Demographic dividend

The concept of the demographic dividend has now found its way into many development policy strategies. It offers countries that are at the beginning of the demographic transition the prospect of a demographically driven improvement in living conditions, similar to that previously experienced by the so-called Asian tiger states. But what does it take for countries in the Global South to achieve the age structure necessary for this? And under what conditions can this become the engine for an economic upturn?

Favourable age structure as a starting point

The specific age structure of a population that favours a demographic dividend arises during the demographic transition that every country undergoes as part of its socio-economic development. During this development, countries experience a shift from high to low mortality and fertility rates. As a result of improved nutrition and sanitation, mortality rates initially decrease, while fertility rates remain high for some time. This temporarily leads to high population growth. Fertility rates eventually start to decline once it becomes clear that more children survive, when education levels and incomes rise, gender equality improves, and people – especially women and girls – have greater ability to make self-determined decisions about their life. As a rule, governments can accelerate this process by increasing girls’ education and women’s socio-economic empowerment in addition to improving sexual and reproductive health and rights for everyone.

Working towards a demographic bonus

In the course of this process, population growth slows down and the age structure shifts. As the average number of children each woman has decreases, the population shifts from being predominantly young to being predominantly working age. As a result, a relatively large number of people can work, while fewer children and only a relatively small population of elderly people need support. When the ratio of the working-age population (15 to 64-year-olds) to the dependent population reaches 1.7 to 1, a demographic window of opportunity opens: the favourable age structure known as the demographic bonus. With additional strategic investments and policies, this demographic bonus can be transformed into economic growth – a demographic dividend.

No easy task

As promising as it sounds, a demographic dividend is by no means guaranteed. To achieve a demographic dividend, governments must create the right conditions. For fertility rates to decline and the age structure to change, people's living conditions must improve in numerous ways. To turn a demographic bonus into a dividend, working-age individuals need high quality education and, above all, jobs.

The path along the demographic transition

As part of their socioeconomic development, all countries in the world go through a demographic transition – albeit at different times and speeds. As living conditions improve, the mortality rate initially falls and some time later, the fertility rate declines as well. In the interim, the population grows rapidly. In phase four, the fertility and mortality rates both settle at a lower level and population growth comes to a standstill. Countries in Africa in particular are still in the first phases of this transition: since child mortality has already fallen significantly, but the fertility rate remains at a comparatively high level, Africa is still experiencing strong population growth.

Different windows of opportunity for a demographic bonus

A young age structure opens a window of opportunity for a "demographic bonus". When a generation of young people reaches working age but has fewer children than their parents, the population increasingly consists of people of working age (15- to 64-year-olds). This demographic bonus can turn into a "demographic dividend" with opportunities for major socioeconomic progress if the young working age population is able to find good jobs. Countries are in different phases of demographic transition. Many countries, such as Germany and South Korea, are already at the end of the phase with a favourable age structure. Other countries with comparatively high birth rates still have the window of opportunity for the demographic bonus ahead of them, especially countries in sub-Saharan Africa such as Nigeria and Ethiopia.

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