Feeling the squeeze: Asia’s Sandwich Generation


Published on

As people in Asia live longer and women have children later in life, a rising number of adults are simultaneously caring for young children and ageing parents—a phenomenon long recognised in other parts of the world as the growth of the "Sandwich Generation". This new research by the Economist Intelligence Unit and sponsored by Fidelity International shows one in five working-age Asians is now a member of this cohort. These people are typically aged 30 to 45, married, and supporting one or two children and two parents or parents-in-law.

These findings are among the results of a survey of 700 people in Australia, China, Hong Kong, Japan, Singapore, South Korea and Taiwan. The aim of the survey, which was conducted by the Economist Intelligence Unit in March and April 2010, was to ascertain how the burden of supporting parents and children affects the decisions of working-age adults in relation to their disposable income and investment/saving behaviour.

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Feeling the squeeze: Asia’s Sandwich Generation

  1. 1. Cover_final.pdf 7/9/2010 1:36:36 PM Paper size: 210mm x 270mm Feeling the squeeze Asia’s Sandwich Generation LONDON 26 Red Lion Square London WC1R 4HQ C United Kingdom M Tel: (44.20) 7576 8000 Y Fax: (44.20) 7576 8500CM E-mail: london@eiu.comMYCY NEW YORKCMY 750 Third Avenue K 5th Floor New York, NY 10017, US Tel: (1.212) 554 06000 Fax: (1.212) 586 0248 E-mail: newyork@eiu.com HONG KONG 6001, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) 2585 3888 Fax: (852) 2802 7638 E-mail: hongkong@eiu.com GENEVA Boulevard des Tranchées 16 1206 Geneva A report from the Economist Intelligence Unit Switzerland Tel: (41) 22 566 2470 Fax: (41) 22 346 93 47 Sponsored by E-mail: geneva@eiu.com
  2. 2. Feeling the squeeze Asia’s Sandwich GenerationContentsPreface 3Executive summary 4Introduction: sandwiched between young and old 6 How large is Asia’s sandwich generation? 81. Family responsibilities 10 Filial values 10 Children come first 112. Financial pressure 13 Education is a priority 13 Parents cost money too 15 Japan: an ageing outlier 17 Costs are expected to go up 183. Working harder, saving less 20 Taking fewer risks 21 Reeling from the financial crisis 22 A dearth of financial advice 244. A happy retirement? 25 The pessimists 25 The optimists 26 From doting to dotage 27Conclusion: a generation under pressure 28Appendix: survey results 29 © Economist Intelligence Unit 2010 1
  3. 3. Feeling the squeeze Asia’s Sandwich Generation Disclaimer © 2010 The Economist Intelligence Unit. All rights reserved. All information in this report is verified to the best of the author’s and the publisher’s ability. However, the Economist Intelligence Unit and the sponsor do not accept responsibility for any loss arising from reliance on it. Fidelity, Fidelity International, and Fidelity International and Pyramid Logo are trademarks of FIL Limited and are used with its permission. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Economist Intelligence Unit.2 © Economist Intelligence Unit 2010
  4. 4. Feeling the squeeze Asia’s Sandwich GenerationPrefaceFeeling the squeeze: Asia’s Sandwich Generation is an Economist Intelligence Unit report, sponsored byFidelity International. The findings and views expressed in this report do not necessarily reflect the viewsof the sponsor. The report’s quantitative findings come from a survey of 700 respondents in Asia, conducted in Apriland May 2010. The Economist Intelligence Unit’s editorial team designed the survey. Anna Morris was theauthor of the report and David Line was the editor. Gaddi Tam was responsible for design. To supplement the quantitative survey results, the Economist Intelligence Unit also conducted in-depth interviews with relevant experts and individuals supporting parents and children. We would like tothank all interviewees for their time and insights.August 2010 © Economist Intelligence Unit 2010 3
  5. 5. Feeling the squeeze Asia’s Sandwich Generation Executive summary The burdens on the Sandwich Generation—those people “sandwiched” between the competing demands of caring both for their children and for their parents—have gained attention in Western countries over the past 30 years. Rising longevity and declining fertility have combined to swell the number of elderly needing care and reduce the number of workers supporting them. Parents are also waiting longer to have children, and more of those children require support through higher education, raising the likelihood that middle-aged workers will end up having to support older and younger generations simultaneously. Asia, in which Confucian principles demanding respect for one’s parents have always been strong and great value is placed on educational attainment, can expect rapid growth in the ranks of its Sandwich Generation in the near term—and greater burdens upon them in the future. This report, sponsored by Fidelity International, examines Asia’s Sandwich Generation: their priorities, the challenges they face, the impact of providing for multiple generations on their financial situation and their plans for old age. It is based on surveys of members of this cohort in Australia, China, Hong Kong, Japan, Singapore, South Korea and Taiwan, and in-depth interviews with experts on regional demographics, financial professionals and members of the Sandwich Generation themselves. The results show that members of Asia’s Sandwich Generation are typically between the ages of 30 and 45, married, and supporting one or two children and two parents or parents-in-law. Across the countries surveyed, this cohort is an estimated 20% of the working-age population (defined as between 21 and 70 for the purposes of this report). The key findings of the report are as follows: • The pressures of supporting parents and children on Asia’s Sandwich Generation have grown as children stay at home longer and life expectancy rises. Asia is in the midst of a fundamental demographic transformation as large numbers of people move into old age and the elderly begin to outnumber the young. But demographic change has already altered the Asian family in important ways. As life expectancy has increased and women have entered the labour market and delayed having children, families are simultaneously caring for young children and ageing parents more than in the past, and doing so while both spouses work. But although the challenges of providing for parents and children may have increased, in Asia the Sandwich Generation’s sense of filial obligation remains strong, with 78% agreeing that it is their responsibility to help their ageing parents. • Education is a top priority and key expense for the Sandwich Generation, and they are willing to pay handsomely for the investment in their children’s future. Although their commitment to their elderly parents is strong, Asian Sandwich Generation members uniformly spend more time and money caring for their children, and their children’s education is the primary concern. Even if they are not paying steep school fees at private schools, between the cost of tutors, sports and music lessons, and any number of extracurricular activities—which parents consider an integral part of their education—the expenses are4 © Economist Intelligence Unit 2010
