The outlook for working age populations over the next 80 years in the Asia-Pacific region look most favorable in The Philippines, Malaysia, India and finally Indonesia, according to long-term estimates by Bank of America Merill Lynch.
In contrast, the percentage of the population of working age in South Korea, China and Singapore will peak before 2020, with Thailand's peaking slightly later in 2022.
These trends have the following implications:
Labor cost pressure will ratchet up in South Korea, China, Singapore and Thailand. The trend of industrial migration out of these locations will speed up, driving investment into less-developed regions of the Asia-Pacific and putting more emphasis on developing trade infrastructure and logistics in the region to coordinate supply chains.
The Philippines, Malaysia, India and Indonesia will retain a strong, longer-term labor cost advantage. With less pressure on the number of workers in the labor force, wage growth should be dampened compared to China and South Korea.
Welfare budgets in China, Korea, Japan and Thailand will come under even more pressure. Providing welfare and public services for aging populations will require extra government spending. States such as China and Thailand will have to tax more effectively (widen tax bases and clamp down on corruption) and pass reforms that drive efficiency in the economy.
Government policies will change to both accomodate and evacuate labor-intensive manufacturing. Countries like the Philippines and India will loosen inward investment rules in order to attract manufacturing companies. More developed locations, such as Singapore and South Korea, will introduce policies that tighten rules on low-value added manufactures and encourage investment in higher-value added sectors, such as TMT and aviation, to move their economies away from a reliance on industrial manufacturing.