Research on How the Digital Economy Contributes to Achieving A High-Level and Balanced Development of the Elderly Care Service Industry

2.1.1 Getting Old Prior to Achiving Affluence

In 2001, the proportion of China’s population aged 65 and above surpassed 7 percent, signifying the country’s formal entry into the aging society phase. During this period, South Korea also stepped into the aging society. In 2000, the proportion of the population aged 65 and above reached 7.13%. Nevertheless, China’s per capita GDP at the time of entering the aging society was less than one-seventh of that of South Korea (Lin et al., 2024). Even at the current stage, the characteristic of China becoming aged prior to getting wealthy is obvious. China’s life expectancy in 2021 reached the level of the UK in 2002 and the US in 2008, yet its per capita GDP was merely 44% of the UK in 2002 and 32% of the US in 2008 (Lin et al., 2024). Additionally, China’s situation of getting old before getting rich is also reflected in indicators such as industrialization and urbanization. For instance, in 2000, China’s tertiary industry accounted for 33.4%, 10.4% lower than that of Japan, while the primary industry was 9.9% higher. During the same period, China’s urbanization rate was about 36.9%, in contrast to 64.0% in the United States and 72.1% in Japan (Du and Yang, 2006). It can be perceived that the most prominent feature of China in the aging society stage is getting old before getting rich. The underlying meaning of getting old before getting rich is that the income of the elderly population is not substantial. In 2018, the disposable income of the elderly in China was 24,000 yuan. Compared with the national per capita disposable income of 28,000 yuan in 2018, it can be observed that the income of the elderly is significantly lower by approximately 14.3% (Xia and Wang, 2021). It should be noted that the national per capita disposable income encompasses the disposable income of the elderly, thus the actual gap between the per capita disposable income of the elderly and non-elderly is larger. In terms of income structure, although the proportion of pension income in total income in 2018 has declined compared with the previous year, it still occupied the highest proportion of income, reaching 41%. In addition, wage income has increased significantly, accounting for 30% of the total income in 2018, second only to pension income. The proportions of net operating income and net property income are relatively stable. Particularly, the income gap between urban and rural elderly in China is relatively large, and the income of the rural elderly population is significantly lower (Xia and Wang, 2021). In this context, the following viewpoints can be derived: from the perspective of the size of the elderly population in China, the market potential of the elderly service industry is immense. However, from the perspective of the actual income of the elderly population in China, the effective demand of the elderly service industry is low.

2.1.2 The Demand for Elderly Care Services Continues to Escalate

The distinctive circumstance of the elderly care service industry is that numerous elderly individuals witness a continuous deterioration in their physical condition due to their advancing age, and the number of disabled elderly persons is escalating year on year. According to certain studies, the disability rate among the elderly population in China ranges from 9.25% to 11.15%, and it exhibits a rapid upward trend. The number of disabled elderly will rise from 250 million in 2020 to 500 million in 2050 (Liao and Wang, 2021). In this backdrop, the demand for care services for the elderly population keeps ascending. According to the data offered by the 2015 Sample Survey on the Living Conditions of the Elderly in China’s Urban and Rural Areas, the proportion of the elderly who self-reported the need for care services was 15.3% in 2015, while it is only 6.6% in 2000. In terms of urban and rural areas, the proportion of the demand for care services in rural areas rose from 6.2% in 2000 to 16.5% in 2015, while that in urban areas increased from 8.0% to 14.2% during the same period. Hence, both in terms of the growth rate and the absolute value, the demand for care services in rural areas is higher. Nevertheless, it is evident that the income of the elderly in rural areas is lower than that in urban areas, which further exacerbates the issue of substantial objective needs but low effective needs.