  6. 6. Feeling the squeeze Asia’s Sandwich Generationconsiderable. Moreover, many expect to continue paying for their children into early adulthood: 58% ofSandwich Generation members expect to care for their children into their 20s.• Caring for parents can also be expensive, especially where the social safety net is weak. In regionswhere the elderly often lack pensions or access to public healthcare services, the burden is heavier onSandwich Generation members to cover their parents’ costs out of their own pockets than elsewhere.Sandwich Generation members in China and Hong Kong find themselves spending more on their parentsthan their Asian peers, the result of underdeveloped social security systems that provide little support forretirees or their families. However, parents frequently assist the Sandwich Generation in return, providingchildcare or other support.• The Sandwich Generation is working harder, saving less and taking fewer risks with theirinvestments in order to provide for the needs of their children, their parents and themselves. Morethan one-third of Asia’s Sandwich Generation members have had to work harder to cover family expensessince becoming “sandwiched”. At the same time, about half have reduced their savings and investments,and nearly two-thirds are more cautious with their existing investments than they would otherwise be.Unsurprisingly, they mostly prefer low-risk bank deposits as their primary savings vehicles.• Although most of Asia’s Sandwich Generation is actively saving to finance retirement, many foreseea lower standard of living once they stop working. For the most part, members of Asia’s SandwichGeneration are contributing to public and private pensions or insurance policies, but 42% overall expecttheir standard of living to decrease once they leave the workforce. South Korean and Japanese SandwichGeneration members have the highest level of anxiety about their retirement years. The mood is verydifferent among those in China, many more of whom (51%, compared with an aggregate of 22%) expectthat public benefits will increase in the future. Regardless of their projections for the future, few AsianSandwich Generation members (16%) seek professional advice in financial planning.• Because there will be fewer of them, the next Sandwich Generation will shoulder more onerousburdens than the current one. As fertility rates have fallen, the Asian family has become smaller, whichmeans that today’s Sandwich Generation members will have fewer children to care for them in their oldage than their parents did. So while the absolute numbers of the Sandwich Generation may not increaseover the long run, in the future people will have fewer siblings with whom to share the increasingly heavyburden of caring for ageing parents. © Economist Intelligence Unit 2010 5
  7. 7. Feeling the squeeze Asia’s Sandwich Generation Key points n An estimated 20% of the working-age population across Australia, China, Hong Kong, Japan, Singapore, South Korea and Taiwan are members of the Sandwich Generation—those people supporting parents and children simultaneously. n The sandwich generation is biggest in China and smallest in Australia and Japan. n Demographic trends—increasing longevity, delayed childbearing and smaller family sizes—are increasing pressure on those caring for parents and children. Introduction: sandwiched between young and old I n 1981, sociologist Dorothy Miller coined the expression “the Sandwich Generation” to identify a segment of the population of middle-aged adults caring for their children as well as their ageing parents. While some experts debate the finer points of the definition—such as whether one’s children must be young or grown—today the Sandwich Generation is broadly understood to be those people supporting themselves, their children and their parents at the same time. The Sandwich Generation is not a new phenomenon in Western countries, many of which have already experienced rapid population ageing and delayed child birth among women. But to what extent is the workforce in Asia “sandwiched” between generations? Cultural precepts stressing filial piety mean many Figure 1 Asia: population by age group: 1950-2050 0-14 15-60 60+ 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: Derived from United Nations Department of Economic and Social Affairs/Population Division, World Population Prospects 2008, medium variant projections. Figures are in thousands. Definition of Asia is broader than in the survey; full definition is available at http://esa.un.org/unpp/index.asp Figure 2 Asia: births by women under 30: 1995-2050 350,000 300,000 250,000 200,000 1995-2000 2000-2005 2005-2010 2010-2015 2015-2020 2020-2025 2025-2030 2030-2035 2035-2040 2040-2045 2045-2050 Source: Derived from United Nations Department of Economic and Social Affairs/Population Division, World Population Prospects 2008, medium variant projections. Figures are in thousands. Definition of Asia is broader than in the survey; full definition is available at http://esa.un.org/unpp/index.asp6 © Economist Intelligence Unit 2010
  8. 8. Feeling the squeeze Asia’s Sandwich GenerationAsian households contain several generations. This may suggest that a larger percentage of working-agepeople in Asia than in the West are supporting elderly parents as well as young children. In addition, Asia is expected to undergo significant demographic change of the kind alreadyexperienced in the West. Increasing longevity means more people living longer once they have retired(Figure 1). And those in the workforce are waiting longer to have children, raising the likelihood thattheir parents will be retired before their children are grown (Figure 2). Declining total fertility is alsolikely to mean the burden of caring for today’s middle-aged Sandwich Generation members will be sharedby fewer siblings (Figure 3).Figure 3Total fertility: 1955-2050 Asia Europe North America654321 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050Source: Derived from United Nations Department of Economic and Social Affairs/Population Division, World Population Prospects 2008, medium variant projections. The chart shows the average number of children a hypothetical cohort of women would have at the end of their reproductive period if they were subject during their whole lives to the fertility rates of a given period and if they were not subject to mortality. Region definitions are available at http://esa.un.org/unpp/index.asp These demographic shifts will have a profound impact on the region’s economies, as the number ofworking-age people shrinks and the number of non-working grows (a rising dependency ratio; Figure4). Though on a macroeconomic level the burden will be borne by all households, those in the SandwichGeneration will bear the greatest weight, financial and otherwise. Many of them face the challenges ofcaring for three generations—their parents, themselves and their children—without much assistance inthe form of social security or public healthcare. How are members of this cohort in Asia coping today? What sacrifices have they had to make? Whatimplications does their position have for their own retirement?Figure 4Dependency ratio: 1950-2050 Asia Europe North America85807570656055504540 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: Derived from United Nations Department of Economic and Social Affairs/Population Division, World Population Prospects 2008, medium variant projection. Chart shows number of non-working-age per 100 working-age in population (defined by UN as between 15-64). Region definitions are available at http://esa.un.org/unpp/index.asp © Economist Intelligence Unit 2010 7
