The Taiwan Banker

In the agricultural and industrial ages, people worked until they were too old to work anymore. Then they retired. In the future, the three traditional stages of life – schooling, employment, and retirement – will no longer apply. We all need to start preparing as soon as possible for the “platinum society.” Over the past 200 years, life expectancies have increased 2 years every decade. People who are now 20 have a 50% chance of living to 100. Eventually, half of the people on the streets will have silver hair, yet still be mentally sharp. As we live longer, it may no longer be appropriate to define "elderly" from age 65. Taiwan is inevitably progressing towards a “platinum society,” and we need to start preparing for this dramatic transformation. Economic ImplicationsTaiwan’s seniors make up 14% of the population, second in Asia only to Japan, and comparable to South Korea. Taiwan will probably develop similarly to Japan. Of Japan’s population aged 65 and over, 20%, or 7.3 million people continue to work, accounting for 11.4% of the total workforce. Japanese over 65 even believe that working three days a week is ideal. Taiwan's National Development Council (NDC) estimates that sub-replacement fertility and acceleration of aging will cause the aged population to exceed 20% by 2026, turning Taiwan a super-aged society – even beyond the extent of Europe, the US, and Japan. By 2030, the aged population will grow to 5.59 million (growth of 63.1%), and by 2065 it will be 7.15 million (growth of 108.4%), making up 41.2% of the total population.This change in population structure will not only greatly impact industry and labor markets, but also financial and economic development. Japan’s challenges form a reference for Taiwan. Hank Huang, President of the Taiwan Academy of Banking and Finance (TABF), believes that population reduction and longevity are irreversible trends, and businesses and individuals must prepare for this huge challenge as soon as possible. Over the past 10 years, Huang has paid close attention to the problem of sub-replacement fertility, and how changes in the dependency ratio will affect society. The ideal structure in the early stage has youth as the base of the pyramid, and the elderly at the apex. In the 1960s, Taiwan’s population formed a perfect pyramid. Now there is a bulge in the middle. Based on the projections of the NDC, within 30 years, the pyramid will invert.The working-age population aged 15-64 began falling after reaching a peak in 2015. In February 2017, for the first time, the population aging index released by the Ministry of the Interior broke 100, indicating that the elderly population had surpassed the youth population. Although Taiwan still has a “demographic dividend,” based on the projections, it will disappear by 2027. In 2030, Taiwan’s working-age population will reach 15.15 million, 10% lower than in 2018; by 2065, it will be reduced by one half, to 8.62 million.These great changes in demographic structure and working-age population will impact economic development. Industrial policies will require adjustment. In July, the Executive Yuan proposed a Sub-Replacement Fertility Plan (2018-2022), recommending that efforts be made to expand access to affordable education and to provide childcare allowances to increase people's willingness to have children.The End of the Three-stage Life PlanEven if the government wants to use policy to encourage procreation, it’s not as simple as it sounds. Young people don’t necessarily accept the traditional concept of marrying and then having children. In Huang's view, new methods are needed to resolve the problems posed by Taiwan's low birthrate and ageing population. Instead of just crunching these numbers, it's better to explore the reasons behind the trends. "We have no experience with prolonged life expectancy and reduced fertility," Huang says. "If an aging society is the inevitable result of economic development and medical advancement, do we even need to consider a response?”The baby boomers were born after the end of World War II, beginning in 1945. It was this group which enjoyed the benefits of the economic boom, rapidly accumulating assets. They are now retiring. Huang quoted from the book The 100-Year Life: “In the future, our lives will not be governed by the school-work-retire model, but rather will contain multiple stages.” In Taiwan’s situation, with the increase in life expectancy and education, more people are remaining single and getting married late. After considering their economic situation, some couples are also choosing to not have children at all. These are all legitimate choices. None are right or wrong. Huang noted that in the previous agricultural and industrial ages, labor was almost equivalent to employment. When one got old enough or became unable to work, one retired and moved back in with the family. In the future, these three traditional stages of life will no longer apply – mainly because lifespans will last longer. The traditional sociological theories of the past will likely change. Even if longevity creates more opportunities for an ideal life, Huang emphasizes the importance of proactive planning. Due to these changes in population and industrial structure, the prosperity enjoyed by the boomers has become difficult to “repay.” Individuals, businesses, and the government must consider how to prepare. Governments can resolve the problems of aging and negative growth through policy incentives, and individuals should also plan for their life in old age. “I’m afraid the lifestyle of climbing mountains and fishing every day during retirement may not materialize," Huang says. He notes that retirees previously had the means to support their needs into retirement through annual fixed savings, but today's middle aged and younger people must accept the reality that the population pyramid will change. Young people must be made aware of the changes coming and be prepared ahead of time.Ability, Networks, and Transformation as Intangible AssetsHuang argues that solutions may come from three directions: career, finances, and networks. First, we live in a multi-career society. There is almost no single skill that can take one all the way from graduation into retirement, for reasons including the gap between study and the real world, and the rapid development of technology. Many jobs are in the process of disappearing, necessitating continuous training, broad skillsets, and secondary expertise. The second point involves tangible assets: financial preparations. Depending on the expected standard of living, it will become more difficult for individuals to rely on savings alone, from the time of entering the workforce until retiring, to support themselves afterwards. Huang reiterated that modern people are under great pressure. Although they live a long time, they are burdened by chronic disease, as well as the potential future risks of future treasury shortages and insufficient health subsidies, and must prepare substitute their own savings. Third are intangible assets. As we live longer and extend the retirement age, a life of multiple careers will become increasingly common. Intangible assets are transferrable abilities and connections. “With the simple environments and single skills of the past, people will find few transformation opportunities," Huang says. "Transformation is a skill that must be learned as soon as possible. I think the best solution is to cultivate and maintain three types of intangible assets. This is will be the most important issue going forward.”The first of these three intangible assets, Huang explained, is “ability.” Those with physical strength can do manual labor; those with professional knowledge can work as managers and consultants. In the US, seniors can be frequently seen working in highway rest stops and gas stations. Through post-retirement employment, not only are others willing to pay them, but they also stay engaged with society. Second is “vitality”: the health and physical and physiological function to achieve one’s objectives. The final intangible asset is “transformation.” Huang recommends planning ahead to prevent shortage of opportunities when facing transitions or cross-sector challenges. “When unemployed, think about what value you will have after retirement," Huang says. Huang believes that the definition of retirement is being rewritten. The 65-year cutoff of the past is just a legal requirement, and doesn’t mean we can't contribute meaningfully to society in a professional capacity. On the contrary, many people remain quite healthy, having been refined by years of workplace experience. He stresses that regardless of education and ability, a word from a “sponsor” at a key time is an important edge. It’s not just performance that’s important, but channels. Strengthening International Cooperation and Upgrading Skills for the 100-Year SocietyHuang also hopes that TABF can play a more active role in the allocation of wealth and resources, and can provide more training for career changes and professional skills, helping those requiring additional studies to add value to their resumes. He adds: "As Fintech develops, existing financial service models, including bank security insurance, will evolve in different ways over the next 20 years. Our new recruits are still proceeding as before, however,” Huang said. “In the face of future industrial changes, it is our duty at TABF to assist in the accumulation of transformational assets, so we will take note of these considerations when designing financial industry training courses.”Meanwhile, TABF has cooperated with the Platinum Society Network (Japan), referring to their experience integrating resources to promote re-employment of the elderly, local tourism, and cultural activities, bringing local development and creating opportunities for youth to return to the countryside. It has also integrated itself into the national conversation on financial education so that different generations (including the youth and middle-aged) can “prepare to be welcomed by a shining platinum society.”