2.1.3 Diversified Consumption Patterns and Stratified Service Requirements

Currently, the consumption patterns of the elderly in China are diverse. From the aspect of consumption composition, apart from daily necessities such as clothing, food, housing and transportation, aspects like education, tourism, entertainment and others that are not essential for daily life also demonstrate a tendency of rapid growth. Regarding service consumption, the elderly have the greatest demand for daily care services like housekeeping and cleaning, accounting for 24.6%, followed by catering, dining services for the elderly, diagnosis and treatment of chronic diseases and health care services. Additionally, the hierarchical characteristics of service demands for the elderly are becoming increasingly prominent, particularly in the consumption of high- income-end and low-income-end. For low-income groups, fulfilling physiological and safety needs is the most urgent; for the middle-income group, after meeting the basic physiological and safety needs, the demand can further extend to social needs and even respect; for high-income groups, respect and self-actualization are of greater significance. Overall, under the old-age security system established on the basis of being basic, having wide coverage and a low level of insurance, the elderly population in China exhibits the characteristic of getting old prior to getting rich, with strong potential consumption demand but insufficient effective consumption demand.

2.2.1 The Supply of Pension Institutions and Facilities is Inadequate

Although China’s elderly care institutions and facilities have witnessed rapid development in recent years, there is still a deficiency in supply. According to the 2022 National Bulletin on the Development of the Elderly, there were 387,000 institutions and facilities for the elderly in 2022, providing a total of 8.294 million beds. However, by the end of 2021, the number of elderly people with chronic diseases exceeded 190 million, and approximately 40 million were disabled or partially disabled, far surpassing the number of elderly care beds. Based on the data of per capita pension beds, the number of pension beds per 1,000 people in 2022 was 29.6, which was much lower than the average level of 50–70 in developed countries. Additionally, the number of pension beds per 1,000 people demonstrated a slightly downward trend, reaching 31.1 in 2020.

2.2.2 The Talents in the Field of Elderly Care Services is insufficient

The insufficiency of the supply of pension beds is not the most significant issue. Even if a pension bed is obtained, the realization of pension services might not be achievable due to the scarcity of professional pension service personnel. The most crucial distinction between elderly care services and other service industries lies in that the service staff need to possess professional knowledge and skills. Nevertheless, according to data released by the China Research Center on Aging, there are merely 500,000 employees related to nursing at present, while the demand for elderly care workers in China has reached 6 million. With the acceleration of the aging process, this data gap is expanding. In January 2023, the Ministry of Human Resources and Social Security published a list of the 100 “most lacking in jobs” in the fourth quarter of 2022, with elderly care workers ascending from the 20th position in the third quarter to the 14th. Some studies hold that although the number of pension beds per 1,000 people in China is lower than that of developed countries, the utilization rate is low, and thus conclude there is no issue of inadequate supply of elderly care facilities. Actually, this is incorrect. Firstly, this perspective neglects the deficiency of professional nursing staff. The shortage of professional nursing staff results in the situation that although some elderly individuals have the need to reside in nursing homes, they do not do so, presenting the illusion of excessive nursing homes and facilities. Secondly, the high supply cost of elderly care facilities is overlooked. Elderly care facilities and institutions charge excessively, leaving many elderly people unable to afford it and leading to an imbalance between supply and demand.

2.2.3 The Supply of Eldercare Products is Inadequate and the Quality Requires Enhancement

China is a globally recognized manufacturing powerhouse with potent manufacturing capabilities. However, it holds no advantage in the domain of pension products. This is primarily manifested in the generally small scale of enterprises, the absence of leading enterprises, the concentration of products in the mid-to-low end, the scarcity of high-end products, the need for improvement in type and quality, and the inability to compete with foreign products. Currently, China can independently produce merely over 2,000 varieties, accounting for only approximately 10% of that of Germany and 5% of that of Japan. Therefore, the majority of elderly products, especially high-end ones, are largely dependent on imports. Regarding domestic supply, there exists a considerable gap in supplies for the elderly. At present, the products utilized by the elderly population in China are mainly concentrated in the low-end sector. Elderly daily life products have been widely employed. Nevertheless, simultaneously, high-end medical rehabilitation products for the elderly have also begun to enter the lives of the elderly, and the demand potential for elderly products is substantial. However, the issue of fewer product categories means that many needs cannot be fulfilled. More significantly, the prices of imported products are relatively high, further exacerbating the contradiction between the demand and the reality of the low income of the elderly population in China.

