Africa's Demographic Transition: Dividend or Disaster? (Africa development forum) - Tapa blanda

"Africa is poised on the edge of a potential takeoff to sustained economic growth. This takeoff can be abetted by a demographic dividend from the changes in population age structure. Declines in child mortality, followed by declines in fertility, produce a 'bulge' generation and a large number of working age people, giving a boost to the economy. In the short run lower fertility leads to lower youth dependency rates and greater female labor force participation outside the home. Smaller family sizes also mean more resources to invest in the health and education per child boosting worker productivity. In the long run increased life spans from health improvements mean that this large, high-earning cohort will also want to save for retirement, creating higher savings and investments, leading to further productivity gains. Two things are required for the demographic dividend to generate an African economic takeoff. The first is to speed up the fertility decline that is currently slow or stalled in many countries. The second is economic policies that take advantage of the opportunity offered by demography. While demographic change can produce more, and high quality, workers, this potential workforce needs to be productively employed if Africa is to reap the dividend. However, once underway, the relationship between demographic change and human development works in both directions, creating a virtuous cycle that can accelerate fertility decline, social development, and economic growth. Empirical evidence points to three key factors for speeding the fertility transition: child health, female education, and women's empowerment, particularly through access to family planning. Harnessing the dividend requires job creation for the large youth cohorts entering working age, and encouraging foreign investment until domestic savings and investment increase. The appropriate mix of policies in each country depends on their stage of the demographic transition."

The demographic dividend describes the interplay between changes in a population s age structure due to the demographic transition and rapid economic growth. Declines in child mortality, followed by declines in fertility, produce a bulge generation and a period when a country has a large number of working age people and fewer dependents. Having a large number of workers per capita gives a boost to the economy. More important, however, are changes in worker productivity as part of the dividend. Smaller family sizes mean that both families and governments have more resources to invest in the health and education per child. It also means that women are more able to enter the labor force. If the economic environment is conducive, and this large and well-educated cohort finds well-paying work, a first dividend comes as this productive labor boosts family and national income. Longer life spans mean that this large, high-earning cohort will also want to save for retirement. And with the right policies and a well-developed financial sector, a second dividend can come from higher savings and investments, leading to further productivity gains. Except for a few countries in Southern Africa and some island nations, fertility rates and youth dependency rates in Sub-Saharan Africa remain among the highest in the world. That exposes the region to higher poverty rates, smaller investments in children, lower labor productivity, high unemployment or under employment, and the risk of political instability. But demography need not lead to disaster. If the focus shifts from population numbers to population age structures, the prospects for Africa can be positive. Declines in fertility automatically raise income per capita in the short run and have the potential for further gains in the long run in the form of a demographic dividend. With prudent policies, African countries can reap the benefits of this demographic dividend. Policy choices and actions can transform the population of a nation into a healthy, educated, empowered labor force that can contribute to real and sustained economic growth that lifts people out of poverty. As a bonus, a demographic dividend can even accelerate economic growth in ways that spread prosperity across society. There definitely is cause for optimism about Africa s potential to reap a demographic dividend. Child mortality rates, the leading edge of the demographic transition, are declining quickly in a majority of countries in the region. Fertility rates in Africa vary enormously with women s education. For example, women with a high school education in Ethiopia have below-replacement fertility a total fertility rate of less than 2 children per woman while the national total fertility rate is just fewer than 5 children per woman. The rapid expansion of school enrollments in the region makes it likely that the total fertility rate of the school age cohort will be lower than previous cohorts. There also is renewed interest in improving access to family planning services. And once a substantial fertility decline gets under way, feedback loops can accelerate the process. But to realize this potential, strategic planning and preparation are required in each country. The first and perhaps most challenging step is to speed up the fertility decline that is currently slow or stalled in many countries. An accelerated fertility decline will produce larger, healthier, and more productive workforces, and these human capital gains can drive faster economic growth if economic policies create the demand for labor. Reducing fertility leads to immediate gains in income per capita as youth dependency rates fall. However achieving the full potential of the demographic dividend requires economic policies that take advantage of the opportunity. Formulating and implementing