What is meant by ‘demographic dividend’?


Demographic dividend is the dividend, advantage or benefit the society, economy or a country gets or is going to get by virtue of some of its demographic characteristics notably the conversion of its population from a burden to an asset because of the age in which the population is and thus the prospects it offers either as market or skill force, or a social and military force.

The demographic dividend thus is a window of opportunity in the growth and development of a society or nation that opens up as fertility rates decline when faster rates of economic growth and individual excellence, human development and social uplift are possible when combined with effective policies and markets. The drop in fertility rates often follows significant reductions in child and infant mortality rates, as well as an increase in average life expectancy. This of course is aided by the realisation of women and families that fewer children will die during infancy or childhood. Thus, the families begin to have fewer children to reach their desired number of children. However, this drop in fertility rates takes time. Till the time, the people continue with high birth rate and there is a time lag between the high birth rate and the realisation that not many children are required, as the survival rate will be high. The time lag, thus produces large population. Which in the new economic scenario is not dependent. Of course, till a certain time this population was burden on society with a high dependency ratio. Eventually this group begins to enter the productive labor force. With fertility rates continuing to fall and older generations having shorter life expectancies, the dependency ratio declines dramatically. This demographic shift initiates the demographic dividend. With fewer younger dependents, due to declining fertility and child mortality rates, and fewer older dependents, due to the older generations having shorter life expectancies, and the largest segment of the population of productive working age, the dependency ratio declines dramatically leading to the demographic dividend. Combined with effective public policies this time period of the demographic dividend can help facilitate more rapid economic growth and puts less strain on families. This is also a time period when many women enter the labor force for the first time. In many countries this time period has led to increasingly smaller families, rising income, and rising life expectancy rates. However, dramatic social changes can also occur during this time, such as increasing divorce rates, postponement of marriage, and single-person households.

Demographic trends suggest that both the size and age structure of the population (and, therefore, the dependency ratio) in all countries tend to change over time because of the nature of the demographic transition. The latter is characterised by the fact that death rates tend to decline before declines in the birth rate set in.

  • The difference in the relationship between death and birth rates, on the one hand, and development, on the other, affects not just the rate of population growth but the age structure of the population.
  • The initial fall in infant mortality and improvement in child survival results in a boom generation, with a larger number of people in the younger ages. After some time, the lagged fall in fertility rates reverses the baby boom, resulting in a “bulge” in the younger ages.
  • As is to be expected, the bulge created by the baby boom moves up the age structure resulting in the fact that at some point the population in the working age (15-64) is much higher than it was previously and would be subsequently.
  • Finally, the bulge enters the old age bracket, as is happening in the developed countries and epitomized by Japan currently.

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