2.2.4 The Elderly Care Service System Remains Unestablished and the Supply of Elderly Resources is Imbalanced

China’s elderly care model primarily depends on family-based elderly care. Nevertheless, due to the alteration of the population structure, China’s family structure has started to transform towards miniaturization and centralization. The function of the family-based elderly care system is expected to diminish in the future, so this implies that the government and society should undertake the augmented care requirements caused by the decline of family care. However, China’s long-term care service system and financing system have not yet been established, and the roles of families, communities, elderly care institutions, and the government remain ambiguous. Consequently, the supply of social elderly care services has not witnessed a significant increase, and the contradiction of supply and demand imbalance persists. Additionally, the supply of pension resources and services also suffers from the issue of imbalance between urban and rural areas. In rural areas, it mainly relies on the family. Furthermore, the proportion of the elderly living alone in rural areas is increasing, which further accentuates the unbalanced distribution of pension resources.

2.3.1 The Demand for Elderly Care Services is at a Low Level

From the perspective of China’s economic development stage and the alterations of the pension system, China has established a pension security system that essentially covers all residents. However, the most prominent issue of this system is that the elderly, who constitute the majority of the population, have a relatively low level of pension security. Some researchers and scholars have indicated that the scale of China’s aging population is huge, surpassing the total population of numerous countries worldwide. Based on this, they contend that the demand potential for China’s elderly care services is extremely vast. Nevertheless, economic theory reveals that demand and effective demand are distinct, and only effective demand can exert a positive influence on the economic development of the industry, region, and even the entire nation. The service demand of China’s aging population holds significant potential, but the transformation of this service demand into effective demand is constrained by numerous conditions, among which the most crucial ones are the awareness of service demand and the income level. For individuals and families, the conventional mode of elderly care in China is home-based care. This deeply rooted ideological tradition and cannot be altered in a short period. According to previous studies, some scholars have discovered that the majority of elderly individuals do not accept social care institutions and do not believe that social care institutions can provide satisfactory services. Hence, they are reluctant to opt for any social pension institutions and prefer to remain at home (Liu, 2010), which aligns with the reality that the current pension mode in China mainly relies on the family. Therefore, many elderly people lack the awareness of the demand for elderly care services. However, the reason for this might be that the elderly have limited knowledge about community care and institutional care. Under the circumstance of having a conscious demand for elderly care services, the income level is a crucial factor influencing the transformation of demand into effective demand. Only when the income level is sufficient to afford elderly care services can it be considered effective demand. Nevertheless, the general situation in China is that the elderly who are relatively healthy will not specifically consume elderly care services due to path dependence. Even though the elderly with physical impairments need to consume pension services, they are unable to do so due to income limitations or can only utilize the affordable yet low-level services they can afford. Even the elderly with high incomes may not employ specific elderly care services as they have numerous means to fulfill their needs. Based on the above analysis, China has a large elderly population, but the actual effective demand is low, which leads to the elderly’s demand for elderly care services remaining at a low level. Under the logic of “bad money drives out good money”, the ultimate realization is inevitably a low-level equilibrium.

2.3.2 The Supply Level of Elderly Care Services is Low

In 2023, the General Office of the CPC Central Committee and The State Council issued the Opinions on Promoting the Construction of the Basic Old-Age Service System, within which the key work mainly centers on supply, encompassing formulating and implementing the list of basic old-age services, enhancing the security mechanism of basic old-age services, elevating the supply capacity of basic old-age services, and improving the accessibility of basic old-age services. In 2024, the National Data Bureau of the Ministry of Civil Affairs issued the Notice on Organizing and Conducting the Pilot Project of the Comprehensive Platform for Basic Elderly Care Services. Its principal task is to undertake the pilot project of the comprehensive platform for basic elderly care services by applying unified standards and specifications, and achieve cross-level interconnection of basic elderly care service information nationwide. Its main objective is to construct a “pension service + supervision + resource scheduling”, “medical, nursing, health, and care” and other business integration platform, to better satisfy the demands of the elderly for high-quality pension services, with a focus on enhancing the supply level. Therefore, it can be inferred from the key work of the above two significant policy documents that the supply level of China’s elderly care service requires improvement at present.

