Demographic Dividend

Demographic Dividend

Subject: Economy

Section: Economic Development

Context:

About the report:

The report on India’s Demographic Dividend released by industry body CII argues that not only is there a shortage of time, but also that the rise in India’s working age population is necessary but not sufficient for it to sustain the economic growth.

About the report

• India will add 183 million people to the working age group of 15-64 years between 2020-50 i.e. 22% of the incremental global share as per the UN Population Statistics database.
• If India does not create enough jobs and its workers are not adequately prepared for those jobs, its demographic dividend may turn into a liability. Thus, education and skill development will be the biggest enablers for reaping this dividend.
• 2020-50 provides India with a short window of opportunity to harness its demographic dividend as India will add 101 million people in the working age population between 2020-30, this number will reduce to 61 million and then to 21 million for 2030-40 and 2040-50, respectively. It is expected that India’s working age population will start declining in the decade post 2050.

What is demographic dividend?

Demographic dividend means that the country’s dependency ratio, as measured by the share of the young and the elderly as a fraction of the population, will come down more sharply in the coming decades. Increase in the share of working age population means more workers in the productive age groups that will add to the total output, generate more savings, accrue more capital per worker, and all these leading to higher economic growth.

Issues:-in reaping the demographic dividend

• Learning loss due to the COVID pandemic
• Labour market imbalances –due to shortage skill skilled labour and skill mismatch.. In 2019-20, only 73 million of India’s 542 million strong workforce received any form of vocational training (whether formal or informal).
• The proportion of formally skilled workers as a percentage of total workforce stands at 24 per cent in China, 52 percent in USA, 68 per cent in UK and 80 per cent in Japan, against a paltry 3 per cent in India.

Suggestions:

• The report suggests that youth may be offered skill vouchers and scholarships which can be linked to the national skill qualification framework. Thus leading to a transformation from supply-based to demand-based skill system.
• The government should also consider setting up multi skill training institutes in MSME clusters to impart skills based on local demand.
• Corporate investment in employee education and training should continue to play a critical role to meet the demand for high-skilled workers. Thus, greater government-industry collaboration holds the key for skilling the burgeoning workforce.

Concept:

Definition

According to United Nations Population Fund (UNFPA), demographic dividend means, “the economic growth potential that can result from shifts in a population’s age structure, mainly when the share of the working-age population (15 to 64) is larger than the non-working-age share of the population (14 and younger, and 65 and older)”.

With fewer births each year, a country’s working-age population grows larger relative to the young dependent population. With more people in the labor force and fewer children to support, a country has a window of opportunity for economic growth if the right social and economic investments and policies are made in health, education, governance, and the economy.

Causes-Change in population structure occur due to

• Falling birth rate
• Lower fertility rate-As fertility declines, the share of the young population falls and if this decline is rapid, the increase in the population of working ages is substantial, yielding the ‘demographic dividend’.
• Increased longevity

Falling birth rate and lower fertility rate will contribute to a reduction in expenditure, increased longevity will lead to an increase in the size of the working-age population.

India’s trends

• India has one of the youngest populations in an aging world. In 2022, the median age in India will be just 29, compared to 37 in China and the US, 45 in Western Europe, and 49 in Japan.
• Since 2018, India’s working-age population (people between 15 and 64 years of age) has grown larger than the dependent population — children aged 14 or below as well as people above 65 years of age. This bulge in the working-age population is going to last till 2055, or 37 years from its beginning.
• This transition happens largely because of a decrease in the total fertility rate (TFR, which is the number of births per woman) after the increase in life expectancy gets stabilized.
• While India is a young country, the status and pace of population ageing vary among States. Southern States, which are advanced in demographic transition, already have a higher percentage of older people.
  • While Kerala’s population is already ageing, in Bihar the working age cohort is predicted to continue increasing till 2051.
  • By 2031, the overall size of our vast working age population would have declined in 11 of the 22 major States.
  • The differences in age structure reflect differences in economic development and health of the states.