What next for country's aging workforce?

Business and Investment - September 12, 2006

Andi Haswidi, The Jakarta Post, Jakarta

With the country facing the challenge of a rapidly aging workforce it needs to look into ways to improve retirement security as only 10 percent of its workers have a pension plan, a survey says.

Research conducted by consultancy firm Watson Wyatt Worldwide shows that Indonesia's workforce aged 50 and above reached 16 percent in 2005. And it is likely to rise to 28 percent in 2030 and 37 percent in 2050.

In absolute numbers, the number of people aged 50 and above will increase more than threefold from 38 million in 2005 to a staggering 123 million by 2050.

Indonesia's total workforce currently stands at about 116.3 million, according to data from the Central Statistics Agency (BPS).

Watson Wyatt Worldwide is one of the world's top benefits and human resources consultancy firms, providing independent professional advice in the areas of employee benefits, human capital issues and human resources technology solutions. It has been operating here since 1973.

"With the increase in the aging population, the population of productive age is expected to decrease substantially, which will have a huge impact on the workforce, particularly regarding the health and pension systems," said Lilis Halim of Watson Wyatt Indonesia.

With only 10 percent of the Indonesian workforce eligible to be pension recipients at post-productive age, population aging is likely to increase the demands for better health care and retirement provisions.

"Our research indicates that most governments and companies in the Asia-Pacific region, including Indonesia, are exposed to a a significant rise in human resources load and that 70 percent of workers expect their companies to provide health and pension plan benefits.

"This will have a significant financial impact on companies within the next couple of decades, regarding the government's limited abilities to improve the people's welfare," Lilis said.

The Watson Wyatt research also shows employers are acutely aware of the issue and the cost pressures it will bring.

"According to our research at 201 companies, 76 percent of them recognized the need to improve worker benefits.

"This indicates that the companies have the awareness and the willingness to do so," she said, although she was quick to add that most companies were facing financial constraints.

Supporting Lilis' statement, a 2006 World Health Organization study shows there was a 15 percent increase every year from 2002 to 2006 in health care costs in the region.

Lilis said she had learned from interviews with company executives and managers that there were great expectations from the business side that the government would reevaluate its policies in order to enhance retirement security.