2 DATA AND ESTIMATION 3 4 CONCLUSIONS AND WAY FORWARD 1 MALAYSIAN DEMOGRAPHIC PATTERNS FINDINGS AND IMPLICATIONS

1 MALAYSIAN DEMOGRAPHIC PATTERNS Source: UN, 2009, World Population Prospects (The 2008 Revision) Fertility, Mortality & Total Fertility Rate, Malaysia, Anti-natalist policy (1960s) Pro-natalist policy (1980s)

1 MALAYSIAN DEMOGRAPHIC PATTERNS TFR, Median Age and Life Expectancy for Malaysia, Year TFR (children per women) Median age (yr) Life expectancy at birth (yr) Life expectancy at 60 (yr) MaleFemaleMaleFemale Source: DOSM, various years; United Nation (2006; 2012)

1 MALAYSIAN DEMOGRAPHIC PATTERNS Source: DOSM, Pala, 2005 Population Ageing Trends in Malaysia,

1 MALAYSIAN DEMOGRAPHIC PATTERNS Age Composition of Malaysian Population, YearNumber of Persons (million) Percentage of total population )60+Total Source: DOSM, various years; United Nation (2006; 2012)

1 MALAYSIAN DEMOGRAPHIC PATTERNS The speed of Ageing source: Kinsella and He, 2009

1 MALAYSIAN DEMOGRAPHIC PATTERNS Dependency and support ratio, Source: UN, 2009, World Population Prospects (The 2008 Revision) 1965: 10: : 7: : 5: 10

1 MALAYSIAN DEMOGRAPHIC PATTERNS Age-Sex Pyramid for Malaysia, 1970, 2000, 2030 Source: UN, 2009, World Population Prospects (The 2008 Revision)

1 MALAYSIAN DEMOGRAPHIC PATTERNS Number of labour force by age group, Malaysia, 1985 – 2012 Source: DOSM, various years; United Nation (2006; 2012) Year Total 15– –64 No% % % , , , , , , , , , , , , , , , ,

Household Expenditure Survey (HES) 2009 A nationwide survey covering 21,641 private households in urban and rural areas. Information on income, expenditure and the debt burden household level The expenditure data are reported at the household level Household Expenditure Survey (HES) 2009 A nationwide survey covering 21,641 private households in urban and rural areas. Information on income, expenditure and the debt burden household level The expenditure data are reported at the household level Household Income Survey (HIS) 2009 Involve 184,447 individuals living in 43,026 households Information on income and basic amenities individual level Income from employment and self-employment are reported in the HIS at the individual level. Household Income Survey (HIS) 2009 Involve 184,447 individuals living in 43,026 households Information on income and basic amenities individual level Income from employment and self-employment are reported in the HIS at the individual level. 2 DATA AND ESTIMATION The Data:

Used the National Income Account data 2009 to calculate the public consumption and macro control Used household survey (HES and HIS) and administrative record from the Ministry of Education and Health to estimate the per capita- age profile. Per capita-age profiles are estimates of per capita values by single year of age (0‐94+). All consumption (private and public) and labor production can be assigned to individuals. 2 DATA AND ESTIMATION

3 FINDINGS AND IMPLICATIONS Public other Public Health Private Health Per capita consumption profiles for Malaysia, 2009 H2: 33H3: 57 H2: 95 H1: 15, 20

The Consumption profile Public consumption is significantly higher at young (education) and old age (health). The contribution of private health and education were small, so age profile of private consumption is driven by its “other” component – i.e. especially during adulthood four humps The total consumption profile for Malaysia shows a special feature - i.e. it has four humps in different age cohort: (1) adolescent, (2) young adulthood, (3) near elderly and (4) elderly. 3 FINDINGS AND IMPLICATIONS

First hump: First hump: Primary school age up to adolescence (peak at 15 and 20) Mostly due to educational cost. Malaysia has allocated a significant amount of budget on education where Malaysians children receive free education from primary up to high school level. Therefore, public consumption is especially high during the school age of 6 through 19 and/or 20. Second hump: Second hump: Age 21 to 44 (peak at 33 years old) High private consumption at this stage may be contributed to lifestyle-related expenditure such as recreation. Third hump: Third hump: Dissipates until early 80s (peak at 57) High private consumption may be due to cultural expenditures such financing children wedding. Public and private consumption on health start to pick up at this stage. Fourth hump: Fourth hump: started at the age of 80’s but reaching its peak at 95 may due to health cost. 3 FINDINGS AND IMPLICATIONS

3 Per capita labour income for Malaysia, 2009

The Income profile Has four phases, where: I.a sharp increase between 19 to 33 years old II.a slow growth with a peak at age 44 III.a sharp decline until around age 61 IV.a gradual dissipation until around age 90s. A small proportion of total lifecycle income earned by persons under age 20 (1.4%) or ages 60 and over (4.38%). Very small portion of elderly who are employed continued working after age 70. The self employed continued to work even after age 70s. Many shifted from wage-based to self-employment upon retirement– self-employment peak around age 57 3 FINDINGS AND IMPLICATIONS

3 The most important graph for Malaysia, 2009

3 FINDINGS AND IMPLICATIONS The Life Cycle Deficit for Malaysia, 2009

The lifecycle : Deficit 26 years 57 and over Child dependency: the first 26 years of life; Older person dependency started at 57 and over Those age 57 onwards can refinance their consumption using other means than their labor income. The total deficit for 2009 is RM410, to be financed either by asset reallocation and/ or familial or public transfers. 3 FINDINGS AND IMPLICATIONS

The lifecycle : Deficit The most critical issues on financing the lifecycle deficits: How the intertemporal reallocation can benefit the economy with good investment. Efficient public transfers consider the efficient reallocation system from the public taxes to the government services that can benefits development of human capital, reducing poverty or inequality. Private transfers from family is critical, especially if there is no other means of elderly to finance their consumption. 3 FINDINGS AND IMPLICATIONS

The lifecycle : Surplus 31 years A productive/surplus period of 31 years (between 26 to 57 years old) – The duration of education on average are relatively long and a relatively high numbers of persons in the 55 and over age group who are outside the labour force. The retirement age was recently extended to 60 years old, so the life time income for wealth accumulation can be improved. But, EPF fears that many Malaysians in retirement will be in poverty due to insufficient saving (The Malay Mail, 5 October 2014) which mainly caused by: Premature withdrawal for housing, health and education the relatively low income of the employees which affects the amount that could be saved for their old age. 3 FINDINGS AND IMPLICATIONS

The lifecycle : Surplus The Government is well aware if this issue and has developed several programmes to improve saving for old age. Private Retirement Scheme The Private Retirement Scheme is a new initiative to promote voluntary savings for old age 1Malaysia Retirement Scheme The Government has also created 1Malaysia Retirement Scheme for self-employed workers to save with the EPF and the government contributed RM 60 to investor. 3 FINDINGS AND IMPLICATIONS

The Malaysian Government is heavily investing in its people through public expenditure on health and education: The universal health programmes and free education for all Malaysians up to high school. Malaysian consumers are heavily spending on other consumption especially on housing, most likely driven by the rising cost of living and prices of housing. The amount of surplus may indicate that Malaysians are not saving as much as well. As such, it has raised the following question: The possibility of bad financial behaviours and lack of preparedness of Malaysian for their retirement. Thus, the need to intensify financial education intervention programmes for all ages to rectify the financial misbehaviour and improve the financial well being of Malaysians. The sufficiency of efforts in capturing the second demographic dividend The sustainability of public expenditure on health and education The adequacy and effectiveness of the current social protection system in Malaysia. 4 CONCLUSIONS AND WAY FORWARD