©NIDEA 1 M ā ori and the Potential (Collateral) Demographic Dividend Natalie Jackson © Professor of Demography, Director, National Institute of Demographic and Economic Analysis (NIDEA) Session Address to PANZ Conference, Auckland Monday 29 th November 2011

©NIDEA 2 The Demographic Dividend Arises out of demographic transition as fertility rate falls, % at working age (15-64 years) increases, % notionally dependent (0-14 plus 65+ years) is at its minimumminimum Has the potential to convert into an economic bonus – sometimes called the demographic ‘gift’ – Does not convert into an economic bonus by itself – that requires awareness, planning, leadership, investment – More a ‘window of opportunity’ (Pool passim) First noted in 1990s as the ‘demographic bonus’ – Growing awareness that population size less important to economic development than age composition

©NIDEA 3 From Baby Boom to Potential Bonus – Total NZ

©NIDEA 4 The concept develops.. At first only one dividend – maximum percentage at key working age, minimum notionally dependent. Two main indices: – ‘Dependency Burden’ (notionally dependent/WAP) – Potential Support Ratio (WAP/notionally dependent) As fertility falls and WAP increases: – The Dependency Burden decreases – The Potential Support Ratio increases Eventually increased longevity drives a reverse in these #1 Transient - critically requires investment in human capital (education) and full employment policies Bloom and Williamson 1998, World Bank Economic Review 12

©NIDEA 5 The Second Demographic Dividend A second dividend theorised as percentage passing through highest income earning age groups (NZ = years) increases – Parenting responsibilities diminishing – Maximum period of saving for retirement begins – Maximum proportions of pop. not yet at older age Potentially permanent, but dependent on adequate investment in First Dividend, and old-age support systems that encourage saving – National Transfer Accounts System needed to trace flows from producing to consuming population Mason and Lee 2006, Genus 62(2)

©NIDEA 6 A third interpretation A ‘collateral’ dividend arising from the historical coincidence of a youthful population co-existing alongside an older population – M ā ori and Pakeha/European – M ā ori also largest Indigenous population among Settler countries (Canada 3%; Australia 2.5%) Many economic opportunities as significantly older Pakeha population retires – Each year for next 2 decades a successively larger baby boomer cohort will retire and be ‘replaced’ by a successively smaller cohort

©NIDEA 7 M ā ori and European 2006* M ā ori * (med. age 23)European/NZ/Other* (med. age 38) *Stats NZ Multiple count ethnicity (Census Base)

©NIDEA 8 Population Share by ethnic affiliation* and broad age group, 2006 *Stats NZ Multiple Count Ethnicity

©NIDEA 9 M ā ori and European 2026* M ā ori * (med. age 25)European/NZ/Other* (med. age 42) *Stats NZ Multiple count ethnicity (Series 6)

©NIDEA 10 Relative size by age 2026* *Stats NZ Multiple Count Ethnicity

©NIDEA 11 Has the first dividend for M ā ori already passed? - Is the second compromised? -

©NIDEA 12 Percentage by broad age group – M ā ori* * Discontinuities due to changing Census classification ObservedProjected (Series 6) 1966

©NIDEA 13 Potential Support Ratio : M ā ori* * discontinuities due to changing Census classification ObservedProjected (Series 6)

©NIDEA 14 Add the context of an ageing New Zealand -Not [only] the conventional kind- -Unfolding very unevenly by region, ethnicity, industry

©NIDEA 15 NZ ageing not [only] the ‘conventional’ kind 1991 Baby Blip – Gen Y Current Baby Blip Gen TGYH Who you ‘gonna call? Percentage at each age Baby Boomers Gen X

©NIDEA 16 Staggering changes in the ratio of young to old ahead Stats NZ (2009) Series 5 = TFR 1.9; ANM 10,000

©NIDEA 17 Ageing very uneven across the country Wairoa 2010 (2006 unshaded) Napier2010 (2006 unshaded)

©NIDEA 18 Ageing differs by ethnicity across the country (Hastings 2006) European/NZ (15.2% 65+)M ā ori (4.0% 65+) Percentage at each age Census 2006 Median age 39.6 Median age 22.5

©NIDEA 19 Ageing differs by industry across the country Statistics New Zealand Customised Database (Census 2006) Females Males

©NIDEA 20 A pertinent comment ‘people from countries where the first demographic dividend has already disappeared can invest their assets accumulated in the form of the second demographic dividend in dynamically growing economies … that are enjoying their first demographic dividend, and, by doing so, bring a sizeable amount of financial gain back to their home countries’ – Ogawa et al. 2010: 115 Can this not occur within countries?

©NIDEA 21 Converting the collateral potential to a dividend Labour shortages are assured as population ageing unfolds – Already here - will be extreme in many regions and industries A new agriculture boom beginning The ‘collateral’ dividend is a unique window of opportunity for NZ – #1 transient; dependent on forward planning and a priori investment in human capital (education) and full employment policies Appropriate education (trades and skills; nursing) – #2 potentially permanent but dependent on investment in #1 and appropriate policy environment Currently manifesting for European population – #3 investment requirements same as #1 but potentially permanent returns for all parties State and iwi investment in M ā ori will be well rewarded No investment will commit NZ to a demographically-driven economic crisis

©NIDEA 22 Thankyou