  9. 9. Feeling the squeeze Asia’s Sandwich Generation About the research The survey sample included only people who fall into the “ABC1” socioeconomic classification (that is, “middle class” workers earning local median income For this report the Economist Intelligence Unit levels and above, or with comparable purchasing surveyed 700 individuals in Australia, China, Hong power). In conducting the survey, the principal Kong, Japan, Singapore, South Korea and Taiwan (100 goal was to ascertain how the burden of supporting per country). Survey findings for “Asia” in this report parents and children affects the decisions of working- refer to aggregate results across these countries. age adults in relation to their disposable income and Survey respondents were between the ages of 21 and investment/saving behaviour. Low-income earners 70 and supporting at least one child and one parent, typically do not have the financial means to support financially or otherwise. (Although this age group multiple generations, nor are likely to alter their was selected to capture the widest possible range of investment, saving or retirement planning (if any) Sandwich Generation members, the results showed given the burden of caring for multiple generations. only a tiny minority—0.4%—of all respondents were As such they are not considered as part of the aged over 60.) Both sexes were equally represented. Sandwich Generation in this report. To better understand the challenges facing Asia’s Sandwich Generation, the Economist Intelligence Unit surveyed middle class, working-age people in Australia, China, Hong Kong, Japan, Singapore, South Korea and Taiwan. (For additional details on the survey see the box above.) The EIU also conducted in- depth interviews with experts on regional demographics, financial professionals and individuals in the surveyed regions who identify themselves as members of the Sandwich Generation. How large is Asia’s sandwich generation?1 Defined in this report as The EIU estimates that an average of 20% of the working-age population1 across China, Japan, Hongbetween the ages of 21 and 70. Kong, Singapore, South Korea, Taiwan and Australia are members of the Sandwich Generation. However, the size of this cohort varies considerably between regions: it is largest in China, where an estimated Figure 5 Asia’s Sandwich Generation Prevalence of Sandwich Total Working-age Generation in working-age Implied number of people in Country population population* population** Sandwich Generation Australia 20.4m 16.3m 6% 1.0m China 1.3b 1.0b 37% 370m Hong Kong 6.9m 5.5m 27% 1.5m Japan 127.4m 89.2m 6% 5.4m Singapore 4.3m 3.4m 26% 0.9m South Korea 47.6m 38.1m 18% 6.9m Taiwan 23.1m 18.5m 19% 3.5m * Over 21 and under 70, estimated at 80% of total population except for Japan (70%). NB, The incidence of survey respondents over 60 years of age meeting the definition of Sandwich Generation member is 0.4%. ** See “About the research”, above, for explanation of Sandwich Generation socioeconomic classification. Sources: Economist Intelligence Unit calculation based on survey response rate. Total population data from United Nations Department of Economic and Social Affairs/ Population Division, World Population Prospects 2008, except Taiwan (National Statistics).8 © Economist Intelligence Unit 2010
  10. 10. Feeling the squeeze Asia’s Sandwich Generation37% of the working-age population is supporting multiple generations. The Sandwich Generation is asignificant cohort in Hong Kong and Singapore too, making up an estimated 27% and 26% respectively ofthe population aged 21-70 (Figure 5). Taiwan has a smaller but still considerable Sandwich Generation, making up 19% of its working-agepopulation, as does South Korea (18%). In these places, more working-age people are sandwichedbetween parents and children than in the US, where an estimated 13% of the population is facing theseresponsibilities.2 2 “Baby Boomers Approach Age 60: From the Age of Japan and Australia have the smallest Sandwich Generation of the countries surveyed, accounting Aquarius to the Age offor only 6% of the working-age population in both places: a result, perhaps, of the well-developed social Responsibility”, Pew Research Center, 2005. These findingssecurity systems in those countries that provide more generous pensions and relieve some of the financial refer to “baby boomers”, Americans aged 41-59. Theburden of caring for the elderly. Cultural factors (in Australia’s case) and these countries’ relative wealth median household income ofmay also be explanatory factors. In addition, Japan’s longevity and the health of its senior population this group is higher than that of all other American adults.is another factor, with many people supporting themselves long enough to avoid sandwiching theiroffspring between generations. The typical member of Asia’s Sandwich Generation is between the ages of 30 and 45, married,supporting one or two children and two parents or parents-in-law, and is feeling the pressure of theseresponsibilities. Members of Asia’s Sandwich Generation are facing steep expenses, particularly the costof educating their children, which they view as an indispensible investment for their offspring’s success.They also feel a strong sense of responsibility to care for their ageing parents, and the burden to financethat care falls heavily on them. Asia’s Sandwich Generation is working harder to meet the costs of care-giving, with many taking onmore work, but also saving and investing less than before, and being more cautious with the investmentsthey do make. And while they are reluctant to cut back on the support they provide their families, andparticularly their children, their situation has made them pessimistic about their own futures. Althoughthey are actively funding their retirements, many expect their standard of living to go down after theyretire—an unfortunate development for a generation that, for the most part, has watched incomes riseand standards of living improve throughout their adult lives. © Economist Intelligence Unit 2010 9
  11. 11. Feeling the squeeze Asia’s Sandwich Generation Key points n Sandwich Generation members, and the Chinese in particular, feel a strong sense of obligation to care for their ageing parents. n While children are their top priority, many spend a significant portion of their time and money caring for their parents. 1. Family responsibilities T he phenomenon of caring for multiple generations is as old as the family itself, but Asia’s demographic transition is increasing pressure on working-age adults. This means that unlike previous generations that often needed to care for their ageing parents only once their own children were grown, many families in Asia today are caring for young children and old parents at the same time, and doing so while both spouses work. So while providing care to both parents and children is not a new scenario, the challenges of doing so have increased. These challenges, however, have not eroded the Sandwich Generation’s enduring sense of obligation to care for their ageing parents, and their willingness to provide their parents with physical and financial support. But the Sandwich Generation is also deeply concerned with facilitating their children’s future success and focused on creating opportunities for them. Their children are their primary priority, and the Sandwich Generation is willing to spend significant time and resources to ensure they have every advantage to succeed. Filial values Confucian ideals hold filial piety, or respect for one’s parents and enduring dutifulness to them, as the highest virtue. It is therefore not surprising that despite rapid modernisation, shrinking family size, growing demands on their wallets and the increasing influence of individualistic “Western” values, members of the Sandwich Generation in Asia feel a strong sense of obligation to ensure the care of their parents through their old age. In fact, 78% of Asia’s Sandwich Generation “Singapore is agree that it is their responsibility to help their ageing parents. still dominated This sentiment is strongest in China, where 87% of respondents feel by Asian values. responsible for their parents’ care. Kwok Hong-Kin, assistant professor Children recognize of sociology and a fellow at the Asia-Pacific Institute of Ageing Studies at their filial duties Lingnan University in Hong Kong, highlights the enduring strength of this and feel it is their responsibility: “Filial piety in Chinese society is still very, very strong”, he responsibility says. “It is clear from my research that, no matter their age, the Chinese have a to care for their strong sense of responsibility to look after their parents.” parents.” Members of the Sandwich Generation in China are also spending more time —Tan Ern Ser, Associate caring for their parents than their Asian peers, and are second only to Hong Professor of Sociology, National University of Kong in how much of their income they spend on their parents, a function of Singapore China’s lack of social insurance or long-term care for the elderly (discussed10 © Economist Intelligence Unit 2010
