Supporting the elderly is a central concern in developed and less developed countries alike. While there are complex structures responsible for insuring old age security in developed countries, there are many fewer options for controlling old age security in less developed countries. For example, “in the United States and other developed countries, market institutions (i.e., employer-provided pensions and health insurance) and tax supported public institutions (e.g., public education, social security and health insurance) may substitute for the family” (Lillard and Willis, 115). In other words, developed countries possess the necessary resources and organization to help facilitate old age security.
How do developing societies grapple with the task of supporting the elderly? First, it is important to understand the social, political and economic conditions that exist within these less advanced countries. In Asia, while many countries are experiencing significant economic and political changes, they are having trouble supporting the elderly; family structures are changing, and urbanization is more prevalent within these regions. While these countries do not have the financial resources to support widespread policies for the elderly, parents rely on their children as a source of security, for present and future demands. It is important to understand that “one source of informal systems of old age security is the deeply embedded sense of filial loyalty in most Asian cultures” (World Bank, 50). This filial loyalty provides the basis for the hierarchical structures within families; children have an embedded responsibility to support and protect their parents.
How does old age security relate to family structures, namely fertility, in Asia? First of all, “[Asia] has the highest old age dependency ratio in the developing world and is expected to experience the most dramatic increases over the next thirty years” (World Bank, 50). This high concentration of elderly citizens will put a great amount of pressure on the existing and future security systems. In “Old-Age Security Motive for Fertility,” Jeffery Nugent provides some insights regarding the nature of old age security in Asian countries, specifically why parents in many developing countries rely on their children for economic support. Generally, motives for fertility as form of old age security are most likely to exist “when the relevant parent is both uncertain about his or her ability to be self-supporting in old age and dubious that there are other more reliable or more effective means of such support than his or her own children” (Nugent). But there are specific conditions that are likely to accompany these motives for fertility; these conditions relate old age security to various social, economic and political circumstances that infringe upon sustained economic stability. Nugent outlines eight specific conditions:
1) Underdeveloped capital markets
2) Uncertainty about the accumulation of assets
3) The absence or inefficiency of private or public old-age insurance programs
4) Confidence in the loyalty of children to their parents
5)The absence of well-developed labor markets for women and children
6)The absence of a spouse that is of a considerably young age
7)The perceptions of old age as an appreciable portion of the life cycle[1]
Nugent identifies “underdeveloped capital markets” as a central property of developing countries (in Asia); this underdevelopment is responsible for the lack of programs and policies designed to foster old age support. While in developed countries people have access to a wide range of accumulable assets, in less developed countries citizens have limited assets at their disposal. Most of such assets in developed countries are unreliable sources of stability: currency, gold, commodities, livestock, land and structures (Nugent, 76). For example, currency is susceptible to inflation, fire and theft; commodities and livestock are difficult to store and cannot last for long periods of time. By this token, these assets are not reliable sources of future stability.
In developing countries, old-age insurance programs are extremely costly, and oftentimes people are not capable of contributing “their portion” to the fund; specifically, with more health problems arising in less developed countries, such insurance programs would be covering an extremely wide range of problems. Note that there are not nearly as many health problems in developed countries, where there are fewer heath problems and concerns. Essentially, “the high information and transaction costs underlying these adverse-selection and moral hazard problems apply to formal insurance programs, but not to traditional family insurers” (Nugent, 78). In other words, the informal systems seem most appropriate for these less developed nations. Of course, there are possible voluntary-based insurance systems, but these “arrangements against these risks [i.e. poor health] often break down because people who think they have a low risk will opt out of the system, while high risks opt in, making the price that insurance companies must charge prohibitive for the average person” (World Bank, 55).
