Demographic Shifts in Asia: Will Population Trends Define Economic Power?

10 Mar 2025

10 Min Read

Dr Deboshree Ghosh, Programme Director for PPE Programme

IN THIS ARTICLE

Written by Dr Deboshree Ghosh, programme director for Philosophy, Politics, and Economics (PPE) programme at Taylor’s University. She can be reached at deboshree.ghosh@taylors.edu.my.

Asia, the most populous continent, is home to over half of the world's population, encompassing a diverse range of demographic landscapes. On one end of the spectrum, countries like Japan and South Korea are experiencing rapid ageing, with a shrinking workforce and increasing dependency ratios putting pressure on economic growth and social welfare systems.

In contrast, nations such as India, Indonesia, and the Philippines have young, expanding populations, where a large percentage of youth able to drive economic growth, innovation, and labour force expansion.

Currently, the percentage of people aged 15–64 in South Asia stands at 66%, compared to the global average of 65% in 2023. Yet, while this demographic window presents immense potential, how can these nations overcome the challenges that stand in the way of fully harnessing it?

The Demographic Dividend: A Window of Opportunity

The demographic dividend refers to the accelerated economic growth that can result from changes in a country’s age structure, particularly when the working-age population (15-64 years) grows larger relative to the dependent population (children and the elderly).

This shift creates a window of opportunity for economic development, as more people enter the workforce, increasing national income and economic output. However, to fully capitalise on this potential, countries must invest in quality education to equip the workforce with the necessary skills, affordable healthcare to ensure a healthy and productive population, and decent job opportunities to absorb the growing labour force.

The Cost of an Ageing Population

While younger economies focus on educating and employing their youth, ageing countries are grappling with the economic and social costs of an ageing population. As life expectancy rises and birth rates decline, a larger share of the population entering retirement (65+ years) presents significant challenges, including increased public spending and a shrinking workforce.

One of the most pressing issues is the rising healthcare burden. Older individuals require more medical care, driving up both government and private healthcare expenditures. Additionally, pension systems face financial strain as fewer working-age individuals contribute to retirement funds while more retirees draw benefits, potentially leading to pension deficits. To maintain financial sustainability, governments may need to raise taxes, cut benefits, or extend the retirement age.

Asian Male doctor using a stethoscope to examining senior woman's lung and heartbeat during a healthcare home visit.

Beyond economic concerns, an ageing population also affects social structures. Families take on more caregiving responsibilities, which adds financial and emotional stress. Governments must allocate resources for elder care infrastructure, including assisted living facilities and home-based care services. In some nations, discussions about universal long-term care insurance have emerged as a way to ensure sustainable eldercare without placing undue strain on families.

Automation as a Solution to Labour Shortages

Japan stands as a prime example of the challenges posed by an ageing population, with nearly 30% of its citizens aged 65 and above. The consequences extend beyond healthcare costs—labour shortages in key industries such as construction, agriculture, and services are forcing rapid innovation in automation and artificial intelligence (AI).

In the construction industry, automation is playing a crucial role in addressing these labour shortages. Despite a construction boom, companies struggle to hire workers, even with incentives to attract younger talent. Only 10% of construction workers in Japan are under 30. To combat this issue, Japanese firms have invested billions in automated systems, such as AI-powered excavation and earth-moving machinery, robotic welding, and drone-assisted site inspections.

Senior farmer and his grandson working together in their vineyard.

Similarly, the agricultural sector faces a crisis, with over 40% of Japanese farmers aged 75 or older. As food self-sufficiency becoming a growing concern, automated farming technologies—such as self-driving tractors, robotic harvesters, and AI-powered irrigation systems—are being deployed to maintain productivity. These innovations not only compensate for labour shortages but also optimise efficiency through precision farming techniques.

While automation provides short-term solutions, the long-term challenge remains in balancing technological advancements with human employment opportunities, ensuring sustainable economic growth without exacerbating job displacement.

The future of Asia’s role in the global economy will depend on how the region manages these transitions. While urbanisation and technological advancements offer potential solutions, policymakers must address issues of inequality to maintain social stability and prevent geopolitical tensions.

— Dr Deboshree Ghosh

Managing Demographic Transitions for a Sustainable Future

The demographic shifts occurring across Asia present both opportunities and challenges. Countries like India and those in Southeast Asia can leverage their youthful workforce for economic growth; while ageing nations such as Japan and China must navigate labour shortages and rising dependency ratios.

For ageing nations, immigration could provide a viable solution to labour shortages. Countries like Japan, traditionally resistant to large-scale immigration, may need to reassess their policies to attract skilled foreign workers. Streamlining immigration processes and creating pathways for integration into the workforce and society could help alleviate economic pressures.

Crowd of people on railroad station lobby.

Ultimately, forward-thinking policies that balance innovation, social equity, and sustainable economic development will be crucial in shaping Asia’s demographic future.

Promoting regional cooperation to manage migration across Asia could help address labour shortages without causing social tensions. By combining new technologies with carefully considered migration policies, countries like Japan and others with ageing populations can mitigate the challenges posed by demographic shifts while continuing to grow economically.

In the end, how well Asia manages its demographic changes will determine its place in the global economy. Migration will play a key role for countries facing declining populations. Focusing on regional cooperation, inclusive growth, and innovative policies will be vital for helping all nations in the region thrive despite changing demographics.

Asia’s demographic shifts bring complex challenges in governance, social policy, and economic sustainability. Want to explore how these forces shape our world? Discover our Philosophy, Politics, and Economics (PPE) programme and gain the insights to lead change.

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