Understanding the reasons for population aging is important for identifying solutions. For example, a solution frequently offered for a shrinking working- age population is to extend the retirement age. The logic behind this idea is powerful: if people are living longer they should work longer. This solution is a potentially important response to population aging, but it does not address the low fertility problem. In many countries the elderly
are heavily dependent on workers (taxpayers) who fund public pension and healthcare programs. Low fertility will lead to fewer children and then to fewer taxpayers on whom the elderly can rely.
Although this broad outline of a changing age structure appears to be common to all Asian economies, there is enormous diversity and uncertainty about the path any one of them should take to address it. East Asian and a few Southeast Asian economies are relatively far along in their demographic transitions. Life expectancy has already reached high levels and continues to rise steadily. Fertility has dropped to very low levels in East Asia and is in fact much lower than in the US and in many European countries. Recently, fertility has increased in the lowest fertility countries of Europe, but this has not happened in low-fertility Asia (Goldstein et al., 2009).
Elsewhere in Asia, the demographic transition is an evolving event. Birth and death rates continue to decline steadily in some cases and more erratically in others (Appendix Tables A1.1–A1.3). There is considerable uncertainty, however, about the speed and the extent of fertility decline. If other Asian economies follow the path of East Asia and fertility rates drop to very low levels, their populations will age more rapidly than the
projections in Figure 1.1 indicate.