Demographic dividend

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Definition

A demographic dividend refers to a situation, typically lasting for about 20-30 years for a given population, where the population has a very low dependency ratio because its population is largely concentrated in the young adult age group. There are two aspects to the demographic dividend:

  1. The young adult age group population is significantly bigger in size than the age group of elderly population, because when the elderly people were of childbearing age, the population was in the early stages of demographic transition, with high fertility and low infant mortality. Thus, they ended up creating a fairly large number of children compared to generations before and after them.
  2. By the time the young adult age group population entered its childbearing years, the next stage of demographic transition, i.e., declines in fertility, started to kick in and catch up with declines in infant mortality, leading to them having fewer children to take care of. Thus, this population is large relative to the population of dependent children.

Effects

The demographic dividend seems positive in the short term because the low dependency ratio enables significant production.

In the longer term, there are two caveats:

  • A demographic dividend can be thought of as borrowing against the future. Parents are forgoing potential children and producing more with the freed up time. However, the fewer children means that in the next generation, there will be fewer productive workers. In the longer run, this could mean a higher dependency ratio.
  • A demographic dividend may portend eventual population decline, once the population momentum has subsided.