Demographic dividend — opportunity or threat?

Pakistan has a rare opportunity to capitalise on its population bulge, fast turning into a ‘youth bulge’. It is faced with a demographic transition whereby the size of the working age population (15-64 years) will expand to occupy a larger share of the total population. This is expected to decrease the dependency ratio, lead to increased savings and long-term investment trends as more people will be working. This outcome has a direct influence on economic growth. But provided that the working age people are actually working and that the gender and educational gap do not keep potential workforces including females, out of the job market.

With around 50 per cent of the population below 20 years and 60 per cent below 30 years, Pakistan is poised for a ‘demographic dividend’, with its workforce growing at a faster rate than total population. This trend is estimated to continue for the next 30-40 years, depending upon the country’s pace of development. Pakistan’s population is projected to reach a staggering 350 million by 2050, almost double its present size, not a very encouraging indicator by itself. But the projected age structure in various demographic studies shows a sizable share to be occupied by the working age group progressively.

On a regional level, demographic changes are evident in other countries like China and India as well. China is now in the post-transitional phase with its population below 14 years declining, compared to that above 65 years which is fast increasing. China’s economic rise in the past decades, owes substantially to its demographic change that occurred early on and also the fact that it channelised its labour force effectively to boost its export-oriented industry, a policy adopted earlier by the East Asian Economies with their outward looking strategy coupled with plentiful supplies of adaptive labour force that helped them create their ‘economic miracles’. China is now faced with the next step in the process, one of an aging population and a shrinking workforce. Labour is already becoming expensive in China.

India is expected to receive maximum demographic advantage in the next few decades. With 25 per cent of the projected increase in global working population estimated to occur in India, it is poised to add over 300 million working age people to its ranks by 2040, making it the largest contributor to global workforce in the next 30 years. The challenge for both Pakistan and India is again to catalyse and capture the true strength of their burgeoning work force through effective policies in the coming decades.

So, how can Pakistan benefit from this opportunity? The immediate challenge is to educate and provide technical and professional training to its work force. Next is the creation of productive jobs in the economy through targeted expansion and growth. Pakistan should seek mutual investment opportunities with other countries in the region. But trade will spur growth and economic activities only if export-oriented policies provide the required impetus to the industry and businesses to move into high value added processes and up the value supply chains. With failing power, gas and water infrastructures, essential inputs to any industry, the challenges are varied and many.

A successful outcome will finally depend on the economy’s ability to absorb the multiplying work force into productive employment. This requires a proactive approach from policy makers to develop a comprehensive framework for infrastructure development and manpower training. The immense benefits and equally innumerable risks involved have to be timely realised.

Published in The Express Tribune, October 18^th, 2011.