Demographic Dividend

We often hear the term, demographic dividend being bandied about in the media and in books. However, not many are aware what exactly it means and the implications of the same for business and society.

The term refers to the advantages that countries have if they have youthful populations. This is because there are more numbers of people who join the workforce leading to an uptake in the supply, which ideally should translate into greater numbers of jobs and more growth.

Further, demographic dividend also accrues when the proportion of working people is more than the proportion of retirees and those not yet ready to join the workforce.

It is believed that countries like India and China with youthful populations are at an advantage when compared to countries like the US and Japan which are graying and hence, “the shock of gray” would make them uncompetitive.

Some Aspects to Consider

Of course, it does not automatically follow that the countries that have a greater proportion of youth would have higher growth rates.

For instance, the employability of the available workforce might be an issue. This happens when there are many people in the workforce but not all are equally qualified or have the necessary skills for the jobs on offer.

Hence, the demographic boom might be an advantage for those with premium skills and those who make the cut. Therefore, companies and countries must consider this aspect and factor in into their calculations when assessing the impact of the demographic boom.

Finally, when countries have younger people, the aspirations are more and if these aspirations were not fulfilled, it would lead to situations like the “Arab Spring” of 2011 where protests were the order of the day because of the presence of younger people and no jobs or a secure future for them.

Demographic Bust

On the other hand, countries like the US and Japan where the number of people over working age is growing steadily and where the retiring “baby boomers” are a liability because the state and the corporate sector has to spend on their pensions and healthcare.

These countries are hit by a double whammy wherein they do not have the numbers for new jobs and on the other end of the spectrum; they have to contend with providing for social security and other benefits.

Some Strategies

For those countries that are facing a demographic bust, encouraging immigration might be a solution as skilled and qualified people from all over the world can emigrate to those countries to make up for the lack of native workers who are suitable for the jobs. This has been the case with the US and Japan is now considering following this strategy. However, the problems of assimilation and tolerance in a multicultural society have to be considered when the governments encourage migration.

Finally, whether a country is facing a demographic boom or a demographic bust, the fact that there needs to be a provision for job creation is the bottom line criterion.

Despite experts voicing views on both sides of the divide, the fact remains that having a healthy growth rate is the answer to both these situations. Either by creating jobs and employing native workers or by encouraging immigration and tolerance, the focus should be on boom instead of bust.