In this week’s Letter from the Editor we discuss how megatrends such as an ageing population, cost of living crises and digitalization across APAC are profoundly changing its risk landscape with the Under-Secretary-General of the United Nations and Executive Secretary of ESCAP Armida Salsiah Alisjahbana.
According to a recent report by ESCAP, cascading risks, compounded by the COVID-19 pandemic, the global cost-of-living crisis and the impacts of the climate crisis, threaten inclusive and sustainable development across Asia Pacific.
Some 156 million people fell into moderate poverty in 2022, and the number of undernourished people, at 402 million, represents 55 per cent of the total number of undernourished people globally.
Wide gaps in access to basic opportunities persist between people furthest behind and furthest ahead—there is a fourfold gap in tertiary education attendance, a threefold gap in Internet usage and a twofold gap in access to clean fuels.
Ageing populations and digitalization are profoundly changing APAC’s risk landscape. According to the Under-Secretary-General of the United Nations and Executive Secretary of ESCAP Armida Salsiah Alisjahbana, social protection can redirect or reinforce these megatrends and set the stage for an inclusive, sustainable and equitable future for all.
APAC is the fastest ageing region in the world, with the old-age dependency ratio expected to double by 2050.
“By 2050, a quarter of the population will be over 60 years of age, and there could be about one dependent person per worker. The goal is a smooth transition to an aged society. To harness the benefits and address potential challenges arising from population ageing, countries in the region will need to strengthen pension systems and health and long-term care, while ensuring that the costs of these do not overburden public budgets. As digitalization replaces jobs and shift demand towards more skilled labour, social protection systems will need to navigate these potential negative and positive transformations to harness the power of technology to foster a more inclusive work force,” says Alisjahbana.
According to the report, two thirds of the workforce, 1.3 billion workers in APAC continue to be informally employed. Prevalence of informal employment is particularly high in South and South-West Asia and South East Asia where many women participate in the labour market as contributing family workers.
“Informality keeps people vulnerable without rights and access to social protection. It is a major challenge that entrenches people in subsistence and low-skilled and low-productivity activities as well as poverty. In this way, informality leads to a vicious cycle whereby employed persons are unable to adhere to contributory pension systems and end up in poverty in old age,” says Alisjahbana.
According to Alsjahbana, social protection is going digital, making schemes more accessible and efficient.
“Just 61.2 per cent of people in Asia and the Pacific use the Internet and digital literacy rates can be as low as 4 per cent. New types of work, such as Internet platform-based work, lack legal clarity to ensure workers’ access to social protection. These gaps must be addressed to ensure that the benefits of digitalized services reach everyone, leaving no one behind. Moreover, with just 0.2 per cent of GDP invested in active labour market policies annually in the region, much of the workforce lacks the vocational training and support to transition or enter into new jobs, including digital ones,” says Alsjahbana.
However, according to the report, too many remain unprotected – 45 per cent of people in Asia and the Pacific have no coverage at all. Systems are often fragmented and under-resourced. Poverty-targeted programmes miss people and contributary schemes remain thin.
“Future proofing starts with establishment of a universal social protection floor anchored in legislative and policy frameworks. It should progress as a multi-pillared system to provide full coverage and adequate benefit levels. Countries should link social protection with care and support services, education, health, nutrition, employment and climate policies. They also need to build capacity to identify, forecast and address climate risks to address new vulnerabilities, including through a better understanding of inequality. Additional actions could include extending non-contributory and contributory pensions to meet the demographic transitions,” says Alsjahbana.
According to Alsjahbana, up to 266 million additional people could fall into poverty by 2040 under a worst-case scenario due to multi-hazard risks induced by climate change, lack of policy response to ageing populations and insufficient digital adaptation.
“The cost of reversing this increase in poverty in 2040 is estimated to be between 6 and 9 per cent of GDP, which is much higher than the cost of acting today. Introducing universal non-contributory social protection schemes today would help offset the worst-case scenario and pave the way for a more positive future,” says Alisjahbana.
The associated cost would be on average 3.3 per cent of GDP in 2030.
“Spending depends on the political will to invest into social protection policies. One third of countries with data in Asia and the Pacific spend less than 2 per cent of GDP on social protection. Expanding fiscal capacity through better and more efficient and effective tax systems, the expansion of contributory schemes, reallocation of public expenditure and exploring synergies with new forms of climate related financing frameworks can fund social protection and address remaining financing gaps,” says Alsjahbana.
Notes from the Editor: In October 2024, the eighth session of the ESCAP Committee on Social Development in Bangkok, will seek policy approaches to counter the megatrends.
