A
demographic dividend is the economic benefit that countries can gain from
changes in population structure. Harnessing demographic dividends are not
automatic – countries need to put certain measures in place in order to reap
the benefits of the changing age structure.
The
most discussed dividend is the demographic dividend that can be harnessed from
declines in fertility otherwise known as the first demographic dividend. The
first demographic dividend can be harnessed during a window of opportunity
after the population changes from youthful to middle-aged due to declines in
fertility.
Less
commonly discussed is the second demographic dividend – one that countries can
gain from population aging. The second demographic dividend that aging
populations can benefit is typically thought to be greater than the first
dividend and the key to sustainable development. Unlike the first dividend, it
can last indefinitely and limited to a window of opportunity. The second
demographic dividend results from accumulation of wealth for old age security
and improvements in productivity of aging workers.
This
blog post will focus on the first dividend which is relevant to developing
countries. Due to the time constraints in harnessing this dividend, it is
important that countries implement the needed policies immediately in the
window of time following fertility decline where an increase in the working
force can spur accelerated economic growth. The change in population structure
after fertility decline involves people in the working ages making up a larger
proportion of the population as the number of births (and by extension the
number of children) declines.
To
capitalize on the growing working age population and gain the first demographic
dividend, countries must invest in the human capital to produce skilled and
healthy workers and create jobs for these workers to occupy. Of course, good
governance is required to ensure these policies are well implemented.
Today
we look at investments in human capital in sub-Saharan Africa using data from
the World Bank’s Human Capital Project. The project produces the Human
Capital Index (HCI) which measures ‘the human capital that a child born today
can expect to attain by his/her
18th birthday, given the risks to poor health and poor education that prevail
in the country where she lives.
It measures his/ her expected
productivity as a future
worker, relative to the benchmark of complete education
and full health.’ The HCI components are schooling (quality and
quantity) and health (child mortality, adult mortality and stunting in children
under 5 years).
The
inaugural HCI findings indicated that more than half of the world’s children will
not realize their full potential due to inadequate investments in health and education. Ghana's report for instance indicated that a Ghanaian child born in 2018 not live up to their
full potential and would grow up to be 44% as productive than they would be if they
benefited from the full education and complete healthcare necessary. The global picture indicates that more than half of the world's children would not live up to their full potential.
Data
from sub-Saharan Africa on the future productivity of children indicate that in
most countries, the average child will not live up to half of their potential
because of deficiencies in education and health. The only exceptions are for
children in Seychelles, Mauritius and Kenya. This indicates that the human
capital investments being made to harness the first demographic dividend in
these countries are not adequate.