A shrinking workforce looms as two retirement waves approach
Taiwan is moving into a period of acute labor tightness. Government projections show that two retirement waves, the first already underway and a second arriving in about sixteen years, will reduce the working age population by about 6.67 million people. This shift reflects a powerful demographic push and pull: very large birth cohorts from earlier decades are exiting the labor market while far smaller cohorts are entering it. The balance is tilting quickly, and the strain is already visible in participation rates and headcount data.
According to the Ministry of the Interior, Taiwan experienced two baby booms that now set the cadence of retirement. The 1958 to 1966 cohort increased the population by 3.78 million, followed by a second surge of 2.89 million between 1976 and 1982. People born in the late 1950s and early 1960s started retiring in 2023, producing a sharp contraction in the labor force. The ministry estimates that new entrants from recent years amount to no more than 1.6 million, which leaves a gap of more than 2 million workers compared with the number retiring in the first wave.
Participation patterns deepen the gap. Only about 10 percent of people aged 65 or older remain employed in Taiwan, compared with roughly 25 to 35 percent in South Korea, Japan, and Singapore. Among those aged 15 to 29, labor force participation is about 38 percent, far below rates near 60 percent in Europe and the United States. Population totals are also shrinking. As of the end of July, Taiwan counted 23,337,936 residents, down for the nineteenth straight month and lower by 71,387 compared with a year earlier.
How Taiwan reached this demographic crunch
The current squeeze is the product of timing and arithmetic. Large postwar birth cohorts aged into the workforce together, then fertility fell and longevity rose. That combination created a double wave: a sizable group now exiting paid work, and a much smaller group entering. Extended education keeps more young people out of full time jobs until later in their twenties, which depresses measured participation among those aged 15 to 29. A rising share of older adults, many in good health, are leaving the labor market early.
Long range government estimates trace the contours. Taiwan is expected to become a super aged society in 2025, when people 65 and older will account for more than one fifth of the population. The National Development Council projects that the working age share will fall below two thirds in 2028. By 2070, the population could drop to about 15 million, with 65 and older reaching nearly 46.5 percent and the median age rising from about 45 today to more than 62. These figures imply a smaller pool of workers supporting more retirees and dependents for decades to come.
The timing of the second retirement wave reflects the later baby surge. People born in the late 1970s and early 1980s will reach typical retirement ages in the early 2040s. The combined effect of both waves, spread over roughly two decades, explains the 6.67 million estimate. Without a sizable increase in participation, productivity, or migration, headcounts alone would keep tightening the labor market.
Why older adults work less in Taiwan
Older participation in Taiwan lags peer economies. Several factors likely contribute, including pension rules that favor early withdrawal from the workforce, workplace practices that have not fully adapted to older employees, and limited use of flexible options that make later life employment viable. Research on retirees in Taiwan finds that occupation before retirement matters for continued work. Those who worked in private companies or as self employed are more likely to keep earning after retirement than former civil servants. Work flexibility and autonomy before retirement also shape decisions to return to paid or unpaid roles.
Gender differences are clear. The study notes that men are more likely to engage in paid or self employed work after retirement, while women often transition into unpaid work linked to family care. These patterns reflect responsibilities that fall heavily on women and workplace structures that make reentry harder. Policy tools that ease those constraints can move the needle. Flexible hours, phased retirement, job sharing, and intergenerational collaboration help older adults balance work and caregiving. Training that refreshes skills, with a focus on digital tools, also supports active aging and extends working lives.
Economic risks and the productivity puzzle
Population aging does not automatically reduce growth. Evidence from Taiwan suggests that an older workforce can support output through experience and human capital, while the old age dependency ratio, the share of retirees relative to workers, drags on growth. The main channel is productivity, measured as total factor productivity (TFP). When more people retire than enter, firms must deliver more output per worker to maintain growth. That puts a premium on skills, technology, and smarter organization of work.
Labor scarcity can push wages up and incentivize investment in automation, software, and artificial intelligence. These shifts can raise productivity, yet they also test small and medium sized companies that operate on thin margins. Public finances feel the pressure as pension and health costs rise. Research on labor markets indicates that older and younger workers tend to complement one another rather than compete, which argues for team structures that pair experience with new skills. Extending healthy working lives, reducing age discrimination, and supporting working caregivers can each add capacity without relying only on headcount growth.
International bodies advise governments to connect these threads into a coherent strategy. In a recent analysis of global aging, the International Monetary Fund stressed that policy can offset much of the slowdown if countries adapt retirement ages, improve health across the life course, and raise participation of groups that are underrepresented in the workforce.
