The aging workforce and medical cost inflation in Singapore are projected to drive up average medical costs per employee by 108% to S$1,973 per year in 2030, representing a mounting financial burden for employers, according to the “Aging Workforce: Cost and Productivity Challenges of Ill Health in Singapore” report released by Mercer and Marsh & McLennan Companies.
The segment of Singapore employees aged over 50 is projected to increase by 55%, and to represent 40% of the workforce by 2030. With an increase in demand for medical services, the aging demographic will contribute to 41% of the escalation in medical costs, as it will drive a rise in the utilization of healthcare services, which together with healthcare cost inflation, will result in a significant surge in overall costs.
“With improved management of health conditions permitting individuals to stay in the workforce longer, increasing financial needs in retirement, as well as more flexible employment options, such as working from home, and on-demand jobs in the gig economy, there is a growing trend for Singapore employees to postpone their retirement,” said Neil Narale, Singapore Business Leader for Mercer Marsh Benefits.
“However, health risks increase with age, ranging from diminishing motor and sensory functions to a greater incidence of chronic diseases, which will create challenges for employers.”
Challenges of stagnating productivity growth
In Singapore, societal aging is estimated to drive the prevalence of chronic diseases such as cancer and diabetes by up to 200% by 2030, which means Singapore will face the challenges of stagnating productivity growth through increasing rates of absenteeism and presenteeism.
Based on current trends, productivity loss due to sickness absenteeism per employee is projected to increase by 25% based on GNI (gross national income).
With an aging workforce, at the national level this represents a cost of S$3.3 billion (US$2.4 billion) in 2030, a 43% increase from 2016. The three main drivers of this are (1) the aging of the workforce, which leads to an increase in sick days, (2) a larger workforce, and (3) the GNI per capita growth rate.
What is worth noting is that 60% of all medical claim costs are attributable to 10% of claimants. This highlights the value of interventions for high-risk groups, such as health and wellness programs to reduce the incidence of disease, and screening for earlier detection of disease.
“Organizations need to adapt to current demographic trends by implementing strategies to mitigate the higher costs of ill health and capitalize on the productivity of an older and potentially shrinking workforce. This includes workforce analytics to characterize productivity drivers, as well as evidence-based workplace strategies such as health initiatives, workplace redesign, and return-to-work programs,” added Narale.
“While an aging workforce may present challenges related to higher healthcare needs, older workers are associated with advantages such as greater firm-specific knowledge, and lower turnover rates. Accordingly, if managed properly, diversity of age at work can serve to improve productivity and reduce the need for governments to tax corporates and the next generation to support the elderly.”
“Consequently, as business leaders and governments design productivity-enhancing changes, it is important for them to consider the implications of an aging workforce in the development of such strategies. A holistic approach that aims to improve the overall health of the workforce, while pre-emptively introducing initiatives to enhance productivity, will enable organizations to capitalize and maximize the productivity of an aging and potentially shrinking workforce,” concluded Narale.