Việt Nam’s rapidly aged society navigates economic shifts and silver economy opportunities

Hamza Malik, Director of the Macroeconomic Policy and Financing for Development Division at ESCAP

Several Asia-Pacific countries are ageing fast. Việt Nam is expected to take only 19-25 years to progress from being an ageing society (with 7-14 per cent of the population aged 60 or older) to an aged society (14-21 per cent aged 60 or older).

Việt Nam News reporter Mai Hương spoke to Hamza Malik, Director of the Macroeconomic Policy and Financing for Development Division at the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), about the implications of Việt Nam’s rapidly aging population. He explores the potential impacts on labour productivity, consumer demand, the economy, and the fiscal adjustments and opportunities in developing the silver economy.

How does population aging in Việt Nam compare globally and what is driving this trend?

Việt Nam is one of the fastest-aging countries in the Asia-Pacific region and the world, driven by rapid fertility decline and increased life expectancy. The proportion of the population aged 65 or over is estimated to be 9.1 per cent in 2024, projected to rise to 11.8 per cent in 2030 and 20.0 per cent by 2050. By 2036, Việt Nam will become an ‘aged’ society, where more than 14 per cent of the population is aged 65 or over.

It will take only 17 years for Việt Nam to transition from an ‘aging’ society to an ‘aged’ one. Population aging results from economic and social development, with life expectancy at birth increasing by nearly 13 years over the past 50 years, now standing at 74.7 years (79.4 years for women and 70.1 years for men). Fertility decline has also contributed, with the total fertility rate dropping from 5.6 children per woman in 1975 to 2 children per woman in 1999 and is now at 1.9 children per woman.

How will the aging population affect labour productivity and the economy of Việt Nam?

Productivity is influenced by factors such as physical ability to work, human skills and knowledge and available technology. Demographic shifts, particularly an aging population, primarily affect the physical ability to work, which naturally declines with age. However, this decline can often be offset by upskilling and reskilling workers and investing in new technologies.

Additionally, improvements in the work environment, labour regulations and management styles can further enhance productivity. Therefore, ageing does not seal the fate of labour productivity, neither in Việt Nam nor in any other country – it is rather a headwind that can be considerably overcome by government policies and private sector action.

As people age, their consumer preferences evolve. The demand for goods, particularly durable items such as housing, cars, and household appliances, tends to decrease, while the demand for services, especially healthcare, increases. Over time, there is a shift in focus from goods that are essential in younger years to services that provide comfort and pleasure in older years. This shift also extends to education, with a growing emphasis on mid-life upskilling and reskilling. Although these changes are gradual, they are powerful and largely irreversible.

How should Việt Nam’s fiscal policy be adjusted to respond to the aging population?

Policymakers typically divide society into two groups, those who work and those who do not. To facilitate transfers between these groups, pension systems are designed in two main ways. First, governments collect social contributions and distribute them to retirees, promising future pensions to current workers. Second, individuals can save and invest through pension funds, funding their pensions directly from their own assets.

Regardless of the system chosen, it is crucial to ensure that people remain active in the workforce as long as they desire, even if their productivity decreases or they work part-time. Extending work activity is the most important pension policy, achieved through synergy with public expenditures on healthcare and education. Good health and updated skills lead to healthier aging, longer work activity, reduced old-age poverty and improved quality of life for the elderly.

While it may seem that reallocating budgets could address socio-economic challenges, budget expenditures are often inflexible, making significant shifts difficult. Key areas such as education, healthcare, social protection and public infrastructure investment are all critically important. However, there is potential to rethink spending within each sector. For instance, building new schools or hospitals in rural areas could have more significant developmental impacts than improving existing urban facilities. Similarly, investing in training and upskilling education and healthcare staff could yield substantial benefits. In public expenditures, efficiency and impact are what matter most.

What measures can the Vietnamese government adopt to maintain and improve the quality of life for the elderly?

To support older adults in the workforce, Việt Nam could increase the retirement age and make it equal for women and men. Continuous learning and skill upgrades should be encouraged, especially for older workers. Addressing age-based discrimination through legislation and awareness campaigns is also essential. More flexible work arrangements, such as part-time work or shorter hours, should be promoted.

Currently, 97 per cent of older workers in Việt Nam participate in the informal sector, indicating significant barriers to formal sector employment. Việt Nam has led in supporting Older Persons Associations (OPAs), which help older adults contribute to society and use their knowledge and experience.

In addition, technology must adapt to an aging population by developing products that meet the needs of older adults, making technology a positive force that enhances their quality of life. Technology can support access to healthcare, assist older adults living alone and help them in the workplace. Digital literacy is crucial for older adults to benefit from technology, and efforts such as ESCAP’s regional meeting on enhancing digital literacy among older adults in Asia and the Pacific have focused on developing tools to increase this literacy.

What are the opportunities for developing the silver economy in Việt Nam?

Contrary to common assumptions, studies have shown that older workforces are not necessarily less productive than younger ones. As the working-age population declines, labour becomes less abundant, pushing economies to become more productive. Globally, the most aged economies also tend to be those with higher productivity. Economies must adjust their production structures from labour-intensive sectors to more capital-intensive ones. The care economy is a growing sector, with a significant unmet demand for professional care work in many countries.

Care services are expected to be the most significant area for growth. However, all sectors can adapt and develop products that appeal to older adults, making them more age-friendly. — VNS