  12. 12. Feeling the squeeze Asia’s Sandwich Generationfurther in Chapter 2). While on aggregate 69% of survey respondents are helping their parents financiallyin addition to supporting their children, 83% are doing so in China. Singapore is also representative of this trend. “Singapore is still dominated by Asian values,” says TanErn Ser, associate professor of sociology at the National University of Singapore. “Children recognize theirfilial duties and feel it is their responsibility to care for their parents.” In South Korea it is not only filial obligation, but also a sense of gratefulness that underpins theSandwich Generation’s respect for their parents, whose hard work turned a nation devastated by theKorean War into a prosperous, modern country with a powerful economy and a high standard of living.This group “has seen its parents work very hard to build up the Korea we have now”, says Thomas Klassen,associate professor of political science and public policy at York University in Toronto, and an experton retirement and South Korea. “They worked six days per week for 52 weeks per year, so the SandwichGeneration feels a kind of obligation to take care of their parents because of the sacrifices those peoplemade.” Strong bonds between parents and children and feelings of obligation to care for one’s parents as theyage are not unique to Asia. But the abiding strength of filial piety in Asian cultures, combined with theabsence of alternative systems of care for the elderly in many of these countries, results in a pervasiveexpectation among the Sandwich Generation that they will be the primary providers for their ageingparents, even as their own families grow.Children come firstWhile members of Asia’s Sandwich Generation are certainly committed to supporting their parents, theysay that their children are their top priority, and in every region surveyed respondents spend considerablymore time caring for their children than their parents, as may be expected. More than one-third (34%) ofpeople surveyed spend over 40 hours per week caring for their children, and another 37% spend between20 and 40 hours. But the vast majority of respondents, 80%, spend less than 20 hours per week caring fortheir parents (Figure 6).Figure 6 Figure 7Hours per week spent caring for family members (Asia) Proportion of income spent on family members (Asia)(% respondents) (% respondents) Children Parents Children Parents0-10 1-10% 10 8 50 4611-20 11-25% 19 41 30 3921-30 26-40% 24 33 12 1231-40 41-50% 13 12 4 2More than 40 More than 50% 34 6 4 1Source: Economist Intelligence Unit survey Source: Economist Intelligence Unit survey © Economist Intelligence Unit 2010 11
  13. 13. Feeling the squeeze Asia’s Sandwich Generation Sandwich Generation members also uniformly spend a higher proportion of their income on their children than their parents. About half (51%) spend more than a quarter of their income on their children, but only 15% spend this much on their parents. (Figure 7). The fact that Sandwich Generation members spend more money on their children than their parents is unsurprising in that most parents in this demographic will have at least some form of income or savings. It is also exaggerated by the high costs of raising a child, particularly when it comes to education (discussed further in Chapter 2). Sandwich generation members are quite clear that their children come first when it comes to their resources. Of her 13 year-old son, one member of Hong Kong’s Sandwich Generation, a working mother who is also supporting her mother and mother-in-law, says: “We always worry about his educational funding, we always plan to save for him. We think of him first and make sure he’s got enough money for his education before we think about our leisure or travelling.” According to Anne Tay, vice president of wealth management at OCBC Bank in Singapore: “Members of the Sandwich Generation face three competing drains on their financial resources: themselves, their parents and their children. If they have just one dollar to spend, it will go on their children. If they have two dollars to spend, the second dollar goes on parents. If they have three dollars, the third will be spent on themselves.”12 © Economist Intelligence Unit 2010
  14. 14. Feeling the squeeze Asia’s Sandwich GenerationKey pointsn Many Sandwich Generation members report struggling to cope under the pressure of supporting parents and children, and most expect family expenses to increase over the next five years.n Education is a major expense for Sandwich Generation members, who view it as an investment in their children’s future success.n Caring for parents is less costly, but it is still a drain on resources, particularly where elderly parents have limited access to public benefits that would help offset the cost of their care.2. Financial pressureS upporting parents and children simultaneously poses daunting financial challenges. While 63% of respondents overall report that they are “coping” or “coping well” with the burdens of caring forparents and children, many are not (Figure 8). More than one-third of respondents (36%) report that theyare “struggling to cope”. In places like China and Hong Kong, where few elderly can count on pensionsor public assistance, and the costs of educating children may be very high, the combined burden onSandwich Generation members may be overwhelming.Figure 8How is Asia’s Sandwich Generation coping?(% respondents) We are struggling to cope We are coping We are coping wellAsia 36 39 24Australia 35 50 16China 45 16 39Hong Kong 53 28 19Japan 30 39 31Singapore 21 56 23South Korea 26 60 14Taiwan 42 29 29Source: Economist Intelligence Unit surveyEducation is a priorityEducation is a major expense for the Sandwich Generation: 75% of its members are currently investing intheir children’s education. In part this stems from cultural pressures to prioritise learning. “The emphasison education is very high in Chinese society, no matter whether it’s in Taiwan or mainland China, or othercountries with Confucian influence such as South Korea or Japan,” says Chin-Chun Yi, a research fellowfocusing on family life at Academia Sinica, a research institution in Taiwan. This extends to concern about competition for university places, for which Sandwich Generationparents are keen to provide their children with every advantage from an early age. As Mr Klassen © Economist Intelligence Unit 2010 13
