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MALAYSIAN DEMOGRAPHIC PATTERNS

2

DATA AND ESTIMATION

3

4

FINDINGS AND IMPLICATIONS

CONCLUSIONS AND WAY FORWARD

MALAYSIAN DEMOGRAPHIC PATTERNS

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Fertility, Mortality & Total Fertility Rate, Malaysia, 1950 - 2050 50

8.00

6.83

6.94 6.72

7.00

Crude death rate Total fertility rate

6.00 35 30 25 20

5.94

Pro-natalist policy (1980s)

5.15

4.16

5.00

4.00

4.24 4.00 3.47

3.00

3.10

15

2.85 2.58 2.35

10

2.16

2.00 2.00

1.87

1.85

1.85

1.85

1.85

1.00

5 0

0.00

1950- 1955- 1960- 1965- 1970- 1975- 1980- 1985- 1990- 1995- 2000- 2005- 2010- 2015- 2020- 2025- 2030- 2035- 2040- 20451955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Source: UN, 2009, World Population Prospects (The 2008 Revision)

Period

Total Fertility Rate

Crude Birth & Crude Death Rate (per 1,000)

40

Crude birth rate

Anti-natalist policy (1960s)

45

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MALAYSIAN DEMOGRAPHIC PATTERNS

TFR, Median Age and Life Expectancy for Malaysia, 1970–2050 Year

TFR (children per women)

Median age (yr)

1970

5.94

17.5

1980

4.16

19.7

63.5

67.1

3.5

7.1

1990

4.00

21.5

67.5

71.6

7.5

11.6

2000

3.1

23.6

69.6

74.5

9.6

14.5

2010

2.58

26.3

72

76.7

12

16.7

2015

2.35

28.0

72.9

77.6

12.9

17.6

2050

1.85

36.3

77.8

82.4

17.8

22.4

Source: DOSM, various years; United Nation (2006; 2012)

Life expectancy at birth (yr) Male Female 57.8 61

Life expectancy at 60 (yr) Male Female 1

MALAYSIAN DEMOGRAPHIC PATTERNS

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Population Ageing Trends in Malaysia, 1970 - 2020 9.9

4000

10.0

Female

Number of Older Persons 60 Years or Over ('000)

% 8.0

7.4 3000

7.0 6.2 2500

5.7

51.8% 6.0

5.5

5.2 2000

5.0

4.0

51.6%

1500

3.0 52.3%

1000

48.2%

52.7% 500

50.6%

48.4%

47.8% 52.2%

49.4%

1970

1980

2.0

1.0

47.7%

47.3%

0

0.0

Source: DOSM, Pala, 2005

1991

2000 Year

2010

2020

Proportion of Older Persons to Total Population (%)

9.0

Male

3500

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MALAYSIAN DEMOGRAPHIC PATTERNS Age Composition of Malaysian Population, 1970 - 2050

Year

Number of Persons (million)

1970

0-14 4.8

15-59 5.4

60+ 0.59

Total 10.9

Percentage of total population 0-14 15-59 60+ 44.5 50.0 5.4

1980

5.5

7.6

0.76

13.9

39.9

54.6

5.5

1990

6.8

10.3

1.0

18.1

37.4

56.9

5.6

2000

8.0

14.0

1.45

23.5

34.1

59.8

6.2

2010

9.2

17.6

2.1

28.6

31.7

60.9

7.4

2015

8.2

19.0

2.8

30.0

27.3

63.4

9.3

2050

7.2

23.6

6.4

37.3

19.4

63.3

17.3

Source: DOSM, various years; United Nation (2006; 2012)

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MALAYSIAN DEMOGRAPHIC PATTERNS

Developed countries

The speed of Ageing 115

France (1865 - 1980)

85

Sweden (1890 - 1975)

73

Australia (1938 - 2011)

69

United States (1944 2013)

53

Hungary (1941 - 1994) United Kingdom (1930 1975) Japan (1970 - 1996)

Developing countries

45 26

33

Azerbaijian (2004 - 2037)

26

China (2000 - 2026)