The direct issue resulting from the low supply level of elderly care service is the high supply cost of elderly care service. To begin with, elderly care service demands professional skills, and the service duration is often long-term. On the other hand, the data aforementioned reveal that China’s elderly care service industry has a low degree of specialization and a shortage of human resources. The demand for elderly care workers far exceeds the supply, and this gap is expanding. The demand exceeds the supply and the prices are overly high, which leads to the supply being capable of serving only a limited number of elderly individuals. Moreover, the supply of China’s old-age service institutions and industries also faces the problem of demand exceeding supply, which further boosts the supply cost of China’s old-age service. In addition to the above factors, another crucial reason for the high supply cost of social pension services lies in the dislocation of supply: Firstly, from the perspective of the government, the majority of the pension institutions and facilities in China are provided by the government. However, from the perspective of agency theory, due to information asymmetry and the lack of channels for expressing demands, the government is in a state of functional dislocation, offside, and absence in the field of social pension (Qi et al., 2020); Secondly, from the perspective of social enterprises, the social pension mode implemented by social enterprises is singular, and most of them are institutional pensions. Evidently, the particularity of the elderly calls for the diversity of pension models. Currently, many regions have explored new social pension models, but these models have not been widely promoted and applied due to the restrictions of regional and financial capacity on the service objects, and there is a mismatch of funds and models (Qi and Chu, 2021); Thirdly, from the perspective of individuals and families, China’s traditional pension model is home care, and this deeply rooted ideological tradition cannot be altered in a short period of time. However, there are certain problems in the provision of elderly care services to individuals and families, such as inaccurate service objects and unequal content. Due to the existence of moral hazard, most elderly care services tend to favor the healthy elderly, disregarding the very old and the disabled and semi-disabled elderly. The dislocation of the supply of elderly care services leads to the idleness of limited elderly care service resources, and some effective demands cannot be fulfilled, which ultimately pulls down the equilibrium level of supply and demand in the market and leads to the low-level equilibrium trap of elderly care services.

3.1.1 Digital Economy and Economic Advancement

From the perspective of the digital economy and economic development, the digital economy can significantly boost economic growth, and numerous research conclusions in the literature validate this view. For instance, the global broadband report of the United Nations Broadband Commission indicates that every 10% increase in the broadband penetration rate can drive China’s GDP growth by 2.5%; Liu (2010) concluded that every 1% increase in China’s Internet resources can stimulate GDP growth by 0.045%. From the macro level, the overall economic development is inevitably bound to enhance the income of micro-households and individuals, thereby laying a foundation for increasing the consumption of the elderly.

3.1.2 Digital Economy and Employment

From a direct effect perspective, as a novel economic form distinct from the agricultural and industrial economies, the digital economy has given rise to numerous new models and business forms since its advent, thereby bringing forth novel employment opportunities, such as network anchors, which has significantly enriched the employment options for market entities. Analyzed from the perspective of economic theory, the advancement of digital technology in China is labor-biased, thus the development of the digital economy leads to an increase in job positions. Furthermore, the digital economy brings not only knowledge-intensive high-tech jobs but also certain low-tech low-end service positions (Qi et al., 2020). In September 2021, the Research Report on the Employment Impact of the Digital Economy released by the China Information and Communication Institute pointed out that during the epidemic period, the digital economy has reshaped the vitality of the industry and created a variety of digital employment opportunities. More importantly, in the era of the digital economy, many jobs can be performed at home, and even many new jobs themselves do not require leaving home. This is more advantageous for the elderly population whose main care mode is at home, facilitating the care of the elderly and reducing the cost of care.

3.1.3 Digital Economy and Wages

The digital economy promotes an increase in employment. What is its impact on income (wages)? According to the research findings in the literature, the majority of the literature contends that the development of the digital economy can enhance the income of workers (Qi and Chu, 2021). Moreover, the increase in employment under the circumstance of constant supply will intensify the competition among enterprises. To obtain sufficient labor, enterprises will enhance their attractiveness by raising wages (Qi and Chu, 2021). On the other hand, as a new form of productivity, the digital economy represents advanced productivity, which can improve the productivity of various industries by enabling them. Wages are the external manifestation of productivity, and the two are highly positively correlated, so the improvement of productivity will augment the income of labor (Xia and Liu, 2021). In particular, the development of the digital economy will significantly raise the wage income of employees in the elderly service industry. As can be seen below, the digital economy is fostering a new full-chain system pension model. Under the new model, in addition to the traditional knowledge and nursing abilities, the proficient application of digital technology is also necessary for the employees of the pension service. Therefore, the increase in ability requirements will be reflected in income. Finally, some studies believe that the development of the digital economy can significantly improve the wage income of migrant workers. The first mechanism is to provide a more flexible working environment, breaking through the constraints of time, place, and skills. The second mechanism is that migrant workers can obtain higher income through digital platforms and even reduce unpaid wages (Guo, 2020).

