The macroeconomic impact of population aging in Indonesia: Do older adults matter?

Indonesia, the fourth most populous country globally, is approaching an aging population and is considered unprepared for its consequences. In this context, the effect of population aging on economic growth is a widely debated topic. Previous research has shown different perspectives, stating that population aging positively and negatively influences economic growth, while other analyses report an ambiguous relationship. Therefore, this research aimed to explore the phenomenon of population aging and its economic implications by using regional macro data at the district or city level from the official 2020 BPS-Statistics Indonesia publication. Using a linear regression method, the results showed that population aging, measured by the OADR (Old Age Dependency Ratio), both traditional and modified, possesses a substantial negative influence on economic growth. However, older workers contribute positively since an increase in labor force participation could mitigate the negative consequences of population aging. Increased inclusion of older adults in economic activities is also a potential strategy for mitigating the impact. The model suggests that this method reduces economic burdens associated with an aging population. However, further research is needed to determine the most effective methods to increase the inclusion of older adults in the workforce while safeguarding basic rights in terms of health and well-being.