24

Sri Lanka (2002 - 2026) Malaysia (2020 - 2043) Thailand (2002 - 2024)

source: Kinsella and He, 2009

Columbia (2017 - 2036) Singapore (2000 - 2019) South Korea (2000 - 2018)

23 22 19 19 18

MALAYSIAN DEMOGRAPHIC PATTERNS

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Dependency and support ratio, 1950 - 2050 97.5

100.0

94.9 92.3

90.0 85.0

Total Dependency Ratio

88.0 84.6

80.0

Child Dependency Ratio 75.4

Old-age Dependency Ratio 73.6 Potential Support Ratio

69.7 70.0

66.2

Parent Support Ratio 59.6

Ratios

60.0

55.6 51.6

50.0

40.0

1965: 10: 10 2000: 7: 10 2030: 5: 10

52.9 49.6

48.2

47.7

47.6

47.7

48.6

50.3

30.0

20.0

10.0

0.0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Source: UN, 2009, World Population Prospects (The 2008 Revision)

Year

MALAYSIAN DEMOGRAPHIC PATTERNS

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Age-Sex Pyramid for Malaysia, 1970, 2000, 2030 Age Group Males

85+

Females

80-84 75-79

1970

70-74 65-69

2000

60-64

2030

55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 15-19 10-14 5- 9 0- 4 10

8

6

4

2

0

Percent

Source: UN, 2009, World Population Prospects (The 2008 Revision)

2

4

6

8

10

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MALAYSIAN DEMOGRAPHIC PATTERNS Size of labour force by age group, Malaysia, 1985–2012

Year

Total

15–19

20-59

60–64

No

%

No

%

No

%

1985

5,990.1

662.8

11.1

5,184.5

86.6

142.9

2.4

1990

7,000.2

748.4

10.7

6,084.6

86.9

167.1

2.4

1995

7,893.1

642.4

8.1

7,075.3

89.6

175.4

2.2

2000

9,556.1

637.6

6.7

8,704.2

91.1

214.5

2.2

2009

11,315.3

452.4

4.0

10,600.7

93.7

262.2

2.3

2010

12,303.9

528.4

4.3

11,491.6

93.4

284

2.3

2011

12,675.8

521.8

4.1

11,842

93.4

311.9

2.5

2012

13,119.6

519

4.0

12,248.8

93.4

351.8

2.7

Source: DOSM, various years; United Nation (2006; 2012)

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DATA AND ESTIMATION The Data:

Household Expenditure Survey (HES) 2009

Household Income Survey (HIS) 2009

• A nationwide survey covering 21,641 private households in urban and rural areas • Information on income, expenditure and the debt burden • The expenditure data are reported at the household

• Covered 184,447 individuals living in 43,026 households • Information on income and basic amenities • Income from employment and self-employment are reported at the

level

individual level

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DATA AND ESTIMATION

• Used the National Income Account data for 2009 to calculate public consumption and macro control • Used household surveys (HES and HIS) and administrative records from the Ministry of Education and Health to estimate per capita age profiles • Per capita age profiles are estimates of per capita values by single year of age (0‐94+) • All consumption (private and public) and labor production can be assigned to individuals

FINDINGS AND IMPLICATIONS

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Per capita consumption profiles for Malaysia, 2009 18000

Public other

Public Education H2: 33

16000

Public Health H3: 57

H2: 95

H1: 15, 20

Per Capita, Ringgit (RM)

14000

12000

10000

8000

6000

4000

2000

Private Education

Private Health

0

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95

Private other

Private Health

Private Education

Public Health

Public Education

Public other

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FINDINGS AND IMPLICATIONS

The Consumption profile • Public consumption is significantly higher at young (education) and old (health) age • The contribution of private health and education is small, so the age profile of private consumption is driven by its “other” component, i.e., especially during adulthood • The total consumption profile for Malaysia shows a special feature, i.e., it has four humps at different ages: (1) adolescents, (2) young adults, (3) near elderly and (4) elderly