3.1.4 The Digital Economy Facilitates the Upgrading of Elderly Consumption

The digital economy boosts the income of micro-entities by stimulating economic development, enhancing employment, and raising wages. Does an increase in income inevitably lead to an increase in consumption? Consumption is a function of income. Generally, when income rises, consumption will correspondingly increase. Additionally, the development of the digital economy has further accelerated this tendency. Firstly, the digital economy has significantly promoted diversity, not only in products but also in consumption, including the transformation of consumption patterns. The traditional consumption mode is offline consumption, but the digital economy enables online consumption and it is increasingly becoming the mainstream form of consumption, which is not restricted to the young group, and an increasing number of elderly people are also beginning to shift from offline to online. Secondly, the digital economy has broken through the scope limitations of elderly consumption. Due to physical reasons, the consumption scope of the elderly population is very limited in the case of traditional offline consumption. However, the development of the digital economy has overcome the limit of the consumption scope, and online consumption can be conducted throughout the country or even worldwide. Meanwhile, online consumption has greatly expanded the consumption scope and stimulated the consumption demand. Thirdly, the digital economy has lowered consumer prices. Traditional offline consumption is more costly than online consumption, so the transformation of the consumption mode can increase the consumption surplus of the elderly population. The increase in the choice of online consumption implies that the competition in online consumption is more intense. The same product can be provided by as many as thousands of merchants, thus the price will decline. At the same time, the lower online cost and more transparent information also reduce the cost of consumption, thereby stimulating the release of consumer demand. Finally, the digital economy can leverage the advantages of big data to determine consumers’ preferences through the massive data generated by online behaviors, so as to achieve more accurate push, and even allow consumers to customize consumer products according to their own preferences. All these greatly meet the consumption needs of the elderly consumer population and promote consumption upgrading. From the above analysis, it can be seen that the digital economy can play a vital role in increasing income, and the increase in income has a significant effect in promoting the increase of effective pension demand, so the low-level equilibrium trap can be addressed from the demand side.

3.2.1 Optimize Resource Allocation and Increase the Supply of Elderly Care Services

The development of the pension service industry demands a significant amount of capital investment. However, the current situation in China is that the supply of pension institutions and facilities primarily relies on the government, with the market’s influence being relatively weak. Since the products provided by the government are mostly “quasi-public goods”, from an economic theory perspective, it is inevitable to encounter the issue of insufficient supply. Simultaneously, when providing old-age service institutions and facilities, it is difficult for the government to collect and integrate the demand preferences of the elderly group, resulting in inefficient resource allocation by the government. On the other hand, from the market perspective, the early development of the elderly care service industry requires a substantial investment of funds, which contrasts with the reality that the majority of market players in China’s service industry are small, medium, and micro enterprises that often face the problem of fund shortage. Moreover, the pension service industry has distinct characteristic differences from other industries, namely, it is demand-oriented. In the case where the demand characteristics and preferences of the elderly are not understood, market input is bound to encounter significant uncertainty, which will intensify the risk and lead to the market players’ inclination to allocate resources to non-pension industries. The development of the digital economy can largely address this problem. By leveraging the big data and digital technology advantages of the digital economy, both the government and market players can promptly and accurately grasp the preference characteristics of the elderly group, integrate the information resources of pension service demand in various and multi-dimensional manners, and solve the problem of asymmetric supply and demand information. This way can achieve the rational choice of supply subjects, the balance and precision of supply and demand of elderly care services, the efficient allocation and utilization of elderly care resources, and significantly optimize the allocation of resources (Xia and Wang, 2021b). For instance, in 2023, the General Office of the CPC Central Committee and The State Council issued Opinions on Promoting the Construction of the Basic Old-age Service System, which mentioned the establishment of an accurate service proactive response mechanism. The establishment of this mechanism relies on the national integrated government service platform and other digital platform systems to facilitate cross-departmental data sharing. It is necessary to establish a precise identification and dynamic management mechanism for the elderly, especially those in need, gradually optimize resources from “people seeking services” to “services seeking people”, and increase the supply of elderly care services.

