(November 2012) Many countries in Asia and Latin America have experienced impressive economic growth over the last two decades, and researchers, economists, and demographers have attributed these gains in part to demographic changes that have facilitated growth. This demographic contribution to accelerating economic growth—the "demographic dividend"—is particularly misunderstood by leaders and decisionmakers in developing countries who, based on their large youth populations, are optimistic about the prospects for such a dividend. This fact sheet aims to improve understanding of what investments are needed to attain the demographic dividend.
What Is the Demographic Dividend?
- The demographic dividend is the accelerated economic growth that may result from a decline in a country's birth and death rates and the subsequent change in the age structure of the population.
- With fewer births each year, a country's young dependent population declines in relation to the working-age population. With fewer people to support, a country has a window of opportunity for rapid economic growth if the right social and economic policies are developed and investments made.
Fertility Must Decline for Countries to Attain the Demographic Dividend. A common misperception among many leaders is that a large youth population itself is an indicator of a coming demographic dividend. While youth can be a great force for economic and political change, the key first step toward the demographic dividend is not a large youth population. The first step, in fact, is a transition from high birth and death rates to low birth rates and child death rates—a process referred to as the "demographic transition." The following facts illustrate the challenge ahead but also what must be done:
- While child survival has greatly improved in developing countries, birth rates remain high in many of them. To achieve the economic benefits of the demographic dividend, developing countries must substantially lower both birth and child death rates.
- In the world's least developed countries, where couples still have many children, more than 40 percent of the population is under age 15 and depends on financial support from working-age adults (defined as ages 15 to 64).
- One in four women in developing countries wants to avoid becoming pregnant or delay or space their births but is not using a modern family planning method. These women account for almost 80 percent of unintended pregnancies. When women can choose when and how often to become pregnant, they are more likely to have fewer children.
Africa, the Demographic Dividend, and Family Planning
- While fertility has declined in most countries in sub-Saharan Africa, women in the region today have on average 5.1 children. Nearly two out of three women who want to avoid a pregnancy for at least two years are not using a modern method of family planning.
- Investment in voluntary family planning helped Thailand accelerate economic growth and provides a model for sub-Saharan African countries. Thailand's contraceptive use increased (from 15 percent in 1970 to 70 percent by 1987) and fertility levels declined (from 5.5 children per woman in 1970 to 2.2 by 1990). This shifted the age structure of Thailand's population, providing a critical first step toward achieving the economic benefits of a demographic dividend.
- Rwanda is one of several countries in eastern and southern Africa where investments in voluntary family planning and child survival have led to significantly lower fertility. Child mortality has been cut in half in just a decade, modern contraceptive use has increased more than fourfold, and Rwandan women are having on average 4.6 children. If the impressive progress continues, Rwanda will, by 2030, have achieved the demographic conditions necessary for accelerated economic growth. Countries that have not seen the same improvements need to greatly increase their investments in family planning.
- In West and Central Africa, where family planning use and fertility declines are lagging, current investments in family planning must increase by three to five times their current levels to meet women's needs for family planning, stabilize births by 2030, and establish the conditions to capitalize on the demographic dividend. Slower progress will delay or may even cause countries to miss their window of opportunity for a demographic dividend.
Improved Health, Education, and Gender Equity Needed
While family planning is necessary for establishing the conditions for a demographic dividend, investments in child health, education, and gender equality are critical additional steps that contribute to family planning use and economic growth.
- Promoting healthy timing and spacing of pregnancies can improve child health. Children conceived less than two years after the previous birth have a much higher risk of dying (1.5 to 3 times higher) than those children conceived three or more years after the previous birth.
- For young women, family planning can help delay their first pregnancy until an age when they are physically, psychologically, and socially prepared for childbearing, thus improving health outcomes for both mother and infant.
- Norms related to family size are changing, and research indicates that families will choose to have smaller families when they know that each child has a better chance of surviving. Investing in health programs that improve child survival stimulates a desire for smaller, healthier families.
- Girls' education—especially at the secondary level—helps delay marriage and first pregnancy. Women who marry later tend to have fewer children than women who marry at a young age.
- Women who are educated are also more likely to work outside the home—increasing the size of the labor force and the potential for economic development. Enforcing policies that enable girls to go to school and equip them with skills to compete for higher-paying jobs are an important step toward gender equity that also fosters economic growth.
The demographic dividend in many developing countries remains a possibility, but for the process to begin, countries must give high priority to substantially lowering fertility and child mortality through the following actions:
- Invest in child survival and health programs.
- Commit to voluntary family planning to achieve the demographic transition.
- Invest in the reproductive health needs of both married and unmarried youth.
- Prioritize education—especially secondary education for girls.