  15. 15. Feeling the squeeze Asia’s Sandwich Generation notes, acceptance to the best universities is what “all South Korean parents want and expect”. And the competition can be intense. A Hong Kong Sandwich Generation member, whose teenage son attends private school, feels the pressure he faces is significant. “Kids in Hong Kong have to compete with all the kids in China, all the kids in Asia, so it’s very competitive now.” Preparing children to succeed in this environment means that educational expenses can be very high, starting as early as primary school. In Asia’s richer cities the burden can be considerable if parents wish to educate their children privately. In Hong Kong, private primary school tuition can cost over US$20,000 per year. With an average annual income of US$29,850 in 2009 (at market exchange rates), this is an option that very few can afford. School fees are a considerable burden even on those in the middle and upper income brackets surveyed for this research. This may be why 53% of Hong Kong Sandwich Generation members—compared with 36% overall—say they are “struggling to cope” with their responsibilities. Elsewhere, the choice between public and private fees is not as clear, but the financial burden can be equally steep. Mr Kwok of Lingnan University says that in China parents must often fork over significant “donation fees”, amounting to thousands of US dollars, to secure their children’s places in respected schools. “In some big cities like Shanghai, Guangzhou and Beijing, if the children are admitted to a famous school—primary or secondary—they need to pay a so-called ‘sponsorship’ to the school.” Such payments are quite common, he says, and because they are considered as “donations”, the transactions are legal. Zhang Ting, a member of China’s Sandwich Generation who is a co-owner of several restaurants in Shanghai, says his family’s most significant financial commitment is his six-year old son’s education. “I think the highest cost—I don’t want to call it a burden, but rather an investment—is education,” says Mr Zhang. “We want to send him to one of the best schools. We may need to pay up to RMB 50,000 [over US$7,000] to those who will help us place him into the school. We also spend quite a lot for private lessons. He’s learning piano, and we have a piano teacher coming to teach him an hour a week, that’s RMB 400 [US$59] each time.” Mr Zhang is not alone in funding educational extras for his child. In “Now there are addition to school fees, expenses related to tutors, sports and music lessons, also growing extracurricular activities, and any number of activities that boost children’s numbers of young chances of being admitted to a prestigious university add up. In Taiwan, people living with where 91% of respondents (compared with 75% overall) are investing in their their parents well children’s education, it is the norm for students to spend hours in after-school into their late 20s tutoring programs. “If you want to apply to better colleges and enroll in good or even early 30s.” majors, the competition is fierce,” says Ju-Ping Lin, associate professor of —Ju-Ping Lin, Associate human development and family studies at National Taiwan Normal University. Professor of Human Development and Family The same is true in South Korea. “Education is just so important in Korea Studies, National Taiwan Normal University because it’s a country without any natural resources, so the only resource it has are people,” says Mr Klassen. “Parents are under tremendous pressure to educate their children to the greatest extent, and almost all parents pay for extra classes, for tutoring, all kinds of extras.” South Korean parents are so committed to ensuring their child has every advantage14 © Economist Intelligence Unit 2010
  16. 16. Feeling the squeeze Asia’s Sandwich Generationthat it is not uncommon for at least one parent move to Seoul, where the best universities are located,to support their university-age child. Parents don’t consider these costs to be extra. Ms Lin says that ifthe Sandwich Generation has to cut corners, “they won’t cut the expenses on raising kids, especially oneducation”. But the Sandwich Generation can also count on paying educational bills for years, even decades. Justas the expenses begin at an early age, they are also likely to continue until children are in their 20s orlater. In Taiwan, “Support for grown-up children in their early 20s through college is regarded as thenorm,” says Ms Lin, as is parents underwriting the costs of their adult children’s graduate or doctoralstudies. “Now there are also growing numbers of young people living with their parents well into their late20s or even early 30s,” Ms Lin says. This may be why 58% of Sandwich Generation members in Asia expect to care for their children intotheir 20s, and why 73% of Taiwanese do. ”Children continue to depend on their parents longer than, say,during the sixties or before,” says Mr Tan of the National University of Singapore. This phenomenon ofprolonged adolescence suggests that even people whose parents are self-sufficient when their childrenare young may nonetheless end up members of the Sandwich Generation after their children havecompleted university.Parents cost money tooWhile caring for their parents is less time-consuming and costly than caring for their children, and manymembers of the Sandwich Generation can share those responsibilities with siblings, it is still a drainon their financial resources. Thirty-nine percent of Asia’s Sandwich Generation members are spending between 11% and 25% of their income caring forFigure 9 their parents.Proportion of income spent on parents(% respondents) In Hong Kong and China people are spending Asia China Hong Kong1-10% even more. Fifty-two percent of Chinese 46 30 respondents and 49% of Hong Kong respondents 25 spend between 11% and 25% percent of their11-25% 39 income on their parents, and 23% of Hong Kong 52 respondents spend between 26% and 40%, 49 compared with 12% overall (Figure 9). The lack26-40% 12 of fully developed pension schemes in many 16 23 countries in Asia is a major contributor to the41-50% Sandwich Generation’s dual burden of maintaining 2 parents and children, and it may explain the higher1 2 expenses the Sandwich Generation faces in HongMore than 50% Kong and China.11 In Hong Kong a means-tested old-age pension1 is available for the elderly poor, but the incomeSource: Economist Intelligence Unit survey and assets of all family members with whom the © Economist Intelligence Unit 2010 15
  17. 17. Feeling the squeeze Asia’s Sandwich Generation senior lives (or from whom they receive support) are taken into account in determining eligibility. This often excludes the parents of the middle class from receiving payments or even accessing publicly funded long-term care. “If you are middle class and have a certain amount of income you do not qualify for comprehensive welfare, and so you have to pay out-of-pocket,” says Odalia Wong, head of the sociology department at Hong Kong Baptist University. “Nor are you qualified to send your parents to a government-operated elderly home.” So elderly parents either live with working-age children (a situation that is not uncommon in Asia, but which has been becoming less so) or they receive care at private nursing institutions, which are expensive—especially the comfortable ones. Moreover, although medical care is heavily subsidized, Mr Kwok points out that patients often have to pay for medication, which can be quite expensive, especially for a chronic condition. “If the family can afford it, they are forced to spend these large amounts of money,” he says. Families who can afford it may also opt for private medical care to avoid the long waits for treatment at Hong Kong’s public hospitals, driving up expenses even further. In China and South Korea, “social insurance systems are relatively underdeveloped”, says Richard Jackson, director of the Global Aging Initiative at the Center for Strategic and International Studies (CSIS) in Washington DC. “Not just the old age part of it, but healthcare and unemployment and everything else.” Savings rates in China are high in part for this reason—money saved serves as a hedge against sickness, unemployment or any other disruption to income. And while some Chinese retirees are able to count on comfortable pensions from the state-owned enterprises where they spent their working years, the children3 “China’s Long March to Re- of those who have no pensions are largely paying for their parents’ care from their own pockets.3tirement Reform”, Center forStrategic