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Will Bangladesh benefit from demographic dividend?
Dr. Ubaidur Rob
 Bangladesh has made considerable progress in health, education and food production in the last three decades. Without significant improvements in economic conditions, the country reached the near replacement level fertility in one generation. The national family planning program has managed to motivate couples to reduce fertility from 6.3 children per family in mid-seventies to 2.3 in 2011. The primary school enrolment is almost universal. In 2013, approximately 2.8 million children have finished primary school which amounts to more than 95 percent of the total surviving children of 2001 birth cohort. The future demographic situation looks bright since two-thirds of the couples desired two-child family and nearly 80 percent of the couples who do not use contraceptive methods intend to use a method in the near future.

In the recent years many countries in South Asia have experienced impressive economic growth and some of these gains have been attributed to demographic changes particularly increase in the proportion of economically active population. This particular phenomenon is commonly known as demographic dividend and can be defined as the potential benefit offered by changes in the age structure of the population, during the demographic transition, when there is an increase in working-age population and associated decline in the dependent age population. In other words, it is the accelerated economic growth that may result from a decline in a country’s birth and death rates and subsequent changes in the age structure of the population.

Countries typically go through three phases in the demographic transition from a period of high birth and death rates to a period of low birth and death rates. The first phase is characterized by high fertility and mortality rates with minimal population growth. However, with advances in medicine and technology mortality begins to drop but fertility remains high leading to high population growth known as second phase. As couples realize that more children are surviving and their educational needs among others have to be catered to, the desire or demand for more children decreases and fertility begins to drop. Eventually both mortality and fertility rates are low with no or some population growth (third phase). In other words, the countries go through four stages of fertility transition:

* High crude birth rate (CBR) and high crude death rate (CDR) - little or no population growth

* High CBR and decreasing/low CDR - high population growth or ‘population explosion’

* Decreasing CBR and low CDR - population growth begins to be steady

* Low CBR and low CDR - little, no, or even negative population growth

In most of the developing world, a demographic transition is under way, accelerating with the declines in mortality that began during the middle of the last century. For example, improvements in medicine and public health – for instance, the introduction of antibiotics such as penicillin; treatments for diseases such as tuberculosis and diarrhoea have contained or eradicated diseases that once killed millions of people in developing countries including Bangladesh. These advances were accompanied by improved sanitation, better nutrition, and the wider practice of healthier behaviours. All this gradually led to increase in life expectancy; for some countries it has doubled in 50 years. As a consequence, the total population has also increased rapidly. For instance, the total population of Bangladesh has doubled and life expectancy at birth has increased to 70 years in the last three decades.

Bangladesh is now in the third stage of the demographic transition. It is projected that Bangladesh’s population will reach its replacement level fertility rate (TFR = 2.2) by 2015. However, when this occurs the population will still be increasing due to the large number of its population of the reproductive age group. It is estimated that the country’s population will be stabilized around 200 million in 2050. Age structural transition - a shift from young to old age structure - occurs as societies move from a position of high mortality and fertility to a situation of low mortality and fertility as currently observed in Bangladesh. During the process of age structural transition, there will be a period of ‘window of opportunity’ during which child dependency ratio declines due to decline in fertility as well as increase in the working age population as children born during the high fertility regime move into working ages. It is estimated that the dependency ratio will decline from 0.55 in 2011 to 0.45 in the next fifteen years in Bangladesh. If this window of opportunity is duly utilized, there is a greater potential for demographic dividend through increased savings and investment for faster economic growth in the country.

In other words, the demographic dividend is a rise in the rate of economic growth due to a rising share of working age population in the country. This usually occurs late in the demographic transition when the fertility rate falls and the youth dependency rate declines. During this demographic window of opportunity, output per capita rises. Typically, the demographic window of opportunity continues for 30-40 years depending upon the economic and demographic conditions of a country. When the demographic structure is such that there is a “boom”, or an unusually large generation in the economically-active age group, with low dependency on the economically active group by their elders and by their children, the potential for realization of a demographic dividend in the form of rapid economic growth is high. When the age structure is such that an unusually large cohort among the elderly has to be supported by a relatively smaller number in the economically active age group, there is a demographic danger. The economically active cohorts will not be able to grow the economy because of the burden of supporting the elderly in the absence of effective social welfare systems.