Nugent outlines such case studies, in order to establish generalities about the nature of old age support programs—the indirect and direct case studies help test the hypotheses that participation in security programs can explain changes in fertility rates. As an example, Cain’s 1981 indirect study is the most simple and straightforward test of the hypothesis. Using cross-section data, Cain compared villages in Maharashtra and Andra Pradesh States of India with a village in Bangledesh, in order to determine factors responsible for variations in fertility rates; fertility rates were high in Bangladesh, while fertility rates were low (and falling) in the Indian villages. According to Nugent, “Indian villages had better sources of credit and stronger lateral relations within extended family households than the Bangladesh village, allowing Indian villagers to adjust to calamities more easily than Bangladesh villagers” (84). In other words, Indian villagers have enjoyed alternative ways of establishing security—they do not necessarily need their children for assistance. Although the evidence in this study suggests a correlation between perceived insecurity and high fertility rates, it is important to remember that Cain limited his study to only two data points (in Bangladesh and India). Therefore, it is difficult to draw strong conclusions about the motives for fertility from this case study.
Aside from these indirect tests, Nugent reveals an array of direct tests, based on microeconomic analysis, that apply to individuals, as opposed to specific groups. Vlassoffs’ study (1980) “was based on a questionnaire consisting of a number of questions related to old-age security addressed to a sample of 357 ever-married men in a rural village in Maharashtra Sate, India” (Nugent, 85). Contrary to Cain’s study (1981), Vlassoff’s evidence indicated that old-age security did not serve as a motive for fertility. This widely based questionnaire supplies some details about individuals’ perceptions and concerns for future security; the questions were designed to obtain a good sense of how the elderly (i.e. retired) feel about their positions in society. The bulk of the Vlassoffs’ conclusions suggested that “few men retire, are senile, enjoy much leisure, express worry about old age, are without any tangible assets, say they receive considerable support from their children, or prohibit their sons from living and working elsewhere” (Nugent, 86). But, these observations do not necessarily all apply to the old-age security problem; therefore, the Vlassoffs were somewhat misleading in their conclusions. Finally, their study only included men’s’ perceptions; by neglecting to interview women, the Vlassoffs disregarded an important element of the old-age security problem.
Building off the Cain and Vlassoff studies, A. Dharmalingam (1987) conducted a survey in a South Indian Tamil village; the survey examined expectations of old-age support, as well as the actual amount of support supplied to the elderly. Since the 1970s the Indian economy has changed considerably, moving from a solely agrarian to a mixed economy. The emergence of unskilled labor has provided many job opportunities for both sexes, and this economic transformation translated to a sense of independence for individual workers. Therefore, there is much less of an emphasis on family farms, and other traditional familial responsibilities; this change in family relations challenged the traditional informal support structures in India.
How have these economic transformations affected the elderly? Frist, the elderly are pushing back their retirement ages, because they can rely much less on their children for future assistance. In other words, the economic transformation that is taking place in India has changed attitudes among younger workers, as they have branched out from their limited family businesses. In a 1987 survey, Dharmalingam discovered that 54 percent of young adults (25-39) expected to retire before age 60, whereas only 35 percent of the older adults (40-59) expected to retired before age 60 (Dharmalingam, 9).
Perhaps the most important factor in old-age security is land ownership; however,
especially considering the economic transformations in India, there are many landlessness citizens in regions where land is a primary source of old-age security. When Dharmalingam questioned elderly villagers whether they could depend on their children for support, “their responses indicate that such support can longer be taken for granted: one out of every three respondents doubted that their sons would definitely help them in the future” (Dharmlingam, 10). Furthermore, landless citizens were less confident than landowners that their children would provide them with old-age support: hence, the old age security problem. [It is important to note that women are less likely than men to receive assistance from their children; widows often struggle to receive proper support.] In short, the new economic structure in India has challenged traditional social conventions; as a result, the elderly are worker harder and longer.
In a more recent study, Lee Lillard and Robert Willis (1997) generated an in-depth analysis of intergenerational transfers in Malaysia, as they specifically applied to some established hypotheses regarding old-age security. The two most important hypotheses that Lillard and Willis evaluated were the “old age security hypothesis” and the “parental repayment hypothesis.” In developing countries, financial systems are primitive, and there are not very strong old age security programs that facilitate long-term stability for the elderly. Hence, “although children themselves are risky investments, according to the [old age security] hypothesis they represent the only chance for common people in poor countries to have any security in old age” (Lillard and Willis, 115). Aside from this traditional hypothesis, Lillard and Willis explore the parental repayment hypothesis, which suggests that “there is an implicit family capital market in which parents finance human capital investment in the children through a combination of grants and loans and, in return, children implicitly repay the loan component by providing old age support for their parents” (Lillard and Willis, 116). In other words, parents sacrifice current and future consumption and invest in their children (human capital); the hope is that this intial investment will translate to the more future income for the children. In tern, the children will repay their parents, as they have enjoyed greater successes as a result of their parents’ assistance.
