1. 1 How can Kenya position itself to Benefit from the Demographic Dividend? Eliya Msiyaphazi Zulu (PhD.) and James Ciera Presented at the Population Association of Kenya 4 th Population Conference Programme Nairobi Safari Club, Nairobi, Kenya October 23 rd -25 th, 2012

2. Main Messages The 21 st century represents a period of phenomenal demographic changes in Kenya and other African countries – Africa will make up about a third of the global population – More Africans will live in urban than rural areas – As fertility declines, African populations will increasingly have working age people and fewer young dependents These demographic changes will present massive opportunities for development if Kenya and other African countries: 1.Boost investments family planning and public health 2.Enhance human capital development through investments in education and empowerment of women 3.Adopt pro-growth, pro-investment, and job-creating economic reforms 4.Optimize the role of urbanization in national development through appropriate planning and infrastructure development

3. Projected Population Growth for Kenya (‘000) Source: UN Population Division, 2011 FERTILITY ASSUMPTION 2010-20152015-20202030-20352045-20502095-2100 Low variant 4.43.93.02.41.5 Medium variant 4.64.33.52.92.0 High variant 4.94.74.03.42.5

4. population (millions) 160 140 120 100 80 60 40 20 0 Total fertility rate: 4.6 Population Size (2010): 40 million The year in which Kenya reaches replacement level fertility will have a major impact on its ultimate population size 200 180 2080 2060 2040 2020 UN Medium Projection 2010 Current population

5. By 2050, nearly half of all Kenyans will live in urban areas Past and Projected Rural and Urban Population Source: UN Population Division, 2012 Population (‘000) Percentage Urban

6. Most urban residents in Kenya live in slum settlements where they exhibit poor health and socioeconomic outcomes Source: UN Habitat, 2010 Population (‘000) Percentage in Slums

7. As birth rates fall, Kenya’s population will increasingly have more working age population Source: UN Population Division (MEDIUM VARIANT), 2011

8. Kenya and Thailand’s age structure differ remarkably due to differences in birth rates 8 Source: UN Population Division (MEDIUM VARIANT), 2011 TFR: 7.5 TFR: 6.1 TFR: 4.6 TFR: 1.6 TFR: 2.7 TFR: 1.7

9. Defining the Demographic Dividend The Demographic Dividend is the economic benefit arising from a significant increase in the ratio of working-aged adults relative to young dependents. When birth rates decline significantly, the age structure shifts in favor of more working-aged adults, accelerating economic growth through increased productivity, greater household savings, and lower costs for basic social services provided to a young population.

10. Ratio of working age to dependent population Sub- Saharan Africa Source: UN Population Division (MEDIUM VARIANT), 2011

11. Ratio of working age to dependent population 11 Source: UN Population Division (MEDIUM VARIANT), 2011 Past and Projected Total Fertility rates

12. Rapid decline in fertility is the major determinant of the magnitude of the labor surplus Source: UN Population Division (MEDIUM VARIANT), 2011

13. Asian Tigers: Success Story Between ¼ to 1/3 of economic growth since 1970 in East and South East Asia can be attributed to the Demographic Dividend” (Bloom and Williamson, 1998; Mason, 2001) The economic success was made possible by sustained investments in education, health, family planning, and economic reforms 13

14. What are the Demographic Pathways to the Demographic Dividend? Increased labor force and potential for increased productivity due to change in age structure Greater participation of women in the formal sector due to time freed from childbearing and greater education attainment due to delayed childbearing Increased investments in human capital due to reduced child dependency burden

15. SOURCE: Mason, 2012 Higher human capital spending is associated with lower fertility

16. Consumption and Labor Income by Age, Nigeria 2004 Labor income (500 trillion Naira)Consumption (500 trillion Naira) Source: National Transfer Accounts estimates (www.ntaccounts.org) - Mason 2012www.ntaccounts.org Economic needs of children are enormous: about 80% of total labor income. Labor surplus is less than 20%. Shortfall is met by relying on: Natural resources Remittances Other asset income. Little remains for saving and investment. 16

17. Labor income (3000 trillion won)Consumption (3000 trillion won) Consumption and Labor Income by Age, S Korea 2000 Source: National Transfer Accounts estimates (www.ntaccounts.org) - - Mason 2012www.ntaccounts.org Child deficit is very small in S Korea: about 35% of labor income. Working age surplus is about 30% of total labor income. S Korea is investing asset income. 17

18. Consumption and Labor Income by Age: KENYA 1994

19. Women in many African countries are already involved in informal economic activities. In order to seize the DD, there should be a shift to the formal sector 19

20. Speeding the Demographic Transition Reduce child mortality – replacement effect Enhance female school enrollment and general female empowerment Create female labor market opportunities Expand access to family planning 20

21. Addressing barriers of access and use of family planning would reduce fertility substantially % of Married women using modern FP and those with unmet need for FP Source: DHS Analytical Series (Forthcoming)

22. Earning the Demographic Dividend Macro-economic policies – the demand Public health Education (shift from universal primary to universal secondary) Youth and Female Employment Unemployment and underemployment Export orientation for labor demand Channeling savings into investment Address huge inequities in economic opportunities between the rich and the poor 22

23. Summary In order for Kenya to seize and maximize potential benefits from the Demographic Dividend, there must be urgent action in: – Accelerating the decline in birth and deaths rates through investments in family planning and public health – Enhancing human capital development through investments in education and broad empowerment of women – Adopting economic policies and reforms that will promote economic growth, reduction in income disparities, job creation and labor-market flexibility, openness to trade, savings, and investment – Optimize the role of urbanization in national development through appropriate planning and infrastructure development 23

24. Research Gaps How does Kenya maximize its labor surplus: – At what rate should fertility and mortality decline? – Over what period of time What is the investment window and and the level of investment needed in education and health for the country have skilled and healthy work-force? What sort of economic reforms does Kenya need to carry out? – Export oriented – Job Creation – Use of natural resource (oil)

25. Promoting the DD Agenda in Africa Steering committee formed to spearhead DD work in Africa – Members include African Union Commission; UN Economic Commission for Africa; African Development Bank; Packard Foundation; AFIDEP; PPD ARO; Gates Institute; USAID The DD was a prominent topic of the July 4 th 2012 African Development Bank meeting on human resources development in Tunis There will be a panel on the DD at the ECA/AUC main meeting in March 2013 – A technical side meeting on the DD will precede the conference. The World Bank is preparing a monograph on the Demographic Dividend – Case Studies: Bangladesh; Pakistan; Kenya; Nigeria; Ethiopia; Ghana; DR Congo; and Brazil 25

26. Thank You www.afidep.org info@afidep.org Eliya.Zulu@afidep.org 26