Demographic Dividend

Demographic Dividend

The concept of the "demographic dividend" has now made its way into numerous development policy strategies. It holds out the prospect of a demographically induced boost for development to countries that are at the beginning of the demographic transition, such as the Asian Tigers. But how much will it take for the least developed countries to reach the necessary change in age structure? And under which circumstances can it become the motor for an economic upswing?

Favourable age structure as a starting point

The favourable age structure for a demographic bonus that can later be translated into a demographic dividend arises in the course of the so-called demographic transition that every country experience in the process of its socio-economic development. This defines the change from societies with high death and birth rates to those in which both reach a low level. Due to better nutrition and hygiene, the mortality rates will decrease initially, while birth rates will remain high for some time. Temporarily, this leads to high population growth. Only when more children will survive, when the level of education and economic prosperity increases, when gender equality is promoted and when individual choices and prospects increase, fertility preferences will change, and fertility rates decline with a certain time lag.

Working towards a demographic bonus

As part of this process, not only does population growth begin to slow down, but the age structure of a society also begins to change: As the number of children decreases, the population shifts from the younger age groups to the working-age population. As a result, the economy has a disproportionately large number of people at its fingertips who can work and be productive, while at the same time there are fewer children and still few older people to care for. As soon as for every dependent person there are at least 1.7 economically active persons between the age of 15 and 64, countries will reach the favourable age structure of the "demographic bonus". With additional investments and the necessary frameworks in place, this can be transformed into a development boost - a demographic dividend.

No easy task

As promising as the concept seems, it is by no means guaranteed that states will actually be able to harvest a demographic dividend. This requires a whole range of preconditions to be met: In order for birth rates to fall and the age structure to change, people's living conditions must improve in many ways. In order to be able to turn this demographic bonus into a dividend, the working-age population requires the provision of the highest-possible level of education and, above all, a job. Otherwise, a large proportion of young workers without prospects can lead to social tensions and conflicts. Rather than a dividend, a "demographic disaster" could be the result.

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