ages 65–69 is included. This implies that a large portion of the population in this cohort is healthy but not participating in the labor force. Why is this group more reluctant to work than a younger cohort aged 55–64 years? One possible explanation is that the older cohort is more likely to be covered by a pension scheme, which could reduce the incentive to work. However, the large difference between the upper and lower panels in all countries, including those with and without high pension coverage, suggests that this explanation is not very plausible. Another possible explanation is a social and institutional norm or cultural inertia that discourages many older people from continuing to work even though they are actually healthy and able to work.

Finally, although many older people in developing Asia lack access to adequate public pensions, the estimated additional health capacity to work for men aged 55–69 during 1995–2010 is comparable to that of OECD countries (Coile, Milligan, and Wise 2017), particularly in Malaysia, the Republic of Korea, and Thailand. The positive values of additional health capacity may be attributable to improved access to formal pension programs. Estimates for older Japanese show a substantial decline in additional work capacity. For 1995–2010, the estimated additional work capacity was 2.20 years, compared with 0.31 years for 2000–2020, with a 15-year linear trend imputation for the latter period. Older Japanese women exhibited negative additional work capacity. These patterns highlight the importance of changes in LFP rates. In particular, the changing pattern of LFP rates among women in Asia for reasons other than health presents challenges for interpreting the results using the MW approach, which has traditionally focused on the relationship between mortality and employment. Table 1 summarizes the country estimates and presents the estimates for the region as a whole.

B. The Cutler, Meara, and Richards-Shubik Method

Following the CMR method, the seven country papers first estimate a linear probability model for binary LFP decisions. The independent variables include health measures, socioeconomic status, and individual characteristics. Separate regressions are done for males and females aged 50–59 and cover two periods (the 1990s and around 2020). Using the estimated coefficients, the papers simulate the health capacity to work of the older age group (aged 60–69). Again, the relationship between a person’s health status and capacity to work is assumed to be the same across age groups. Finally, the additional capacity to work, or “slack,” is calculated as the difference between the actual and predicted employment rates. Note that the reference year of the microlevel dataset used varies by country, with Indonesia using data from 2014.

We consider two model specifications. The first model, model (0), focuses on major health factors, such as self-reported health, ADLs, and a number of chronic illnesses, along with other variables (e.g., smoking, educational attainment, marital status, and region). The second model, model (1), further incorporates indicators for whether respondents have been diagnosed with any of the three chronic diseases (diabetes, hypertension, and heart disease) and an indicator variable for elevated depressive symptoms. The following discussion is based on model (1), for which most country teams were able to identify the same set of covariates for a standardized empirical model.

When comparing the regression coefficients between countries, we used a linear probability model that allows for a straightforward comparison of values (Angrist and Pischke 2008), and the coefficients can be easily interpreted as expressions of marginal effects. However, when comparing simulation results, we rely on coefficients derived from logit estimation to ensure that the estimated work capacity does not exceed 100%. The estimated coefficients from the logit estimation are qualitatively comparable to those based on the linear probability model.

Tables 2(a) and 2(b) present the estimates obtained from the linear probability model with model (1) specification for older men and women, respectively. The results suggest that self-rated health is an important determinant of employment status in all countries and genders, except for Malaysian, Chinese, and Vietnamese women. ADL impairment consistently has a negative coefficient with variations in statistical significance, except for Indonesian men and women, and Malaysian, Thai, and Vietnamese women. Illness is also negatively associated with employment status in most cases but not for men in Indonesia, Viet Nam, and the Republic of Korea, and women in Malaysia and Viet Nam. Interestingly, smoking generally shows a positive association with employment status. This may reflect a correlation between cessation of smoking and sickness, which makes one stop working, or a propensity to smoke with work colleagues or clients.

Other individual characteristics also display a strong link with the labor participation of older people. Marriage is positively correlated with employment for men but negatively for women, except in the case of the PRC, where a different pattern emerges. Depressive symptoms appear to be an equally important factor in determining employment status. Finally, a college education increases the likelihood of employment, while the effects of educational attainment below the college level are mixed.

