Economists and others taking part in the annual conference of the South Asian Network on Economic Modelling (SANEM) in Dhaka this week dwelt at length on the demographic dividend. They discussed how Bangladesh could reap multiple benefits from such dividend.
But the stark reality is that many developing countries, including Bangladesh, will hardly be able to do that, without appropriate policies and substantial investments in a number of areas. Recent developments rather bear out that the demographic dividend will be wasted, if such policies and investments are not in place.
Bangladesh is now going through a phase of demographic transition. The country needs to concentrate its effort on harnessing the potential of demographic dividend as the benefit will not be there for long. Here, there is a strong need to equip its largely-young population with skills while the country strives for becoming a higher middle-income one.
Demographic dividend, according to analysts, leads the surge in economic growth that may result from a decline in a country's mortality and fertility rates and the subsequent change in the age-structure of its population. This decline is often accompanied by an increase in average life expectancy which increases the size of the working-age population. The shifts in age-structure are driven by a transition from people living short lives and having large families to living long lives and having small families.
The United Nations Population Fund (UNFPA) considers such a benefit in terms of higher economic growth potential, resulting from shifts in a population's age structure in a country, mainly when the share of its working-age population is larger than that of the non-working-age ones.
Combined with effective public policies, the period of time for taking advantage of the demographic dividend can be the conduit for facilitating more rapid economic growth, putting less strains on families. This is also a period of time when many women join the labour force for the first time. In many countries, it has led to increasingly smaller families, rising income and higher life expectancy rates.
Bangladesh had, in fact, a demographic dividend prematurely in the 1980s despite lower levels of its per capita income, which is, however, helping it now to maintain the current growth rate. But the bad news, according to economists, is that the country may exhaust earlier the opportunities for its demographic dividend, as the proportion of its elderly people and dependents is increasing.
The major constraint to reaping the benefit of demographic dividend relates to the fact that most of the country's workforce is untrained, semi-skilled or uneducated. Creating adequate and proper employment opportunities for its workforce is a real challenge for Bangladesh. There is also a need for forging a link between educational institutions and industries so that the former can effectively cater to the skill needs of the latter. It has to create jobs that in turn generate demand in order to reap the benefit of demographic dividend. Attention has also to be paid to small and medium enterprises which, as analysts say, can act as one of the main growth drivers and provide thus a cushion to the economy during shocks.
There is no denying of the economy's resilient growth and overall stability in an uninterrupted manner over past several years. But this growth rate is still stuck at 6.0 per cent. Acceleration of this growth rate is critical to achieving the goals and objectives that have been spelt out in the Seventh Five Year Plan document.
Meanwhile, the economy is yet to move in the direction that is needed to take advantage of its demographic dividend because of serious shortage of skilled workforce. This heightens the need for making more quality-wise investments in education and health to ensure the supply of a healthy, skilled and productive workforce.
There are four distinct ways through which, according to economists, the benefits of demographic dividend can be reaped in a purposeful way.
On this count, first comes the case of ensuring increased supply of skilled and semi-skilled labour force; here the magnitude of the benefit of demographic dividend will largely depend on the economy's capacity to absorb and employ productively the additional workers.
The second way of reaping demographic dividend is through increased savings which, if and when invested in priority sectors, will lead to higher productivity.
The third one is human capital. Fertility declines result in reduced economic pressures at home, thereby enabling parents to invest more in children's health and education, leading to healthy and educated labour force.
Then comes, as the fourth way as noted above, the increase in domestic demand, resulting from the rise in per capita income and the reduced dependency ratio.
The economists have highlighted all such aspects, amply well. In this context, there is some striking evidence of the ways of successfully reaping the benefit of demographic dividend by the East Asian countries. Those countries benefited from the knowledge, experience, and technology of other countries which had already passed through the demographic transition.
In Bangladesh, workers are now being employed in a relatively large number than before in the industrial sector. But their productivity continues to be low. The share of jobs in service sector has also been growing but value addition there, in real terms, is still lower than that of most other Asian developing economies.
The main challenge ahead of the country is thus to create the conditions for faster growth of productive jobs in industry and service sectors. Otherwise, the demographic dividend might turn into a large demographic burden.
© 2017 - All Rights with The Financial Express