Social Pension, Aging and Poverty in Malaysia

Social Pension, Aging and Poverty Social Security Research Centre, On life's Journey University of Malaya Authors: Saidatulakmal Mohd (USM), Norma Mansor (UM) & Shamsulbahriah Ku Ahmad (UM) Study funded by Social Security Research Centre, University of Malaya, Kuala Lumpur What is this paper/research about?  Emerged from SSRC research on universal pension lead by Dr Saidatulakmal(USM)  Following from one of the conference theme regarding population ageing and inadequate social security schemes in Malaysia  Possible inputs for the Eleventh Malaysia Plan Qualifications  Work in progress (raw draft) : while exploring what could be the best option/s for cost  Preliminary approach: in this paper using sensitivity analysis (proposed by the main author)  Other Approaches: calibration analysis, regression analysis or as the World Bank PROST model and the common cost benefit analysis Main Focus  This paper attempts to estimate the financial cost of social pension schemes as a percentage to GDP  Quantify the role of social pension in reducing elderly poverty in Malaysia  Estimations were made using the 2009 Household Income Expenditure (HIES) survey  To be replicated using the recent 2012 HIS data to further assess the impact of social pension cost and poverty reduction  The final analysis will be further corroborated by other supporting data Structure Background Information Distribution of population in Malaysia Year Total 0-4 5-14 15-24 25-34 35-44 45-54 55-64 65-74 75+ 1970 10,439.4 1,651.4 3,033.1 2,004.9 1,293.1 953.3 697.3 485.4 233.4 87.5 1980 13,136.1 1,779.6 3,416.3 2,758.6 1,933.2 1,295.3 888.1 589.6 334.7 140.7 1991 18,379.6 2,344.6 4,364.2 3,515.7 3,096.8 2,187.0 1,335.0 856.7 456.0 223.6 2000 23,274.7 2,612.7 5,138.3 4,454.2 3,721.2 3,192.5 2,087.4 1,167.6 610.8 289.8 2012 29,336.8 2,506.5 5,250.8 5,710.1 5,283.8 3,844.4 3,139.5 2,056.6 1,027.2 517.7 9.1 6.7 4.6 2.2 0.8 Number (‘000) Distribution (%) 1970 100.0 15.8 29.1 19.2 12.4 1980 100.0 13.5 26.0 21.0 14.7 9.9 6.8 4.5 2.5 1.1 1990 100.0 12.8 23.7 19.1 16.8 11.9 7.3 4.7 2.5 1.2 2000 100.0 11.2 22.1 19.1 16.0 13.7 9.0 5.0 2.6 1.2 years an above increase from 7.6 2012 100.0 8.5 17.9 19.5 18.0 13.1 10.7 7.0 3.5 1.8 percent in 1970 to 12.3 percent in • Percentage population aged 55 2012 • 2015 Malaysia’s population aged 65 years and above will be six percent of the total population Growth Rates of Elderly vs Growth Rate of the Total Population The growth of elderly population surpasses the growth of the total population Table 2: Profile of elderly: HIES2009 Male : 48.05 Female : 51.95 Working : 24.55 Not Working/Others: 75.45 Bumiputra : 50.86 Chinese : 34.9 Indian : 5.28 Others : 8.96 Gender AGE 60-64 : 36.33 65-69 : 25.72 70-74 : 18.82 75-79 : 9.8 80 & Above: 9.29 Working Status Characteristics of Marital Ethnicity elderly Education Primary : 43.25 Secondary : 19.42 Tertiary : 3.79 None : 33.54 Strata Urban : 64.72 Rural : 35.28 Married : 65.08 Others : 34.92 Status LIVED WITH Others: 0.26 Alone: 6.18 Living Arrangements Spouse: 17.94 Other Elderly: 1.31 Spouse & Adult Child: 64.17 Spouse & Young Child: 10.15 Table 2: Profile of elderly living in poverty: HIES2009 (revised) 60-64 : 5.75 (161) 65-69 : 7.97 (158) 70-74 : 10.06 (146) 75-79 : 13.89 (105) 80 & Above: 13.11 (94) Working : 7.82 (148) Not Working/Others: 17.76 (516) AGE Bumiputra : 11.10 (435) Chinese : 2.79 (75) Indian : 5.16 (21) Others : 19.25 (133) Employment Status Ethnicity Primary : 7.62 (254) Secondary : 2.0 (30) Tertiary : 0.68 (2) None : 14.62 (378) Characteristic of Elderly Living in Poverty Gender Marital Status Education Strata Urban : 5.7 (285) Rural : 13.94 (379) Male : 7.00 (262) Female : 10.00 (402) Male (HoHH) : 7.9 (223) Male (Mem) : 4.3 (39) Female (HoHH) : 29.0 (230) Female (Mem) : 5.3 (172) Married : 12.7 (342) Others : 6.4 (322) Multi Pillar Framework to prepare for and live in retirement FOUR FOURPILLARS PILLARSOF OFRETIREMENT RETIREMENT Study Focus: Pillar - Methodology Strengthening Pillar Zero Exploring Exploringthe thepossibilities possibilitiesof ofintroducing introducingsocial socialpension pension Methodology – Objective One Analysis Analysisinclude: include: 11 22 33 Methodology – Objective Two Analysis Analysisinclude: include: 11 22 33 Table 4: Baseline simulation on projected cost of a Social Pension Table Findings  If eligibility age was 60 years old, the costs decreased from 1.36 percent in 2010 to 1.02 percent in 2020, if benefits were kept fixed at RM400 per month • If benefit increased with percentage of GDP beginning 2013, cost increased from 1.02 percent in 2010 to 1.37 percent, if initial benefit was RM300 per month  If