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FINDINGS AND IMPLICATIONS

• First hump: Primary school age up to adolescence (peak at 15 and 20) • Mostly due to educational cost • Malaysia has allocated a significant amount of budget to education with Malaysian children receiving free education from primary up to high school; therefore, public consumption is especially high during the school ages of 6 through 19 or 20 • Second hump: Age 21 to 44 (peak at 33 years old) • High private consumption in this age group may be attributed to lifestyle-related expenditure such as recreation • Third hump: From mid-50s to early 80s (peak at 57) • High private consumption may be due to cultural expenditures such financing children’s weddings; public and private consumption on health start to increase at this stage • Fourth hump: Starting in the 80s (peak at 95) • May be due to health costs

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FINDINGS AND IMPLICATIONS Per capita labour income for Malaysia, 2009

26000 24000 22000

Per Capita, Ringgit (RM)

20000 18000 16000 14000 12000 10000 8000 6000 4000

2000 0

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 Earning

Self employment

Labor Income

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FINDINGS AND IMPLICATIONS

The Income profile • Has four phases, with: 1. A sharp increase between age 19–33 2. Slow growth with a peak at age 44 3. A sharp decline until around age 61 4. A gradual decline until around age 90 • A small proportion of total lifecycle income earned by persons under age 20 (1.4%) and at age 60 and above (4.38%) • Very small portion of elderly who are employed continue working after age 70 • The self-employed continued to work even after age 70 • Many shift from wage-based to self-employment upon retirement: Self-employment peaks at around age 57

3

26000

FINDINGS AND IMPLICATIONS The most important graph for Malaysia, 2009

24000

Per Capita, Ringgit (RM)

22000 20000 18000 16000 14000 12000

10000 8000 6000 4000 2000 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94

Labor Income

Consumption

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FINDINGS AND IMPLICATIONS The Life Cycle Deficit for Malaysia, 2009

18000 16000 14000 12000 10000 8000 6000 4000 2000 0 -2000 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 -4000 -6000 -8000 -10000 -12000

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FINDINGS AND IMPLICATIONS

The lifecycle : Deficit • Child dependency up to age 26 • Older person dependency starts at age 57 • Those age 57 and older can change how they support their consumption using means other than their labor income • The total deficit for 2009 is RM410,249.83, to be financed either by asset reallocation and/ or familial or public transfers

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FINDINGS AND IMPLICATIONS

The lifecycle : Deficit • The most critical issues for financing the lifecycle deficit:

• How intertemporal reallocation can benefit the economy with good investments • How public transfers can provide an efficient reallocation system from taxes to government services that can suport the development of human capital, reducing poverty and inequality • Private transfers from families are critical, especially if there is no other means for the elderly to finance their consumption

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FINDINGS AND IMPLICATIONS

The lifecycle : Surplus • A productive/surplus period of 31 years (from age 26 to 57) • The average duration of education is long, and a high number of persons age 55 and above are outside the labour force • The retirement age was recently extended to age 60, so the lifetime income for wealth accumulation can be improved • But EPF fears that many Malaysians in retirement will be in poverty due to insufficient saving (The Malay Mail, 5 October 2014), mainly due to • Premature withdrawal for housing, health and education • The relatively low income of employees, which affects how much they can save for old age

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FINDINGS AND IMPLICATIONS

The lifecycle : Surplus

• The Government is well aware if this issue and has developed several programmes to improve saving for old age • The Private Retirement Scheme is a new initiative to promote voluntary saving for old age • The Government has also created 1Malaysia Retirement Scheme for self-employed workers to save with the EPF and the government contributing RM 60 to investors

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CONCLUSIONS AND WAY FORWARD

• The Malaysian Government is heavily investing in its people through public expenditure on health and education; there are universal health programmes and free education for all Malaysians up to high school • Malaysian consumers are spending heavily on other consumption, especially on housing, most likely driven by the rising cost of living and housing prices • The amount of surplus may indicate that Malaysians are not saving very much; this raises the following concerns: • Whether Malaysians are making bad financial decisions and not preparing for retirement, suggesting the need to intensify financial education programmes for all ages • Whether efforts to capture the second demographic dividend are sufficient • Whether current levels of public expenditure on health and education are sustainable • Whether the current social protection system is adequate and effective