Demographic dividend : Reality and possibility for Bangladesh
Abdullah Al Mahmud Shohag
Demographic dividend refers to a period usually 20 to 30 years; when fertility rates fall due to significant reductions in child and infant mortality rates. As women and families realize that fewer children will die during infancy or childhood, they begin to have fewer children to reach their desired number of offsprings, further reducing the proportion of non-productive dependents. This fall is often accompanied by an extension in average life expectancy that increases the portion of the population that is in the working age group. This cuts spending on dependents and spurs economic growth.
Demographic dividend, as defined by the United Nations Population Fund (UNFPA) means, the economic growth potential that can result from shifts in a populations age structure, mainly when the share of the working-age population (15 to 64) is larger than the non-working-age share of the population (14 and younger, and 65 and older). In other words, it is a boost in economic productivity that occurs when there are growing numbers of people in the workforce relative to the number of dependents. UNFPA stated that, a country with both increasing numbers of young people and declining fertility has the potential to reap a demographic dividend.
Bangladesh has experienced a dramatic decline in fertility and mortality during last four decades. Total fertility rate (TFR) has declined by 63.5 per cent to 2.3 in 2010 during 1970-2010. During the same period contraceptive prevalence rate (CPR) has increased by 695 per cent to 61.2 percent in 2011. During 1970-2010 mortality has also declined significantly. Infant mortality rate and under-five mortality has declined by at least 74 per cent to 38 and 78.7 per cent to 47 in 2010 per 1000 live births respectively, while maternal mortality ratio declined by 63 per cent to 240 per 100000 live births in 2010. During the same period life expectancy at birth has increased by 33.6 per cent to 70.2 years in 2010. This has produced a huge shift in age structure of the population, with more population in working ages than in dependent ages. Dependents per 100 working population declined from over 100 in 1961 to 60 in 2010. This has created a window of economic opportunity that can be expressed as demographic dividend of Bangladesh.
Demographic dividend helps improving living standards of the population through increased:
(i) Capital formulation,
(ii) Savings and investment,
(iii) Female participation in labor force,
(iv) Improved quality of labor force,
(v) Slowing unsustainable fractionalizing of holding and releasing pressure of absorbing growing labor force on limited agricultural land and
(vi) Increased demand of goods services
The demographic dividend is unlikely to last long, as has been the case earlier with all other countries. This dividend at present provides an opportunity to Bangladesh to make use of its working-age population for productive socio-economic activities. But the opportunity and the reality are not synonymous. For translating this opportunity into a reality, investments in both public and private sectors is one of the most critical factors.
Besides, macro-economic strains, deficit of infrastructural facilities, problems about access to land, corruption, abrasive tax administration and political instability are impediments to boosting investments. All such factors merit a simultaneous attention to help create a synergy that can lead to a virtuous cycle of more investments, more jobs and more growth.
The benefits of demographic dividend, however, must not be understood only in terms of additional numbers of jobs created. Quality of such jobs, gender participation, future growth momentum and its dynamism etc., are all important points for consideration. Creation of higher productivity jobs, intermediation of savings of the existing working-age population for investment in infrastructures and institutions, creation of greater opportunities for female labor force participation in high productivity decent jobs, etc., matter here. There is little scope to fritter away time by postponing hard, effective and decisive actions to make all these things happen sooner rather than later. Otherwise, the demographic dividend will be lost as the
current bulge in the countrys working-age population will transform into a bulge in the elderly population within the next one decade or so.
Furthermore, making the best out of the current demographic dividend that Bangladesh enjoys is vitally important so that it can take timely steps for operating a funded pension system that will take care of the elderly. Once the demographics change, an ageing population scenario will emerge that requires huge resources to look after the needs of the elderly. In fact, there is a strong need for funding pension and other retirement funds, involving the insurance companies in Bangladesh, for employees in government, public and private sector agencies. And steps for this must be taken and made effective before the period of demographic dividend in Bangladesh is over.
Otherwise, things are most likely to turn for the worse, making it quite challenging to provide the much needed social security benefits or protection to the elderly population at, or upon, retirement. Policymakers and social scientists optimistically discuss the demographic dividend as if the benefits are imminent and within grasp. However, many developing countries, including Bangladesh, will not be able to achieve this economic benefit without appropriate policies and substantial investments in a number of areas. Indeed, as recent development history suggests, the demographic dividend is wasted if such policies and investments are not in place.
Demographic dividend is the surge in economic growth that may result from a decline in a countrys mortality and fertility and the subsequent change in the age structure of the population. This decline is often accompanied by an increase in average life expectancy, which increases the size of the working-age population.
Economists have identified four distinct ways the benefits of demographic dividend can be achieved. The first is the increased labor supply; however, the magnitude of this benefit will depend on the ability of the economy to absorb and productively employ the additional workers. The second is through increase in savings (resulting from reduced dependency ratio) which, if and when invested, leads to higher productivity. The third is human capital. Fertility declines result in reduced economic pressures at home, thereby enabling parents to invest more in childrens health and education, leading to healthy and educated labor force. The fourth is the increase in domestic demand resulting from the rise in per capita income and the reduced dependency ratio.
The writer is Research Officer, Population Council