policies that strengthen financial institutions and encourage savings will channel rising incomes into domestic savings and investments that further fuel growth and development. The relationship between the fertility transition and human development works in both directions, creating a virtuous cycle that can accelerate fertility decline, social development, and eventually economic growth. Empirical evidence points to three highly interactive accelerators. The first accelerator is health. Child health is a critical input into fertility declines. As children s health and survival rates improve, family demand for more children declines as confidence in child survival increases. Smaller family sizes improve maternal health, which further improves child health, completing a virtuous reinforcing cycle. The second accelerator is education, especially education for girls. Female education is a critical driver of lower desired fertility and the fertility transition. Fertility decline, in turn, has a strong effect on education by allowing for fewer, healthier, better nourished and better educated children. The third accelerator is women s empowerment, clearly related to the first two. Better-educated and healthier women with more market, social, and decision-making power in the family are likely to have fewer children . And women who have fewer children delayed age of marriage, first sexual contact, or through child spacing are much more likely to enter the paid labor market, increase earning, and increase personal empowerment. While speeding the demographic transition can help deliver more and high quality workers, the full economic benefits can be achieved only if there is a strong demand for labor: the workforce needs to be productively employed if Africa is to reap the dividend. The supply of labor is not enough on its own in the absence of sufficient demand. East Asia reaped the demographic dividend because it combined the rapid demographic transition with export-oriented policies that increased demand for labor. The best possible outcomes come from coupling economic policies that expand the demand for labor along with policies that support a healthy, skilled workforce, which can in itself attract investments that create jobs. The takeoff in economic growth in Africa over the last 15 years, after a period of stagnation, creates some optimism for the future. A rise in foreign direct investments (FDI) is compensating to some extent for weak domestic savings. Note, however, that not all FDI is the same in creating jobs. Some FDI may support the growth of extractive industries in ways that do not absorb the increase in labor supply. In the short term, the economic dynamism in the region provides some fiscal space for governments to put in place policies to speed the fertility transition and take advantage of the resulting demographic transition. The longer view hinges on the ability of Africa to continue this rapid growth and to create high productivity jobs that absorb the youth bulge and the expected increase in female labor participation. The report presents a positive agenda for increasing the likelihood of first speeding up the demographic transition and then capturing the potential social and economic benefits to create a demographic dividend in Sub-Saharan Africa. There is a real possibility of a rapid demographic transition and large demographic dividend given the region s rapidly decreasing child mortality, fast increasing female education enrollment, increasing demand for family planning, renewed high level political support for tackling demographic challenges, and rapid economic growth. Reasons for concern include stagnation in fertility rates, stubborn pockets of child malnutrition, cultural norms that greatly value high fertility, gender inequality, and low domestic savings. The report identifies, based on evidence in and outside Africa, policies that can begin to take the challenges of transition and build on recent successes. While this report takes a regional approach to outlining the potential for a demographic dividend and presenting broad recommendations, country-level considerations will drive country-specific approaches. There is huge heterogeneity across Africa regarding how advanced countries are in the demographic transition, making it critical to avoid a cookie-cutter approach. The priority actions listed at the end of this overview are likely to be important in most countries. But country-specific actions must take into account country constraints and opportunities. Countries that still have high child mortality and fertility will naturally focus on policies to speed the demographic transition. Those that have seen substantial progress on mortality and fertility, and are seeing a rise in the working age share of the population, should be addressing the issue of realizing the potential demographic dividend by creating jobs for the rising labor force. For countries with larger cohorts of older workers, issues around saving and investment are central. The phrase demographic dividend might imply a simple interaction between age structure and economic growth. But the report lays out relationships across several sectors that go the heart of human, social, and economic development. The sectors needed to encourage the demographic transition and produce a dividend include: health, education, population, business development and investment, domestic saving, and trade. The relationships among sectors have the potential for virtuous circles as well as vicious cycles. Once the demographic transition gets under way, it can accelerate with the economic growth produced leading to further demographic change that feeds more economic growth. The interconnectedness and range of issues touched upon require national commitment and responses that transcend sector silos and engage broad segments of society."