and International In South Korea the situation is quite similar. “Since our government sponsored long-term careStudies, 2009. program is in its early stages, seniors rely on family and private care. It is very expensive and tends to force households to go bankrupt if seniors have a chronic disease such as cancer,” says Sung-won Kang, a research fellow at South Korea’s Samsung Economic Research Institute. Few retired workers have substantial savings or pensions, public or private, “The relationship to contribute to the cost of their care, and although means-tested welfare is between the middle available, only 14% of elderly South Koreans received benefits in 2005, and generation and4 “The Aging of Korea”, Center those benefits averaged less than US$80 per month.4 their parents isfor Strategic and Interna- The exception in Asia, however, is Japan. Of the populations surveyed, the actually reciprocal.tional Studies, 2007. Japanese spend the least on their parents, both in terms of hours and money. While they provide Almost three-quarters (73%) of Japanese Sandwich Generation members financial support to spend under 10% of their income on their ageing parents, compared with 46% their parents, their overall who spend this much. Japan’s case differs from that of many of the parents also help do other countries surveyed in that it has a generous system of social assistance house chores and, for the elderly. Long-term care insurance covers about 90% of the cost of most important of5 Ministry of Health, Labour health care for people over 65 years old.5 Many of Japan’s elderly retirees are all, help nurse theand Welfare, Japan: http:// also supported by generous company pensions, earned during the years of kids.”www.mhlw.go.jp/english/ —Chin-Chun Yi, Researchtopics/elderly/care/2.html. rapid economic growth. Even if they are not, many are fit enough to support Fellow, Academia Sinica16 © Economist Intelligence Unit 2010
  18. 18. Feeling the squeeze Asia’s Sandwich GenerationJapan: an ageing outlier Sandwich Generation members spend between 11% and 40% of their income on their parents, the majority of Japanese spend less than this, with 73% of Japanese spending only up to 10%. Similarly,When it comes to the pressures exerted by an ageing society, Japan 78% of Japanese respondents report spending 1-10 hours per weekcould be expected to face the most daunting challenges in Asia. caring for parents, compared with an average of 50% of respondentsJapan’s over-60 age group counts for 30% of its total population; across Asia who spend this amount of time (Figure 10).in Hong Kong, the second oldest society in Asia, the over-60 cohortmakes up only 18% of the total.6 Yet despite Japan’s large numbers Figure 10 Time and money spent on parentsof elderly, its Sandwich Generation is the smallest of the regions (% respondents)surveyed: only 6% of Japan’s working-age population, compared with a) What proportion of your income is spent on your parents?27% in Hong Kong, report that they are sandwiched between parents 1-10% Japan Asia 73and children. 46 According to Hiroko Akiyama, professor at the Institute of 11-25%Gerontology at the University of Tokyo, the Sandwich Generation 15 39phenomenon never became an issue affecting large numbers 26-40%of people in Japan, despite predictions to the contrary. The 10 12combination of longevity and good healthcare for Japanese 41-50%citizens—which includes long-term care for the elderly—has 1 2largely insulated working-age Japanese from the demands of More than 50%simultaneously caring for parents and children. 1 Japanese women may have the longest lives in the world (86) and 1Japanese men the 4th longest (79)7 but they also remain healthy b) How many hours per week do you/your spouse spend caringlate in life. For 80% of Japanese men and women, it is only in their for your parents? 0-10 Japan Asiamid-70s that they begin to require some assistance in their daily 78lives.8 Thus, the elderly are more capable of remaining independent 50 11-25of their families’ care than elsewhere. “By the time one faces the 15need to care for parents in Japan, it is likely that one is already done 30raising children,” says Professor Akiyama. 26-40 6 In addition, comprehensive public healthcare and access to long- 12term care (Kaigo Hoken) services help to relieve the financial and 41-50 1time burdens on working-age adults of caring for parents. “In the 4past, nursing care was socially imposed almost entirely on women, More than 40but there is now the option to make use of the long-term care 0 4insurance scheme,” Professor Akiyama says. “A lot of people do use Source: Economist Intelligence Unit surveythis while they continue working.” In other parts of Asia, like Chinaand Hong Kong, people cannot turn to comparable social services to 6 “Population Ageing and Development”, United Nations Department of Economic and Social Affairs/Population Division, 2009.assist them in caring for their ageing parents. These factors may explain why the Japanese Sandwich 7 Population projections for Japan (as of December 2006), National Institute of Population and Social Security Research, Japan.Generation spends the least amount of time and money caring for 8 Hiroko Akiyama, “Conceptualising science and society in the age of longevity”,its parents among those surveyed. While on aggregate, 51% of Asian Science Journal Kagaku, Vol. 80 No. 1, January 2010, Iwanami Shoten. © Economist Intelligence Unit 2010 17
  19. 19. Feeling the squeeze Asia’s Sandwich Generation themselves by working for years after reaching retirement age, as the country’s extreme longevity attests. (See also the box on Japan, p17.) It is important to keep in mind when considering the Sandwich Generation’s elder-care costs that their parents often assist them in return, in monetary and non-monetary ways. Ms Yi of Academia Sinica points out that grandparents will often provide care for their grandchildren. “So the relationship between the middle generation and their parents is actually reciprocal. While they provide financial support to their parents, their parents also help do house chores and, most important of all, help nurse the kids.” Mr Zhang in Shanghai agrees, saying his parents are not a burden yet. Mr Zhang is now paying the mortgage on the apartment where his parents are living, but “as a matter of fact, they actually help a lot,” he says. “My parents paid the down payment—50% of the overall price—for our first apartment 10 years ago when I first moved to Shanghai.” Costs are expected to go up The Sandwich Generation is clearly facing significant expenses to maintain their children and parents, and they expect these costs to go up in the near term. Overall, 78% of respondents believe that the cost of their children’s education will increase over the next five years and 69% believe the same of their parents’ healthcare. Singaporeans worry the most about cost increases. Some 67% of Singapore’s Sandwich Generation, compared with 51% overall, are expecting an increase in their parents’ daily living expenses, and 88% are expecting increases in the cost of their children’s education (Figure 11). Figure 11 Rising costs expected over the next 5 years (% respondents) Asia Increase significantly Increase moderately Stay the same Decrease Not applicable Children’s education 36 42 17 4 1 Parents’ daily living care 11 40 43 4 1 Parents’ healthcare 22 47 27 2 1 Your own healthcare 13 42 41 3 1 Children’s healthcare 12 41 39 6 1 Singapore Increase significantly Increase moderately Stay the same Decrease Not applicable Children’s education 51 37 11 1 Parents’ daily living care 20 47 31 2 Parents’ healthcare 26 55 19 Your own healthcare 18 47 33 2 Children’s healthcare 20 45 32 2 1 Source: Economist Intelligence Unit survey18 © Economist Intelligence Unit 2010
