Overcoming demographic deficits through regional worker migration

The region’s governments have focused on investing in transport, energy, and telecommunications infrastructure, alongside industries that would employ more people and make them more productive.

But as demographic dividends turn to deficits, a new play book is needed, one that invests squarely in people over places, and in particular, one that prioritises greater labour mobility across the region.

Asian countries have passed their ‘peak dividend’, according to United Nations data. The proportion of the population aged between 20 and 64 has started to fall. In China, the working age share of the population reached 66 per cent in 2012, but has already fallen to 63 per cent this year, on its way to 50 per cent by 2060.

Thailand peaked near 65 per cent in 2018, and Vietnam at 62 per cent in 2016. Perhaps even more seriously for growth outcomes, the absolute number of people of working age is set to fall in several countries.

China had 917 million people aged from 20-64 in 2016. That has fallen to 901 million in 2024 and is forecast to be 704 million by 2050.

Thailand’s working-age population is forecast to shrink by 22 per cent between 2020 and 2050. Singapore will hit peak working age population in 2028; South Korea reached the peak in 2019, and Japan in 1998.

Given these dynamics, short- and medium-term policies aimed at boosting growth are colliding with fiscal realities. The region’s infrastructure agenda has merit, both in increasing overall productivity and in addressing climate change and resilience. But it is largely funded on the public balance sheet at a time when governments are facing higher costs of borrowing, greater demands for social spending associated with growing elderly populations, and limited growth in tax revenues.

Many developing countries in Asia-Pacific won’t get rich before they get old, pointing to challenging conditions for development progress. As officials in Japan, South Korea, and China can attest, higher levels of wealth are not an antidote to the challenges of ageing societies, and a policy agenda focused exclusively on boosting growth now to secure the future is likely to fail.

Instead, an ageing region will need to grapple with a more complex set of challenges and focus on an adaptive set of policy responses that go well beyond efforts to strengthen care of the elderly.

A more ambitious response begins with making the most of the potential workers that countries still have. For example, increasing labour force participation, especially among women, not least through support for childcare. And helping to build human capital by ensuring that all talented students have access to higher education, whatever their socioeconomic background. But it goes beyond that to include far greater regional cooperation.

A regional approach would recognise the value of linkages between countries that are facing demographic deficits and those that will continue to see growth in their working age populations.

In contrast with countries like China or Japan, India’s working age population share will continue to climb to 2040, and the absolute number of working age people in that country will rise almost to the half-century point.

A firm embrace of flexible migration policies within the region would better exploit the value of these differences. Not only would greater migration help provide good jobs to those who need them from demographic dividend countries as well as fill jobs that need doing in deficit countries, it would considerably strengthen trade and investment ties, foster innovation and entrepreneurship, and build remittance flows.

Out-migration from many countries in Asia-Pacific is already happening, but much of it is responding to demand from outside the region, particularly the Gulf states. Countries like the United Arab Emirates have adopted proactive strategies that leading Asian countries would do well to consider, such that there are more job opportunities for Asia’s migrant workers within the region and stronger bonds between Asian economies.

Fortunately, some changes in policy and attitudes in the region’s largest economies are already pointing towards a larger role for migration to fix what is more a workforce imbalance in the region rather than any overall shortage.

For example, South Korea’s immigrant population climbed by 829,000 between 2013 and 2023. The country’s growing interest in a migration-based strategy is understandable. Unchecked demographic drag may reduce per capita income growth in South Korea over the next half century by 0.85 percentage points per year.

On the other hand, a gentle rise in South Korea’s migrant worker population from less than 3 per cent of employed workers to roughly 15 per cent over the next 40 years, a level of increase already matched by Australia and Malaysia, would offset most of the country’s demographic drag.

Anchoring greater demand for migrant workers within Asia-Pacific as a regional strategy makes sense. But much more progress could be made by working through regional bodies such as ASEAN, with an aim for regional agreements akin to trade agreements to facilitate greater mobility for workers.

The agenda could include regional cooperation on licensing and training requirements to ease skills portability, and skills partnerships where destination countries help origin countries train workers to fill employment gaps in both economies.

More than any other region, Asia-Pacific has delivered on the positive vision of demography as destiny over the past five decades by matching growing populations with productivity-enhancing investments in economic infrastructure.

Now destined for increasingly aged populations in many countries, the region’s governments will need to behave differently. They need to put investments into human capital on equal footing with physical capital, and facilitate the cross-border movement of people, just as they have long facilitated the flow of goods and services through trade integration.

If fully realised, this version of regional integration promises to deliver more development, strong economies, and greater regional stability.

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