How do these theories work in practice, in Malaysia? According to Lillard and Willis, there was little evidence supporting the old age security hypothesis; by studying specific intrafamily transfers, they found few patterns associated with the traditional hypothesis. While there are weak connections between low-income parents and transfers, “only the wife’s work status is a significant determinant of the (log) amount received” Lillard and Willis, 128). In other words, only under very specific conditions is there any support for the old age hypothesis.
On the other hand, their evidence supported the parental repayment thesis. Generally, Lillard and Willis discovered that monetary transfers from parents to children “are strongly related to the number of these children who currently are attending high school or college both in terms of the probability of giving a transfer and, for children in college, in terms of the amount of the transfer” (Lillard and Willis, 130). This link between monetary transfers and education reflects the nature of parental investments; of course these investments vary in magnitude, according to amount of parental income available for such transfers. Furthermore, there is a positive relationship between the level of parental education and the amount transfers allocated towards education for children. Essentially, Lillard and Willis argue that parental investment in their children’s human capital “has played a signigicant role in facilitating rapid economic growth in Malaysia, and moneteary transfers from their children have enabled both the younger and the older generation to share in the benefits of growth” (Lillard and Willis, 134).
Although developing countries still rely on their informal old-age security systems, in many Asian countries these traditional structures are breaking down. In China, the informal system is suffering because of some specific factors: “out-migration, education, longer life expectancy and the official one-child policy”(World Bank, 51). These modern trends contradict many of the conditions that make informal systems effective and efficient. Furthermore, in many East Asian countries the emergence of high growth and urbanization rates has placed a great amount of stress on the family support system; these regions include Singapore, Korea, Malaysia and Hong Kong. The side effects of these changing economic and social trends include a decrease in filial loyalty, and “in urban areas, the shrinkage of extended families to their nuclear core and the changing occupational structure are pushing the old out of the labor force and reducing their access to family support” (World Bank, 52). Such sharp changes in the composition of Asian markets and family structures are redefining the social structures within societies. Even with the degradation of the extended family system, this informal structure is still the most important and functional style in the developing countries.
These economic and social changes in Asian countries have created a need for reform: How can these developing countries provide better support for the elderly? Given the rich filial history in these countries, “a general principle in establishing government programs is to provide goods and services that complement rather than substitute for those provided by families and other voluntary sources of support” (World Bank, 69). By relying partially on intergenerational transfers and also incorporating social/economic programs that facilitate old-age security measures, governments can improve living standards for the elderly. For example, there are “community clinics, outpatient health facilities, and day and social facilities for older people in Angola, Hong Kong, and Thailand” (World Bank, 69). More ways of facilitating old-age security include improving communication between urban and rural settings and creating special security programs for widows (World Bank, 69). Essentially, the effectiveness of security policies requires a keen understanding of the specific countries’ social and economic structures. By incorporating new social and economic policies into the pre-existing culture, there will be a smooth transition into modern security.
References:
Jeffrey Nugent, "The Old Age Security Motive for Having Children", in Population and Development Review, Volume 11, Number 1, March 1985, pp. 75-98.
World Bank, "Informal Arrangements," in Averting the Old Age Crisis, World Bank Policy Research Report, Oxford University Press, 1994, Chapter 2, pp. 49-71.
A. Dharmalingam, "Old Age Support: Expectations and Experiences in a South Indian Village", Population Studies, Vol. 48, No. 1, March 1994, pp. 5-19.
Lee A. Lillard and Robert J. Willis, "Motives for Intergenerational Transfers: Evidence from Malaysia" in Demography, Vol. 34, No. 1, February 1997, pp. 115-134.