  20. 20. Feeling the squeeze Asia’s Sandwich Generation Mr Tan attributes this to what he says are Singaporeans’ middle-class ambitions. “With higheraspirations, expectations and longevity, the general perception is that costs are always on the rise,”he says. “I don’t subscribe to the view that Singaporeans are living from hand to mouth. Rather I wouldargue that even as their hands grow bigger, so do their mouths. Singapore aspires to be a middle-classsociety, and it can be quite costly maintaining a middle-class lifestyle.” Whatever their aspirations, the belief that their basic living costs are on the rise worries people, and somany members of the Sandwich Generation have redoubled their efforts at work. © Economist Intelligence Unit 2010 19
  21. 21. Feeling the squeeze Asia’s Sandwich Generation Key points n Many Sandwich Generation members have had to work harder to pay for the care of their families since becoming “sandwiched”. n At the same time, they are saving and investing less than before, and are more risk-averse with the money they do invest. 3. Working harder, saving less A s a result of the demands of caring for both parents and children, the Sandwich Generation is working harder. More than one-third (36%) of those surveyed say they have to work harder to pay for the care of their families, and another 14% have taken on additional jobs. Mr Zhang, who is overseeing the launch of his third restaurant, welcomes the opportunity to increase his income. “With a new restaurant opening now, I can earn more money. I think this is a kind of healthy pressure on my side to push me work harder and make more money. That’s my duty to my family.” But along with working harder, the Sandwich Generation is also reducing their savings and investments, a trend that may foreshadow trouble when it comes time to retire. More than half of Sandwich Generation members (58%) have reduced or spent savings to meet their immediate living costs. Almost half (49%) have also reduced the amounts they invest or liquidated investments for the same reason. Figure 12 Caring for parents and children means ... (% respondents) a) Savings (Asia) I/we have had to reduce the amount we save to meet immediate living costs 36 I/we have had to spend some of our existing savings to meet immediate living costs 22 I/we have increased our savings because we anticipate higher costs in the near term 15 I/we have stopped saving (ie, we spend all of our income each month) 9 No change 16 b) Investment (Asia) I/we have had to reduce the amount we invest to in order to meet immediate living costs 32 I/we have had to spend some of our existing investments to meet immediate living costs 17 I/we have increased our investments because we anticipate higher costs in the near term 13 I/we have reduced the amount we invest because we anticipate higher costs in the near term 9 I/we have stopped investing 10 No change 19 Source: Economist Intelligence Unit survey20 © Economist Intelligence Unit 2010
  22. 22. Feeling the squeeze Asia’s Sandwich Generation In China, while similar numbers of people have reduced or liquidated savings and investments as theoverall average, 27% have actually increased their savings and 26% have increased investments becausethey anticipate that their near-term costs will go up, compared with 15% and 13% respectively overall. Wang Yong, a private banker at China Merchants Bank in Shanghai, suggests the reason for thesecontradictory outcomes is that China’s Sandwich Generation is far from being a single unit. Incomedifferentials between families within this cohort will lead to divergent savings behavior. “One group ofpeople will have to cut their expenses to meet the growing demands of healthcare and education becausetheir disposable income is not growing as fast as the increase in prices,” Mr Wang says. “The other groupis much better off, so that their accumulated wealth is increasing and the inclination is for investment.” Australians, by contrast, have gone in the opposite direction, with 20% reporting that they havestopped saving altogether to cover their daily expenses, compared with 9% overall, and 25% havestopped investing, compared with 10% overall.Taking fewer risksWith the money they do manage to save and invest, the Sandwich Generation is taking fewer risks. Mostrespondents (64%) say they are more cautious with investments than they would be if they only hadthemselves to look after (Figure 13). So their discretionary savings overwhelmingly go in bank deposits,with 79% of people indicating that banks are among their top two primary savings locations.Figure 13Sandwich Generation’s attitude towards risk (Asia)(% respondents)I/we are more cautious with investments than I/we would be if we had only ourselves to look after 64No effect 24I/we take more risk because I/we need higher returns 12Source: Economist Intelligence Unit survey This preference is attributable in part to the Sandwich Generation’s desire to avoid high-riskinvestments given their family responsibilities. One Hong Kong Sandwich Generation member says herhusband, who works in the financial industry, “will not put [our savings into] risky investments becausehe knows that we have somebody at home that we need to take care of”. Sandwich Generation members may select savings vehicles that they are confident will both protecttheir principal today and ensure their children’s inheritance tomorrow. Hyun Jin Jun, senior manager ofwealth management at Shinhan Investment Corporation in South Korea, says that there, middle-classSandwich Generation members’ principal concern is maintaining their wealth and passing it on to theirchildren, rather than exposing it to risky investments. Many elsewhere feel the same. Consequently, Asia’s Sandwich Generation tends to be risk-averse: after bank deposits, respondentsfrom South Korea, Japan, Taiwan and Singapore opted mostly for insurance products as secondary savingsvehicles. © Economist Intelligence Unit 2010 21
  23. 23. Feeling the squeeze Asia’s Sandwich Generation Hong Kong and China, however, showed a strong preference for the stockmarket. Forty-eight percent of Hong Kong respondents and 40% of those in China named the stockmarket among their top two savings locations, compared with 29% overall, suggesting that these Sandwich Generation members have a higher risk tolerance than some of their Asian counterparts (Figure 14). In this respect, these investment preferences are representative of broader trends in China. “I think there’s a sort of investment mentality in China where people put the majority of their savings into something very safe and then they gamble with the rest of it,” says Mr Jackson. “There’s no long-term investment strategy. It’s either bank deposits or a crapshoot in the stockmarket.” Ms Tay of OCBC Bank believes that stockmarket investors in Singapore are “In Singapore also missing an investment strategy. “Investment in the stockmarket tends to investment in be very short-term, very speculative and very emotionally driven,” she says. the stockmarket “Some investors look at underlying fundamentals, but many are driven by tends to be very sentiment in the broader market. When investors buy into the stockmarket, short-term, very they don’t tend to be long-term ’buy and hold‘ investors.” speculative and South Korean Sandwich Generation members are more sceptical about very emotionally putting their money in stocks and shares. “They have seen the Korean driven.” stockmarket repeatedly fail to yield high returns, even in the long run,” —Anne Tay, Vice-president, says Mr Kang. “Their portfolio consists of high-risk, high-return real estate Wealth Management, OCBC Bank investments and safe financial investments.” Mr Klassen calls this a two-part savings plan. The first part is to purchase a house. But “housing is a relatively risky investment, so they compensate by