The IMF wrote: “Policies that support healthy aging, raise labor force participation among older individuals, close gender gaps, and adapt retirement ages to increased life expectancy can help mitigate the negative effects of aging.”
For Taiwan, that guidance maps to attainable steps. A higher effective retirement age, targeted upskilling, and wider access to flexible work can raise participation among people 50 and older. Programs that keep people healthier in midlife deliver economic benefits later by extending productive years.
Policy responses on the table
Taiwan has started to redesign labor and social policies for an older society. Government plans emphasize promoting employment of older workers, encouraging lifelong learning, and upgrading workplaces to be age friendly. Authorities have explored flexible retirement options that allow partial pensions while working part time, plus incentives for companies that retain or hire older employees. Reforms to pension and social security systems aim to keep them sustainable as the population ages.
Supporting women and caregivers is central. Affordable childcare, reliable long term care, and more generous parental leave improve the odds that parents, especially mothers, stay attached to the labor market. Removing barriers to the reentry of women who paused careers helps fill vacancies and narrows skill shortages. Taiwan has also relaxed some restrictions on foreign labor and expanded long term care services, moves that partly ease the strain in hospitals, home care, and manufacturing.
Youth outcomes matter as much as older participation. The Ministry of Labor has flagged a group of about 196,000 university and college graduates who have not enrolled in labor insurance, a signal of stalled entry into formal employment. Work based learning, apprenticeships, and clearer pathways from school to work can reduce time spent between graduation and the first stable job. Raising the 15 to 29 participation rate toward international norms would provide an immediate lift to the labor pool.
Immigration, automation, and the care economy
Migration and technology are the other levers. Peer economies in East Asia provide a window into what works. Japan, which has the highest share of people 65 and older in the world, has expanded the number of foreign workers to around two million and plans further increases. South Korea and Singapore also rely on foreign talent to supplement local labor. Taiwan has options along the same path, including more permanent visas for skilled and mid skill workers and measures that help families settle, such as access to schools and housing.
Automation and artificial intelligence can help companies cope with tight headcounts. Investments in advanced machinery, software, and process redesign reduce repetitive tasks and lift output per employee. That said, Taiwan will need more hands in health and social care even with technology. The government has built out long term care programs, including community services and home based support. Expanding training pipelines for care workers and raising pay and status in the sector can attract domestic and foreign talent. Better coordination between hospitals, insurers, and community providers can improve outcomes and reduce costs.
What companies can do now
Employers will shape much of the near term response. The most effective changes remove friction that keeps capable people out of work or underemployed. Companies that redesign jobs and adjust expectations can expand their recruitment pool without large cost. Practical steps have emerged from research and experience.
- Offer flexible hours, shift options, and part time roles that fit older workers and caregivers.
- Create phased retirement programs that pair reduced hours with mentoring and knowledge transfer roles.
- Adopt job sharing for roles that benefit from continuity but do not require one full time employee.
- Provide skills refresh courses, with a focus on digital literacy and basic data tools.
- Invest in ergonomics, safety, and age friendly equipment to reduce physical strain and injury risk.
- Develop apprenticeship style placements for new graduates and link them to formal benefits, including labor insurance enrollment.
- Use remote and hybrid options where possible, and evaluate performance on output rather than time at a desk.
- Partner with vocational schools, universities, and workforce agencies to align training with vacancies.
Firms that combine these steps with career pathways for both younger and older hires can widen their talent funnel. The payoff is faster recruitment, lower turnover, and better knowledge retention during a period of tight labor supply.
Key Points
- Two retirement waves are projected to cut Taiwan’s working age population by about 6.67 million.
- The first wave began in 2023, and a second wave is expected in roughly sixteen years as late 1970s and early 1980s cohorts age.
- Only about 10 percent of people 65 and older work in Taiwan, compared with 25 to 35 percent in South Korea, Japan, and Singapore.
- Labor force participation among those aged 15 to 29 is about 38 percent, well below rates near 60 percent in Europe and the United States.
- Taiwan’s population fell for the nineteenth straight month to 23,337,936 at the end of July, down by 71,387 from a year earlier.
- Government projections point to super aged status in 2025 and a working age share below two thirds by 2028, with a potential population of about 15 million by 2070.
- Research indicates an older workforce can support growth, but a higher old age dependency ratio weighs on productivity and public finances.
- Policy options include flexible retirement, age friendly workplaces, lifelong learning, support for women and caregivers, selective immigration, and expansion of long term care.
- Companies can act now with flexible schedules, phased retirement, job sharing, targeted training, and safer workplace design.