Ageing population can potentially lead to another high dependency ratio and consequent low productivity. However, when those in labour force begin to realize they need to be prepared for retirement and thus starts savings or acquiring assets, this again generates national economic growth. The second demographic dividend is created by improved health, smaller family size and economically active in the older ages. If the accumulated wealth and savings are directed towards productive investments, it will contribute to higher economic growth during the period of ageing of the population.

Starting in around 2014, Bangladesh will enter the best period for realizing the demographic dividend, with the lowest levels of combined child and adult dependency in its history. This golden period will last until around 2033 when the more burdensome adult dependency (ratio of adults over 65 years of age to the working population aged 15-65 years) reaches significant proportions. If the golden years are not used to achieve economic growth and build a good social security system, Bangladesh will face the demographic danger, or the demographic time bomb.

How does the demographic dividend help?

The demographic dividend is delivered through several mechanisms.

Labour Supply

* The generations of children born during periods of high fertility, finally leave the dependent years and can become technically trained workers.

* Women now have fewer children than before and are able to take jobs outside home; they also tend to be better educated than older cohorts and are therefore more productive in the labour force.

Savings

* Working-age adults tend to earn more and can save more money than the very young. The shift away from a very young age distribution favours greater personal and national savings.

* Personal savings grow and serve as a partial resource for industrial investments that fuel economic growth.

Human Capital

* Having fewer children enhances the health of women. Their participation in the labour force, in turn, improves their social status and personal independence.

* Parents are under less strain to provide economic support to many children.

* Family income can be focused more upon better food for infants, including girls, who are often given less to eat. Incomes can be utilized for higher education for girls, and for teenagers of both sexes to improve their life prospects.

Favourable policies are required to encash demographic dividend in Bangladesh

The demographic dividends are not automatic. To realize the dividends, Bangladesh will need educated, healthy and productive labour force. These partly depend on the policies of the government to build human capital, create favourable environment for investment and encourage savings. The following issues need special attention.

* A high share of working-age people (both male and female) is beneficial only if those people are employed. If they are unemployed, the outcome will likely be problematic. Labour market policies must encourage employment. Having a larger, healthier, and better-educated workforce will only bear economic fruits if the extra workers can find jobs. Open economies, flexible labour forces, and modern institutions that can gain the confidence of the population and markets alike may help countries reap the potential benefit created by their demographic transition.

* Girls’ education – especially at the secondary level – helps delay marriage and first pregnancy. Women who marry later tend to have fewer children than women who marry at a young age. Women who are educated are also more likely to work outside the home - increasing the size of the labour force and the potential for economic development. Enforcing policies that enable girls to go to school and equip them with skills to compete for higher-paying jobs, an important step toward gender equity that also fosters economic growth.

* Sound macroeconomic management is the key issue. An economy that has persistently high inflation is unlikely to be able to take the best possible advantage of a large segment of working-age people.

* Many countries have benefited by expanding their exports, and a large working-age population can benefit by having a country’s products succeed in the external market. Nevertheless, imports, unless carefully handled, have the potential to wreak havoc with the lives of millions of workers and their families.

* Relationships with other countries and with international financial institutions will determine the future external resource generation and can be important in extending economic growth.

* Encouraging savings and investment via reform of financial institutions and targeting the poor with microfinance programs will give Bangladesh the resources to prepare for the future, when the boom generation passes out of the workforce.

* Appropriate infrastructure, logistics and legitimate are required at government institutions.

The bottom line is that the economy of Bangladesh has been showing improvement. Therefore, Bangla-desh can take full advantage of the demographic dividend. However, it depends on the policies the country chooses and on its political and economic relationships with rest of the world. However, with poor macroeconomic policies and governance, baby boomer could become a burden with high unemployment rates and attendant high crime and other social ills. The political leaders have to move fast to formulate education strategy and comprehensive economic plan to capture the once-in-lifetime opportunity.

The writer is Country Director, Population Council, Bangladesh
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