The care economy conundrum

IN 2023, Japanese researchers revealed a chilling pattern: over a decade, an older person was killed every eight days by a relative overwhelmed by caregiver fatigue – an outcome of exhaustion, despair, and a society unprepared for ageing.

Malaysia is not Japan, yet we are closer than we think. Our demographic clock is ticking faster than our institutional readiness, and the care burden is no longer a question of if, but how prepared we are to manage it.

Care economy and its strategic importance

The care economy encompasses all services, activities, and systems that enable people to live healthy, dignified lives – from infancy to old age.

It primarily serves four groups: children, the elderly, persons with disabilities (PWDs), and the ill. It operates across two spheres.

First, informal care – unpaid work carried out largely by women at home, including childcare, eldercare, cooking and cleaning. An ISIS study estimates Malaysia’s unpaid care work is valued at RM379bil, nearly one-fifth of the services sector.

Second, formal care – paid, professionalised services such as childcare centres, nursing homes, domestic workers, disability care and home care.

Care is often framed as a welfare issue; however, care should be seen as a productivity enabler, a labour-market engine, and the backbone of a functioning society, especially in a country undergoing rapid demographic shifts.

Why the care economy is becoming urgent

Malaysia is no longer within a “demographic opportunity window”. We are entering a demographic crisis, particularly in key economic centres such as Kuala Lumpur, Penang and Selangor.

Nationally, Malaysia’s population is expected to peak at 42.38 million in 2059 before declining. However, economic centres will peak much earlier: Kuala Lumpur by 2031, Penang by 2040, and Selangor by 2049.

Fertility has fallen to 1.67 – well below the replacement rate – while life expectancy is averaging 75 years. By 2060, the median age will reach 40.7.

What makes Malaysia’s situation uniquely challenging is the income level. Our workforce is ageing at US$15,000-US$20,000 GDP per capita, far below South Korea or Japan when they reached similar milestones.

We age before we become wealthy – and without strong pensions, household savings, or social care systems, the burden will fall on families who can least afford it.

Among the care economy’s four beneficiary groups, two trends are clear.

Demand for childcare will decline as fertility continues to fall. In contrast, demand for eldercare will surge as Malaysians live longer but have fewer children to care for them.

Yet eldercare in Malaysia remains informal, unregulated and expensive. Policymakers cannot rely on the optimistic “silver economy” narrative.

An ageing society only becomes an economic opportunity if people can afford care, and many Malaysians today cannot even afford retirement.

The real national objective, therefore, is to maximise the productivity of our existing population by enabling women, families, and older Malaysians to remain economically active – without sacrificing intergenerational equity or ignoring the financial realities of ageing in a developing country.

A strong care economy is the system that makes this possible.

Key considerations for policymakers

With stakeholders ranging from childcare operators to ageing-care advocates, reforms must balance competing interests while remaining practical, future-focused, and aligned with the ultimate goal: building a care system that enables productivity in a shrinking workforce.

Malaysia trains care workers only to see many leave for countries that pay more and value the profession. As global ageing intensifies, this competition will escalate.

Recommendations: Introduce tax incentives and allowances, establish structured career pathways, professionalise the sector through certification and wage standards, and run national campaigns positioning care as skilled and essential work.

Many Malaysians postpone ageing and financial planning until it is too late – shifting the burden onto families and the government.

Recommendations: Implement mandatory retirement-planning courses at entry, mid-career, and pre-retirement stages through Employees Provident Fund (EPF). These should address financial preparedness, lifestyle planning and intergenerational responsibility without overburdening families.

High care costs hinder women’s labour-force participation and strain households.Meanwhile, inconsistent municipal regulations deter investment and enable rent-seeking.

Recommendations: Incentivise private operators to offer bottom 40% income group quotas, as done in the United Kingdom; expand tax deductions for families using formal care services; support home-renovation programmes for safe ageing; standardise regulatory requirements nationwide; and explore innovative models such as Switzerland’s Time Bank, where citizens “save” care hours for future use.

Women continue to face career penalties due to care gaps, while the long-delayed gazettement of the Career Comeback Programme tax incentives for employers (announced during Budget 2025 last year, but still not in operation at the time of writing) has further eroded trust. At the same time, seniors remaining in full-time roles for longer can unintentionally limit upward mobility for younger workers.

Recommendations: Finalise the gazettement of both Career Comeback Programme tax incentives (for employees and employers) and care-leave incentive under Budget 2025; strengthen shared parental leave, flexible work and affordable childcare nationwide; align incentives to support family formation during women’s optimal reproductive years (24–35); adopt transitional retirement models for seniors; and require structured succession planning.

Weak retirement savings, rising care needs and limited insurance coverage leave many Malaysians financially vulnerable in old age.

Recommendations: Malaysia must strengthen long-term care insurance, improve the adequacy of EPF savings, and consider universal healthcare insurance to protect households from ageing-related costs.

The country stands at a demographic crossroads, with the care economy at the heart whether we decline or adapt. Continued delay will deepen inequality, intensify caregiver burnout, and leave seniors ageing without dignity.

With decisive, coordinated reform, Malaysia can build a care system that supports families, unlocks women’s participation, protects the elderly, and sustains our economic resilience. The crisis has arrived; the question is whether we will prepare for it or be overwhelmed by it.