eligibility age was 65 years old, the cost decreased from 1.72 percent in 2010 to 1.31 percent in 2020, with benefits fixed at RM800 per month • If benefit increased with percentage of GDP beginning 2013, cost increased from 0.86 percent in 2010 to 1.17 percent, if initial benefit was RM400 per month Table 5: Baseline simulation on poverty and projected cost of a Social Pension – HIES2009 Conditions Elderly Poverty Incidence (%) Category Eligib ilty Age Income Total Recipie nts All Elderly 60 All Income 65 60 With RM300 Social Pension With RM400 Social Pension With RM800 Social Pension With RM300 Social Pension With RM400 Social Pension With RM800 Social Pension 7,586 Witho ut Social Pensi on 8.46 2.61 1.27 0.00 2.74 3.65 7.31 All Income 4,826 8.46 3.98 2.91 1.84 1.74 2.32 4.65 642 8.46 2.61 1.27 0.00 0.23 0.31 0.62 502 8.46 3.98 2.91 1.84 0.18 0.24 0.48 60 RM800 & below RM800 & below All Income 5,624 8.90 2.97 1.51 0.00 2.03 2.71 5.42 65 All Income 3,840 8.90 4.20 2.97 1.67 1.39 1.85 3.70 60 501 8.90 2.97 1.51 0.00 0.18 0.24 0.48 412 8.90 4.20 2.97 1.67 0.15 0.20 0.40 60 RM800 & below RM800 & below All Income 3,549 8.00 3.72 2.38 0.91 1.28 1.71 3.42 65 All Income 2,131 8.00 4.94 3.84 2.58 0.77 1.03 2.06 60 RM800 below RM800 below & 450 8.00 3.72 2.38 0.91 0.16 0.22 0.43 & 371 8.00 4.94 3.84 2.58 0.13 0.18 0.36 65 Household with co-residing elderly member 65 Household headed by elderly Pension Cost as a Percentage of Income 65 Table 5: Findings  Highest cost incurred if the social pension schemes were given to all elderly irrespective of income either at age 60 or at age 65 years old • Change in poverty incidence ranged between -4.48 percent and -8.46 percent  Social pension targeting only households with co-residing elderly • Cost was highest if all households with co-residing elderly (aged 60 and above) received the benefits with highest cost of 5.42 percent of income if benefits were RM800 and 0.24 percent of income if benefits were RM400 • If the social pension was only targeted to poor households with co-residing elderly aged 60 years and above, the cost as percentage of income was only 0.48 percent of income if benefits were RM800 per month Elderly poverty was also eliminated in this case Table 5: Findings  Social pension Targeting households headed by elderly • This targeted scheme covered the least number of elderly as they were only 3.549 households headed by elderly aged 60 years old and above, of which, 450 households were living below the PLI • If RM800 benefits were given to only the poor households, the cost as a percentage of income was only 0.43 percent and poverty incidence reduced to 0.91 percent Conclusion: Expanding coverage, fiscal sustainability and addressing informality  Cost is normally cited as a major obstacle in providing social pension, some form of social pension could be still implemented, while keeping the cost at a minimum  Sensitivity analysis indicated that the cost of social pension could be kept at an average of 1.30 percentage of GDP; appropriate targeting reduces costs  The 2009 HIES data also indicated that elderly poverty could eventually be eradicated with social pension while cost of the social pension was kept at reasonable levels Social pension could be expanded to include other excluded groups Profile Data  Female Headed Households  Self-employed (own account workers) / Unemployed  Bumi / pribumis / “others”  Low Education / Uneducated Is there a case for universal pension? Should Malaysia adopt a “universal pension” initially for the eradication of poverty among the elderly as a mandated policy instrument: • Moving from the residual to the “human right” approach “to live with dignity in old age” So social pension is not just about the cost to the government but also can be seen as a social responsibility • A multi-tier social pension system to cover excluded groups Thank you Social Security Research Centre, University of Malaya Authors: Saidatulakmal Mohd (USM), Norma Mansor (UM) & Shamsulbahriah Ku Ahmad (UM) Study funded by Social Security Research Centre, University of Malaya, Kuala Lumpur ... Following from one of the conference theme regarding population ageing and inadequate social security schemes in Malaysia  Possible inputs for the Eleventh Malaysia Plan Qualifications  Work in. .. poverty incidence reduced to 0.91 percent Conclusion: Expanding coverage, fiscal sustainability and addressing informality  Cost is normally cited as a major obstacle in providing social pension,. .. possibilitiesof ofintroducing introducingsocial socialpension pension Methodology – Objective One Analysis Analysisinclude: include: 11 22 33 Methodology – Objective Two Analysis Analysisinclude: include: