How Will Changing Eldercare Needs Impact Indonesia's Workforce?

Overview & Synopsis

Indonesia’s population is aging, signaling both challenges and opportunities for the nation’s workforce. The old-age dependency ratio, the proportion of elderly to the working-age population, is expected to more than double over the next quarter of a century, from 11.0 percent in 2025 to 22.8 percent in 2050. Higher dependency ratios are associated with lower economic growth, and aging populations can lead to higher medical expenses and a shrinking workforce. Although formal eldercare systems are expanding, most elderly people in low- and middle-income countries rely on family-based care, which hinders caregivers' labor supply, particularly women. At the same time, healthy elderly often contribute to unpaid childcare and domestic work, which frees time for younger individuals to work. While previous studies suggest that the continued engagement of elderly in the labor force could enhance overall productivity, including that of younger workers, emerging evidence casts some nuances. Older workers could limit opportunities of younger workers when older and younger workers exhibit substitutable skills. Global evidence suggests that the continued engagement of elderly in the labor force can both limit opportunities for younger workers and enhance overall productivity. Given the complex relationship among aging, care, and market work, country-specific analysis is needed to guide policy decisions to minimize the risks and harness the opportunities of aging for the workforce. This report explores how the aging population shapes the eldercare needs and the workforce needs to inform the policy dialogue on Indonesia’s care economy. It provides descriptive evidence of the magnitude of both the financial and nonfinancial support that elderly Indonesians require and how these needs have shifted over time. It also presents information on how eldercare needs are currently met and unpacks the relationships among aging, care provision, and labor market outcomes. It does not provide a comprehensive analysis of aging’s effects on the economy; it focuses instead on the nexus of aging, care, and work. The report aims to inform the implementation of Indonesia’s strategic goal of strengthening care systems by identifying the challenges of current eldercare arrangements and reviewing the evidence of promising solutions.