Based on the regression coefficients, the share of individuals that would be working if they worked as much as people in the younger reference group with the same level of health is simulated. By cross-checking the results with the actual work status of the sample respondents, the estimated work capacity is divided into the portion that is already working (actual) and not working (additional). Figure 8 shows estimates of actual and estimated additional work capacity for the two age groups—those aged 60–64 and those aged 65–69—separately by gender.

A large majority of men in their 60s are estimated to have the health capacity to work across the studied countries, with around 80% or above of men aged 60–64 are considered to have the health capacity to work (Figure 8). A large majority of the younger old men are working, but there are still considerable additional untapped work capacity ranging from 7.8% of the total age-cohort workforce in Viet Nam to 21.1% in Malaysia. For men in the late 60s, there is a marginal decline in the total size of work capacity, but their untapped and additional health capacity are greater, exceeding 30.0% of the total age cohort group in Thailand (32.3%), Japan (32.1%), and the Republic of Korea (31.3%).

The total work capacity is smaller for women, but their additional work capacity is comparable to that of men (Figure 8). Similar to the case in the MW estimation, interpreting the results for women using the CMR method is challenging because the retirement age for women is lower than for men in some countries (e.g., the PRC, Indonesia, and Viet Nam), which ideally requires younger reference groups, but even younger groups in some countries may also be “infected” by the lower retirement age because retirement often occurs before the official retirement age. Also, using very young reference groups makes them less comparable to the oldest group, creating a tradeoff. In the PRC study, the results for women are very sensitive to the reference group choice. If we use a younger group (50–54 years old), the additional work capacity of both men and women becomes larger. Second, total work capacity tends to decline uniformly with age across all age groups.

The gaps between the stacked bars and the 100% line are considered to be the proportion of older people who are physically unfit for work. With that in mind, policy reforms, such as raising the pensionable age, need to be implemented along with measures that could provide a safety net for individuals who may have difficulty accessing wage-earning opportunities and pension schemes. We also find varying patterns relating to place of residence, educational attainment, and informal work. Third, disaggregated analyses of the work capacity reported in the country papers show that greater additional work capacity is more likely to be found in urban than rural areas, among more educated than less educated individuals, and among formal workers than informal workers (Table 3). This is consistent with the general observation that jobs in urban areas are more likely to attract a greater number of formal and educated workers who have access to pensions and retirement benefits, generating greater additional health capacity to work. On the other hand, many jobs in rural areas are in agriculture and other informal sectors, where there is limited pension coverage and retirement options. Geographic location is a more influential determinant of health capacity to work in the PRC; the opposite is true in Japan, while trends are less clear in Indonesia. The differences can be partly explained by the extent of gender segmentation of the labor market and by LFP rates, which is compounded by the fact that there is a large gender gap in educational attainment among older populations.

C. Work Capacity and Policy Context

Given the wide variations in the health status of older people, the policy environment including pension modalities (i.e., social, national, or private) and coverage, pensionable age, labor regulations, labor market structure (supply and demand), and gender norms, it is only natural that there are both similarities and differences in work capacity across countries. Hence, a unified framework applied to different countries would be useful to identify potential mechanisms.

Figure 9 plots the estimated additional health capacity among men aged 65–69 in the seven Asian countries relative to their respective contributory pension coverage. We can see that some countries with extensive to moderate coverage of contributory or social pensions—such as Japan and the Republic of Korea—tend to have greater additional work capacity. In contrast, countries with relatively low contributory pension coverage—such as Indonesia, Malaysia, and the PRC—have relatively low additional work capacity. This association does not hold for Thailand, which has large untapped work capacity with low pension coverage. The moderate association between additional work capacity and pension coverage implies that noncontributory social pension coverage poses varying associations with additional health capacity.⁶ This finding is not surprising given that pension availability provides a uniform incentive for people to retire regardless of their health conditions, and specific design features of pension schemes may have different effects on work incentives. Given the limited pension coverage in many Asian countries, the extent of additional work capacity remains relatively modest compared to OECD countries (Coile, Milligan, and Wise 2017).

D. Measuring the Silver Dividend in Asia

Based on the estimated additional work capacity among older persons from seven countries in East Asia and Southeast Asia, we perform a straightforward calculation to estimate the size of the silver dividend, defined as the productivity of the untapped work capacity of older people aged 60–69. The daily minimum wage in each country at the time of the survey is used to calculate the GDP contribution of untapped work capacity;⁷ therefore, the estimate takes into account the downward pressure on wages that may result from an increased labor supply (Matsukura et al. 2018).⁸ Nonetheless, the use of a lower-bound estimate for wages means that our estimates of the GDP contribution are conservative. However, we also assume that older people work full-time, which will lead to some upward bias. We also do not consider possible savings to be made in the fiscal space when a greater number of older persons remain in the labor force. Table 4 shows the results. The silver dividend is estimated to be relatively high in countries that have a large population share of older people, such as Japan and the Republic of Korea. We estimate that these countries have the potential to increase their GDP by 1.4% and 1.5%, respectively. The silver dividend in emerging countries with aging populations is also sizable and could lead to GDP increases of 1.1% in Viet Nam and 0.9% in Thailand. More moderate contributions are observed for the PRC at 0.4%, Indonesia at 0.3%, and Malaysia at 0.2%.

IV. Policy Implications

Based on the results of the seven country studies, this comparative paper shows that there is significant health capacity to work among older persons in Asia, indicating an untapped potential for achieving the so-called silver dividend. We find greater additional work capacity in urban areas, where there are more formal jobs with better access to pensions. Given that countries in the region continue to undergo rapid urbanization while experiencing a mix of formal and informal jobs in the labor market, our findings offer several policy-relevant insights for developing and aging Asian countries, particularly in reviewing and updating their respective labor, pension, and health policies in preparation for an aging society.

The first set of priority policy actions underscores the crucial role of well-designed pensions in sustaining the economic participation of older people. The untapped potential work capacity among pensioners is evidently high. One important policy implication of this finding is that pension policies should be designed to ensure that they do not create disincentives to work beyond retirement age. Careful examination of the potential impact of pension reforms on LFP choice is needed so that workers are not disadvantaged but rather benefit from economic gain by working longer. Experience from OECD countries shows that reforming the pension system to incorporate incentives for longer working lives can be a long, difficult political process, and it may take even longer for older people to adjust their expectations about retirement. Countries in the region are encouraged to act now in reviewing and adjusting their pension systems.

Given the sizable untapped work capacity among formal workers, raising the pensionable age may be a viable option if governments can carefully account for the actual health capacity to work among older individuals that may vary from country to country. Raising the retirement age must be accompanied by measures to provide a safety net to support the newly created gap in the years when individuals do not have access to wages or pensions. Indeed, the majority of older workers today are either self-employed or in the informal sector and therefore remain excluded from pension coverage. There is a need for pensions that provide basic support for informal workers in a way that reduces the gap in pension coverage between workers in the formal and informal sectors. In addition, inequalities in coverage and pension generosity between rural and urban residents persist and need more attention from policymakers.

Second, there must also be a policy environment that enables older people to participate in employment activities. The types of work preferred by older people include those that are flexible in time and come with a sense of contribution and purpose. Further efforts to promote the employment of seniors can focus on promoting a life-cycle approach to developing and upgrading skills and supporting job searches by improving the matching system in flexible labor markets. Another important point to consider is the need to address the demand side of the labor market, where employment opportunities for older people are often quite limited. Information and incentives (e.g., subsidies) can encourage firms to employ older people and invest in their productivity through a lifelong learning approach, preventive health programs, and improved workplace ergonomics. Prohibiting age-based discrimination during recruitment and in the workplace merits attention. In addition, the successful engagement of older people, especially women, in the workforce depends heavily on the availability of formal childcare and long-term care services (Donehower 2023).

Third, this study also highlights the importance of promoting healthy aging. Health conditions, whether physical or mental, are closely linked to an individual’s employment status. Despite the decline in the burden of disease, the improvement in mortality rates among older people has been somewhat marginal due to the increasing burden of noncommunicable diseases, particularly among men and in low-income parts of the region. In fact, the proportion of noncommunicable diseases has increased in South Asia and in the Pacific subregions (by more than 5 percentage points) in the last 2 decades (WHO 2020a). Of the top five major contributors to the overall burden of disease in the region, three showed a decline during the review period: chronic obstructive pulmonary disease (−43.4%), stroke (−28.8%), and ischemic heart disease (−2.0%). However, the other two—diabetes and cancer—have increased by 14.1% and 6.5%, respectively. In such a context, it is vital to continuously support older workers’ health capacity to work by providing preventive and curative health services. Therefore, it is necessary to promote universal health care to ensure accessible and comprehensive health services for all. Promoting a healthy and active lifestyle is a cost-effective approach to preventing noncommunicable diseases and should be strongly encouraged.

Last but not least, this study confirms that increased longevity leads to an overall expansion of work capacity, providing insights and implications for preparing future cohorts of older people. Future generations of older people are expected to live longer and enjoy better health, giving them an even greater capacity to work in later life. These expected improvements in the socioeconomic landscape surrounding older people necessitate a review of existing pension policies that were designed based on the characteristics of earlier generations. Such a review should aim to align retirement plans with evolving pension programs and to change expectations about the role of work in healthy aging. At the same time, the future population of older people will have less support from their children due to smaller family sizes and the effects of rapid urbanization and migration. Reforms of pension systems must consider this aspect and expand coverage in ways that do not disincentivize longer working lives. Relatively younger people are typically more educated and technologically proficient, so there are many opportunities for technology to support their working lives as they age. Technology can also help older people in the workplace, facilitate job matching, and support lifelong learning (Asian Development Bank 2019).

ORCID

Aiko Kikkawa  https://orcid.org/0000-0002-7490-661X

Takashi Oshio  https://orcid.org/0000-0001-8142-5585

Yasuyuki Sawada  https://orcid.org/0000-0002-4167-7697

Satoshi Shimizutani  https://orcid.org/0000-0003-1095-0950

Albert Park  https://orcid.org/0009-0007-3323-120X

Tetsushi Sonobe  https://orcid.org/0000-0002-9961-9764

Notes

¹ United Nations (UN). 2023. Data Portal Population Division. UN Population Division Data Portal. https://population.un.org/DataPortal/ (accessed 3 April 2023).

² Cognitive health is another factor that can affect the ability to work, which is closely associated with the decision to retire (Ogawa et al. 2022).

³ In Indonesia, for example, the retirement age is expected to rise from 58 at present to 65 by 2043. Meanwhile, the Government of Thailand’s plan to raise the mandatory retirement age for government officials from 60 to 63 remains under consideration. The 2009 pension reform enacted in the Republic of Korea is gradually raising its pensionable age from 60 in 2009 to 65 by 2033.

⁴ We also note the benefits of retirement on cognitive function and self-assessed health status documented by Sato and Noguchi (2023).

⁵ The retirement ages for each of the countries in the study at which workers are entitled to an employment-based contributory pension are as follows: Indonesia (70), Japan (65), Malaysia (60), the PRC (male 60, female 55 [government]/50 [others]), the Republic of Korea (62), Thailand (60), and Viet Nam (male 60, female 55).

⁶ Social pension coverage is high in countries such as Thailand (82%) and the PRC (60%).

⁷ Minimum wage information is sourced from International Labour Organization (ILO). Wages and Working Time Statistics Database ILOSTAT. https://ilostat.ilo.org/topics/wages/ (accessed 27 April 2023).

⁸ Another point of consideration is whether the increased labor supply of the older group can displace workers in the other age group. The evidence is mixed in advanced economies but more evaluation is pointing to no direct impact (Kondo 2016). The evidence for developing Asian countries remains scant.