taking any other cash and putting it into these conservative financial instruments”, like insurance products. Insurance products also allow Koreans to avoid taxes that would reduce their children’s inheritance, thereby safeguarding their accumulated wealth for the next generation, says Ms Jun. Reeling from the financial crisis The Sandwich Generation’s relatively conservative views on investing may have been reinforced by the global financial crisis, which negatively affected the financial situation of 40% of those surveyed. As a result of the crisis, 41% of people polled will need to delay retirement, 44% have adjusted their lifestyles and 37% expect they will probably need to work part-time after they retire. Sandwich Generation members across the seven countries surveyed reported a similar impact. Singapore is typical, with 40% of Sandwich Generation members saying that the financial crisis had affected their financial situation, 51% saying they will have to delay their retirement as a result and 55% saying they have had to adjust their lifestyle. Their investment preferences have also changed, according to Ms Tay: “When it comes to choosing investment vehicles, Singaporeans have a firm preference for physical, tangible assets. That means property. This is the case generally, but this preference has increased since the financial crisis struck. The crisis has hit people’s confidence in paper or financial assets.” 22 © Economist Intelligence Unit 2010
  24. 24. Feeling the squeeze Asia’s Sandwich GenerationFigure 14Sandwich Generation’s top two savings locations(% respondents) Asia Australia China Hong Kong Japan Singapore South Korea TaiwanBank 79 85 83 63 94 84 80 66Stockmarket (direct investment/individual shares) 29 9 40 48 17 29 26 31Insurance products 27 5 21 31 21 34 34 42Property 14 17 19 14 8 10 17 13Mutual funds 10 5 13 7 8 4 13 18Pension funds 7 7 9 6 4 6 9 10Not applicable—we don’t have any savings 2 40 30 21 3Source: Economist Intelligence Unit survey © Economist Intelligence Unit 2010 23
  25. 25. Feeling the squeeze Asia’s Sandwich Generation A dearth of financial advice Figure 15 How does the Sandwich Generation make decisions about savings and investments? (Asia) Despite the fact that they face mounting costs in (% respondents) caring for their families, declining savings and I/we make my own decisions 79 investment rates, and for the most part receive low I/we take financial advice from my banker rates of return on the investments they do make, 6 very few members of the Sandwich Generation I/we take financial advice from my insurance agent in Asia seek the advice of professional advisers 5 I/we take financial advice from an expert that is not tied to a bank or in creating a financial strategy. Four out of five an insurance company (independent adviser) 4 Sandwich Generation members make their own decisions about savings and investments. Only I/we take advice from friends or family 4 16% rely on the counsel of financial or insurance I/we leave all the decisions to a discretionary wealth manager professionals (Figure 15). 1 One reason for this may be sensitivity about Source: Economist Intelligence Unit survey revealing personal information to relative strangers. “Singaporeans, on the whole, are reluctant to discuss their personal wealth and finances with strangers like IFAs [independent financial advisers],” says Ms Tay. “If they have a friend who is financially well-educated, they will seek him or her out rather than an unknown professional.” Attitudes in Hong Kong are similar. Professor Wong of Hong Kong Baptist University thinks that people are likely to ask, “Why should I show you all of my accounts, all my properties? Who are you?” She adds: “We’re very conservative, we don’t trust people easily and we don’t consult financial advisers as readily as Westerners.” Mr Wang of China Merchants Bank says in China investors are also sceptical that financial advisers have much insight to offer. “The Chinese stockmarket, as everybody knows, plays quite a lot on [inside] information, so they don’t really appreciate the advice of professional financial advisers.” Rather they will look to those who they believe have the kind of information they need. On this basis, it is not entirely surprising to find that, overall, mutual and pension funds rank at the bottom of respondents’ preferred savings vehicles, with 10% and 7% respectively using these financial products in their top two savings locations. Ms Jun and Ms Lin both agree that the reason is not that the Sandwich Generation is unaware of such products, but rather that they do not have much income left at the end of the month to invest. The typical member of the Sandwich Generation is “not [as wealthy] as people in their 40-50s who may need to seek external help on wealth development”, says Ms Jun. “They choose saving in bank deposits rather than other financial vehicles because they need to do so.”24 © Economist Intelligence Unit 2010
  26. 26. Feeling the squeeze Asia’s Sandwich GenerationKey pointsn Most are saving for retirement through public or private pension contributions or insurance annuities, but many expect their standard of living to decrease when they retire.n South Koreans and Japanese are the most pessimistic about retirement, while the Chinese are the most optimistic.n Most respondents are not looking to their children to support them in their old age.4. A happy retirement?W ith all the large expenses facing members of the Sandwich Generation—expenses that they may be covering for two or three decades—it is not surprising to find that many people are worried abouttheir future financial security. To be sure, they have considered how they will fund their retirement, andmost are actively saving for it, either through private pension contributions, public pension contributionsor insurance policies. But many (42% overall)expect their standard of living to decrease once Figure 16 Sandwich Generation retirement expectations (Asia)they leave the workforce (Figure 16). Do you think you will be able to maintain your current standard of living once retired? (% respondents)The pessimists No 42South Korean and Japanese members of the Yes 33Sandwich Generation are the most pessimistic Don’t knowabout their retirement futures, with 61% and 57% 26 Source: Economist Intelligence Unit surveyrespectively reporting that they do not think theywill be able to maintain their current lifestylesonce retired. In Japan, where pensions are relatively more generous than elsewhere and elderly livingstandards are high, such attitudes may be related to the country’s long period of economic stagnationand persistent deflation. South Korea’s economy may be growing faster than Japan’s, but the Sandwich Generation remainsgloomy for a number of reasons. One is the lack of public assistance for the elderly. “We don’t have aproper safety net to prepare for retirement. Our pension market is small. Our national pension has avery low replacement rate. And most Korean firms force their employees retire at age 55,” says Mr Kangof Samsung Economic Research Institute. According to Mr Klassen of York University, “People are quitepessimistic that the public pension plan is going to be of much assistance, and that’s partly because inthe past 20 years there have been several reforms to public pensions, and each time the changes havemade public pensions a lot less generous.” The low retirement age is the second factor feeding South Korean insecurity. “The SandwichGeneration are people who will be forced to retire when they’re in their 50s. There’s this policy ofemployers basically firing—we can call it ’mandatorily retiring’—workers in their 50s,” says Mr Klassen.There are a number of reasons for the low retirement age, including the fact that older Korean employees © Economist Intelligence Unit 2010 25