Table of Contents
- What Is Demographic Dividend?
- Key Takeaways
- Understanding Demographic Dividend
- Important Note
- Types of Demographic Dividend
- Is Demographic Dividend Guaranteed?
- Which Region of the World Is Experiencing the Fastest Population Growth?
- What Is One Reason Why a Country Would Experience a Demographic Dividend?
- The Bottom Line
What Is Demographic Dividend?
Let me explain demographic dividend directly: it's the economic growth that comes from changes in a country's population age structure, usually triggered by drops in fertility and mortality rates. You see this when a nation moves from high birth and death rates to lower ones, freeing up resources for productivity and investment.
Key Takeaways
Here's what you need to know: demographic dividend means economic growth from shifts in population age, driven by falling fertility and mortality. This change ramps up the working population's productivity, which in turn lifts per capita income. The first phase of this dividend can stretch over 50 years or longer, and the second phase can go on forever as older folks invest in various assets. You'll find these dividends in areas like savings, labor supply, human capital, and overall economic growth.
Understanding Demographic Dividend
Demographic dividends happen in countries where both fertility and mortality rates drop. If you're in a place with low birth rates alongside low death rates, you get an economic boost from the more productive working population. With fewer births, the number of young dependents shrinks compared to workers, so resources get redirected to accelerate economic development and future prosperity.
To tap into this, a country has to undergo a demographic transition—from a rural, agrarian setup with high fertility and mortality to an urban, industrial one with low rates. Early in this shift, falling fertility means the labor force grows faster than dependents, and per capita income rises quicker, all else equal. That's your first dividend.
Most countries have better child survival now, but high birth rates persist in many, especially less developed ones, so they miss out on this dividend.
Important Note
Remember, a drop in fertility and mortality boosts working population productivity, leading straight to a demographic dividend.
Types of Demographic Dividend
The first dividend period usually lasts a long time, like five decades or more. But eventually, low birth rates slow labor force growth, while better medicine creates a larger elderly group, which drains income and ends the first dividend. At that point, per capita income growth slows, turning the first dividend negative.
Then, an older workforce facing longer retirements starts building assets for support, investing them domestically and abroad, which adds to national income. This is the second dividend, and it keeps going indefinitely.
These benefits aren't automatic—you need the right government policies in education, health, governance, and the economy. The dividend's size depends on young adults' productivity, tied to schooling, job practices, childbearing timing, and policies helping young parents work. For older adults, it's about tax incentives, health programs, and retirement policies.
Areas Where You Can Find Demographic Dividends
- Savings: Personal savings rise during this period and can fuel the economy.
- Labor supply: The workforce expands, including more women joining in.
- Human capital: Fewer births mean parents invest more per child, improving education and health.
- Economic growth: Lower dependency ratios increase GDP per capita.
Is Demographic Dividend Guaranteed?
Even if age structures change, that alone doesn't guarantee a dividend. Many countries see drops in birth and death rates but no economic growth, because you need enough jobs to absorb the growing workforce.
Which Region of the World Is Experiencing the Fastest Population Growth?
Africa leads with the highest rates—South Sudan at 4.65%, Niger at 3.66%, and Angola at 3.33%.
What Is One Reason Why a Country Would Experience a Demographic Dividend?
It's not just one reason; multiple factors converge, but key is higher productivity in the working population from lower birth rates reducing dependents and lower mortality expanding the workforce.
The Bottom Line
In summary, demographic dividend is the economic growth from a population's age shift when fertility and mortality fall, expanding the working group. This can boost savings, workforce size, human capital, and growth overall.
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