Percikan pikiran seorang ekonom.

The Coming of (Old) Age in Indonesia

Evi Nurvidya Arifin

Jakarta Globe, 14 June 2010

Early population census reports have showed 10 centenarians are living in surprisingly good health in Tasikmalaya, West Java. Three more centenarians were recorded in other districts in the province, and there are likely many more across the country. Indeed, Indonesians are living longer. Life expectancy was only about 45 years a half century ago, but it has now surpassed 70.

The change presents us with the challenges of a newly large elderly population. Our over-60s population has rapidly jumped to the current 20 million, or four times the entire population of Singapore, from only about 5.3 million in 1971.

Their share rose from 4.5 percent of our entire population in 1971 to 8.2 percent today. At the same time, the share of youth (those 15 and younger) declined to 27 percent from 44 percent over the same period.

A population explosion poses no threat to the country’s immediate future. A booming population has made it a promising place of enterprise, with a large market and production base. However, a boom in the elderly population is upon us, and we ignore it at our own risk.

The issue? How to finance the elderly, whose population will keep expanding because of the past high fertility rate and the ever-increasing life expectancy?

If these older people are fragile, sick and unable to work, or even help themselves, they will become a burden — both emotionally and economically — on families, society and the state.

The country’s age demographics are now showing signs of problems and trends that many developed countries, such as Japan, the United States and European countries, have experienced.

Indeed, Indonesia is a latecomer to issues surrounding aging. Advanced countries have had a long time to deal with it, accumulating wealth and social infrastructure, realizing high levels of income and building effective institutions.

Japan, for example, has already faced the issue of its people living longer. In 1963, the country celebrated the lives of 153 centenarians. Last year, there were more than 21,000.

Japan, the United States and many European countries finance their elderly through complex pension systems. They have defined-benefit pension schemes, where social security is based on a fixed share of employees’ salaries. Workers contribute a part of their salaries to the government, which is then used to finance the pensions of older citizens.

But with growing numbers of pension recipients and a declining number of young workers, these governments have been faced with the difficult task of maintaining their pension systems, which can fuel expanding budget deficits.

Indonesia is already applying this defined-benefit pension system, but it is limited to civil servants, who make up less than 5 percent of the labor force. With such small numbers, the prospect of budget deficits from increasing numbers of pensioners may not be that big.

Meanwhile, another system, a defined-contribution scheme, entails employees putting a small part of their salaries into a superannuation fund, with employers also making some contributions during their period of employment.

This money can be managed by the government or by private companies, then released to workers upon retirement.

Under such a scheme, the government does not face budget problems because people essentially contribute to their own pensions. Still, this scheme does not guarantee enough money to support people in their old age.

People on low incomes will struggle to put aside enough before retirement, if they are able to contribute to their superannuation at all.

In Indonesia, data from the Central Statistics Agency (BPS) shows grown children are the main source of income for the elderly.

However, relying mainly on children for financial support is risky and unsustainable because external shocks, such as retrenchment due to economic crises, may jeopardize the whole family.

Millions of elderly Indonesians are now economically disadvantaged, and little has been done to make it otherwise.

Last week, during an event to mark National Day for Older Persons at the State Palace in Jakarta, President Susilo Bambang Yudhoyono promised to increase the social security fund ( Jaminan Sosial Lanjut Usia ), which is currently Rp 300,000 ($33) per month.

He announced a pilot project providing assistance in the form of cash aid to 10,000 people across 28 provinces.

Several other steps have been previously taken by the government. A number of laws and regulations have been drawn up to address the issue of an expanding elderly population, including the 1998 Law on Elderly Welfare and the 2004 Law on Social Security.

While the laws are not yet fully implemented, the 1998 law did lead to the establishment of the National Commission for Older Persons (Komnas Lansia).

If everything remains at the status quo, however, growing poorer as we grow older would seem to be our fate.

Keeping elderly people active in the labor market is perhaps is one way to mitigate the economic impact of an aging society. People should be allowed to work as long as they are capable and willing. Salary should not depend on age, but on productivity.

The presence of centenarians in our society has given us an opportunity to reflect on appropriate policies to address an aging society. To see that they are now part of society is already a step forward. Now we must take the next step.

Read more  *  Which Ethnic Groups is Ageing Faster?

                        * Population Ageing: issues for all ages

Filed under: ageing, Demography, economy, poverty,

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