A useful indicator for the demographic transition in a country is its “dependency ratio”. This compares the number of juveniles and senior citizens with those of working age who support them, either directly or through government services funded by taxation.
A high dependency ratio is causing considerable concern in mature economies, where funding of health, care and pension provision is inadequate to support ballooning numbers of older people, living ever longer.
By contrast, many poorer countries are at an earlier stage of the demographic transition, with low dependency ratios. In theory these countries should be able to face the future with more confidence, their populations dominated by potentially productive young people. The UN’s World Population Prospects 2019 reports that only 3% of Africa’s population is aged over 65; in Europe the figure is 18%. The economic potential of a low dependency ratio is often described as the “demographic dividend” and has been associated with the tiger economies of East Asia.
In sub-Saharan Africa, it is unclear whether the optimum dependency ratio has been reached. The proportion of children may be too large, not yet economically productive. And the trend to lower fertility rates may be too slow; at current rates Nigeria is considered to be decades away from an advantageous profile. Governments of these countries should be responsive to advocacy for policies which encourage later pregnancies and smaller families.
The demographic dividend is a fleeting opportunity which can quickly overturn into social unrest. Very high rates of youth unemployment do indeed persist in Africa and the Middle East; investment in education and training is desperately needed to ensure that a favourable demographic profile delivers dividends rather than deficits. Indonesia is a country that may be in a position to revive faith in the concept of a demographic dividend..
Aware that the demographic dividend may exist more in theory than substance, many economists interpret the demographic mismatch between richer and poorer countries as a force for migration. This view suggests that the imbalance will be a long term driver of labour migration, ultimately redressing the falling populations of the mature economies.
more Population briefings (updated August 2021)
World Population Projections
Opposition to Family Planning
Overpopulation or Overconsumption?
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