demographic dividend and aging population

Manish Kumar Chowdhary

It is not entirely correct to believe that mere increase in population will increase the demographic dividend. Many other factors are also responsible for this. There is also a big reason that there is a huge difference in the development rates of different states of our country, because the priorities of each state are different regarding development.

There is a lot of talk about the demographic dividend, but is it real? Can this dividend be derived from the increasing population of a country? If so, which section of the population gets such benefits. It is well known that the young population is a large productive workforce and acts as an engine of economic growth. Even though the facts are true to the assumption that the maximum benefit of demographic dividend comes from the young population, but it is not 100 percent correct.

Populations are aging in the world’s largest economies—from the United States and Europe to Japan and China. Globally, the number of people aged sixty-five and over is expected to grow from 761 million in 2021 to 1.6 billion in 2050 over the next thirty years. By then one in four people in Europe and North America will be aged sixty-five or over, according to new United Nations population projections. The rapid aging population has given rise to concerns about the future of the global economy.

Some studies have shown that in aging societies, growth in the income level of the population slows down. Yet there is growing evidence that if advanced economies are able to maintain the good health of their elderly, they can not only reduce the economic harm of ageing, but also turn it into an advantage. .

Aging can slow down GDP growth, but does not affect per capita income as much. Experts agree that increased levels of technology and higher life expectancy can increase productivity in the working-age population and potentially offset losses from a shrinking workforce. The accumulated wealth of older generations can drive future investments.

Some countries are showing how this can be done. China’s ratio of 16 elderly people per 100 workers will double by 2025. China’s population is set to decline in 2022 for the first time in sixty years. Developed nations, despite their aging populations, have so far lived in an economic ‘Goldilocks’ zone, that is, neither too young, nor too old. Because their fertility rate is declining rapidly. Countries in East and Southeast Asia, Europe, North America, Australia and New Zealand currently have the highest proportion of the working-age population, defined by the United Nations as being between 25 and 64 years old. But this working age population has now stabilized or is declining.

Usually the working age population of a society produces more than it consumes. In some cases the effect of a growing population on GDP can be more extreme. China is an example. The growth rate of China’s working-age population is projected to decline by one percentage point each year from 2020 to 2060, compared to 1.5 percent growth each year from 1990 to 2015.

However, the GDP growth rate is not always the best indicator of how an economy is coping with aging. What matters most for a population’s well-being is the level of income, measured by GDP per capita. A study has shown that the effect of aging working population on the level of per capita income is negligible. Age should not be linked too much to productivity. You can be healthy and do a lot of work at the age of seventy.

In the context of India, the population of the country has increased by sixteen crores in the last decade. Compared to this, the population of China has increased by half ie eight crores. Many analysts are of the opinion that India has benefited from the population growth, as the millions of people born in the past decade will soon become part of the working age population and then continue to benefit the country’s economy through their economic contribution until they retire.

In this way, India should get twice the demographic advantage of China. But it is not so. There are two reasons for this. First, an average Indian works less than the Chinese. Second, India’s labor force contribution is 45 per cent, compared to China’s 68 per cent. It is clear from this that it is not entirely correct to believe that mere increase in population will increase the demographic dividend. Many other factors are also responsible for this. There is also a big reason that there is a huge difference in the development rates of different states of our country, because the priorities of each state are different regarding development.

Lack of education is also a major hindrance in the way of demographic dividend. Among the workers employed in the unorganized sector of India, 31 percent are illiterate, 13 percent are educated at primary level and only 6 percent are graduates. Globally, the proportion of formally skilled workers to the total workforce is 24 per cent in China, 52 per cent in the United States, 68 per cent in the UK and 80 per cent in Japan.

Whereas in India it is only 3 percent. This is the reason that even though an additional 1.5 crore people are added to the labor force every year, only 12 to 15 lakh people get employment every year. If we don’t raise our workforce participation rate and improve the skills of workers, however much the demographic dividend may be, we won’t get much. The demographic dividend may also be what comes with an aging population. Significantly, aging societies adopt labor-saving technologies more quickly, making them more capital-intensive, leading to higher per capita incomes than other countries.

Economists point out that in focusing on aging, countries are often failing to make optimal use of their working-age populations. We may have an aging population, but we also have a lot of unemployed youth at present. Japan, with the world’s oldest population, is a leader in developing policies that focus on the health needs of older people, while making labor markets more flexible by allowing older people to work.

Japan has raised its retirement age from 60 to 65 through a 2021 law requiring employers to try and retain their workforce until age 70. Also in Asia, Singapore has made it mandatory for companies to offer re-employment to employees from 2022. Singapore plans to raise the retirement and re-employment ages to 65 and 70, respectively, by the end of the decade. The paradox is also that political gains are hidden behind such steps taken by the governments.