3.2.2 Reduce the Cost of Elderly Care Services

The second issue confronted by the pension service industry is the high supply cost of the pension service industry, encompassing search cost, copy cost, transportation cost, tracking cost, trial and error cost, etc. In this context, if the pension service industry is promoted by the government, it is bound to impose a burden on the government finance; if it is driven by the market, the supply price of market players is bound to be elevated. Therefore, reducing the supply cost of the pension service industry is the key for the pension service industry to break through the low-level equilibrium. As a new economic form distinct from the agricultural and industrial economies, the digital economy has exerted a considerable impact on economic activities. The low search cost in the digital environment expands the potential scope and quality of search. Digital goods can be replicated at zero cost, meaning they are often non-competitive; because digital goods and information cost approximately zero to transport, the role of geographical distance changes; digital technology enables easy tracking of the behavior of any individual; finally, digital verification simplifies the authentication of the reputation and trustworthiness of any individual, company or organization in the digital economy. To sum up, the development of the digital economy has significantly reduced the search cost, copy cost, transportation cost, transaction cost, verification cost, etc. in the actual operation of industrial development, thereby bringing about the dual improvement of the type and quality of elderly care services and also reducing the price. Digital technology enables the elderly population to enjoy a high-quality service experience at home through intelligent products and new interactive terminals, providing substantial convenience for the elderly population to opt for an independent mode of home care and also saving the cost of going to institutions for pension to a certain extent.

3.2.3 Employing Data Elements and Digital Technology to Establish a Digital Ecosystem of “Elderly Care Service + Supervision + Resource Scheduling” and the Integration of “Medical Care, Nursing, Health, and Caregiving”

The development of the elderly care service industry encompasses multiple departments, regions, levels, and directions. Different departments, regions, levels, and directions intersect with one another, forming a complex ecosystem of the elderly care service industry. Hence, once a problem occurs in the development of the elderly care service industry, it is likely to have a widespread impact. In such circumstances, relying on traditional production factors like human capital and physical capital is insufficient to establish a matching platform for elderly care services, let alone construct an ecosystem for elderly care services. Only by relying on data elements and digital technology can cross-departmental, cross-regional, and cross-level data exchange, system docking, and function expansion be achieved. Simultaneously, under the influence of unified standards, data sharing, resource integration, enhanced coordination, and grassroots empowerment, precise matching of supply and demand for elderly care services and intelligent supervision of the entire process of elderly care service behavior can be realized. From a policy perspective, the State Council, the National Development and Reform Commission, and other departments have issued numerous policies, including the National Mid - and Long-term Plan for Actively Responding to Population Aging, the Implementation Plan for Actively Responding to Population Aging Project and Care Construction during the 14th Five-Year Plan Period, and the Opinions on Promoting Property Service Enterprises to Develop Home-based Community Elderly Care Services. These measures actively plan and promote the construction of a digital ecosystem based on 5G communication technology, the Internet of Things, cloud computing, big data, and artificial intelligence, and integrate home communities, medical institutions, elderly care centers, government agencies, and other departments, regions, levels, and locations into the digital elderly care service ecosystem. Digital economy can improve the service capacity and quality of digital health information management, user health portrait, chronic disease management and prevention, personalized push of health information, disease risk factor identification, emergency rescue, medical resource scheduling, intelligent assistance of daily life for the aging group, and continuously promote the quality, efficiency, healthiness, digitalization, and intelligence of China’s elderly care service industry. Regarding the integration of medical care, nursing, health care, and other services, the digital economy also offers significant contributions. For instance, digital technology, through the integration and innovation of “medical and health care”, employs innovative technology to build a smart pension platform system via an ecological integration strategy without increasing or even significantly reducing the demand for labor, and constructs a new smart pension mode of “system + service + elderly + terminal” that can provide full-age health care services. To establish an online + offline full-scene smart and healthy elderly care ecosystem.