The challenge of harnessing the demographic dividend

The challenge of harnessing the demographic dividend
Population and Development in Ghana The challenge of harnessing the demographic dividend by Jean-Pierre Guengant, Ph.D. Director of Research IRD Accra–September 23-27, 2013

Demographic dividend has to do with demographic transition
and changing age structure Young country Old country Women Potentially Active Men Potentially Active Women Potentially Active Men Potentially Active Mais, sous l'hypothèse fécondité décroissante, la réduction de la fécondité se répercute entièrement sur les tranches d'âge les plus jeunes. Certes le nombre d'enfants continue à augmenter, puisque ceux-ci apparaissent encore en 2020, en augmentation de 50% environ sur le nombre de Mais cette augmentation est deux fois moindre que sous l'hypothèse fécondité constante. Après l'âge de 30 ans, les effectifs sont identiques sous les deux hypothèses puique celles-ci ne différent que pour la fécondité. En effet les personnes qui auront 30 ans et plus en 2020 étaient déjà nées en 1990. < 20 years < 20 years

There are two demographic dividends
During demographic transition, the age structure changes and the dependency ratio decreases The entry of many youth in the workforce can increase output & savings per capita & foster sustainable growth These are the benefits of the 1st demographic dividend Later on, as the working-age population matures, the prospects of retirement can provide greater motivation to save for financial security. These additional savings can either be consumed or used to prolong economic growth This later stage of economic growth has been termed the second demographic dividend

But benefitting from the demographic dividend is not automatic
Harnessing the demographic dividend requires creating a window of opportunity (which lasts years) through rapid fertility decline and capitalizing on the dividend economically This implies Accelerating fertility transition Improving human capital (Health & Education) Saving & investing in value added activities Having a legal, institutional and political reliable environment (good governance) Creating many jobs with high productivity

4 phases in the demographic and fertility transition
TFR: 6-8 children L-E: years TFR: 1.5/2.5 children L-E: 80+ years Natural Increase per year 0.5 / % + 3% / + 0.5

Where is Ghana. Not far (phase 2) with a natural increase of still 2
Where is Ghana? Not far (phase 2) with a natural increase of still 2.2% p/yr 3.0% 2.2%

A result of still high fertility and decreasing in mortality
MICS 2011 2010 Census

Result: a rapidly growing population and many dependants (114 per 100 20-64Yrs & 50%<20yrs
Ghana : 6.6 million Ghana 2010: 24 million 80 + 70-74 65 years + 60-64 50-54 Men Potentially Active Women Potentially Active 40-44 30-34 20-24 Mais, sous l'hypothèse fécondité décroissante, la réduction de la fécondité se répercute entièrement sur les tranches d'âge les plus jeunes. Certes le nombre d'enfants continue à augmenter, puisque ceux-ci apparaissent encore en 2020, en augmentation de 50% environ sur le nombre de Mais cette augmentation est deux fois moindre que sous l'hypothèse fécondité constante. Après l'âge de 30 ans, les effectifs sont identiques sous les deux hypothèses puique celles-ci ne différent que pour la fécondité. En effet les personnes qui auront 30 ans et plus en 2020 étaient déjà nées en 1990. < 20 years 10-14 0-4 Population by five-year age group (million)

In 1960 Korea had also a young population (50% <20 yrs) & high dependency ratio (118/100)
Korea 1960: 25 million 80 + 70-74 70-74 65 years + 60-64 60-64 50-54 50-54 Men Potentially Active Women Potentially Active 40-44 40-44 30-34 30-34 20-24 20-24 < 20 years Mais, sous l'hypothèse fécondité décroissante, la réduction de la fécondité se répercute entièrement sur les tranches d'âge les plus jeunes. Certes le nombre d'enfants continue à augmenter, puisque ceux-ci apparaissent encore en 2020, en augmentation de 50% environ sur le nombre de Mais cette augmentation est deux fois moindre que sous l'hypothèse fécondité constante. Après l'âge de 30 ans, les effectifs sont identiques sous les deux hypothèses puique celles-ci ne différent que pour la fécondité. En effet les personnes qui auront 30 ans et plus en 2020 étaient déjà nées en 1990. 10-14 10-14 0-4 Population by five-year age group (million)

But by 2010, Korea has only 23% youth and a favorable dependency ratio (50/100)
Korea 2010: 48 million (2 times more people) 80 + 70-74 65 years + 60-64 60-64 50-54 50-54 Men Potentially Active Women Potentially Active 40-44 40-44 30-34 30-34 20-24 20-24 < 20 years Mais, sous l'hypothèse fécondité décroissante, la réduction de la fécondité se répercute entièrement sur les tranches d'âge les plus jeunes. Certes le nombre d'enfants continue à augmenter, puisque ceux-ci apparaissent encore en 2020, en augmentation de 50% environ sur le nombre de Mais cette augmentation est deux fois moindre que sous l'hypothèse fécondité constante. Après l'âge de 30 ans, les effectifs sont identiques sous les deux hypothèses puique celles-ci ne différent que pour la fécondité. En effet les personnes qui auront 30 ans et plus en 2020 étaient déjà nées en 1990. 10-14 10-14 0-4 Population by five-year age group (million)

GDP per capita increased 15 folds against 1,5 in Ghana

Since 1960 Korea had a sustained economic growth and a large GDP per/capita increase
GDP total growth GDP per capita growth %

Result of “the Generational Economy”: the economic flows across generations
Revenues from natural resources and exports IDA, FDI Remittances Transferts to the State Labour income Parents spending to private institutions. Public health and education service Care, transfers from children Pensions, benefit from personal savings & assets Consumption 10 20 30 40 50 60 70 80 AGE

Industrialized Regions
Population growth between >1%-<3% per year, declining except in Africa Industrialized Regions Developing Regions

In 2012, SS-Africa GDP per capita was only 54% higher than in 1960
GDP total (base 100=1960) GDP per capita (base 100=1960)

But since the mid 1990s SS-Africa GDP growth resumed

However recent Africa GDP per capita growth is 2.2% per year

Can Ghana harness the demographic dividend ?
Accelerating fertility transition Improving human capital Saving & investing Good governance Creating jobs

Future population of Ghana. Between 26 million (2013) to
Future population of Ghana? Between 26 million (2013) to ? million by 2050 Assumptions

Population growth will remain positive up to the 2070s (but ≠in urban & rural areas)
2,3 1,9 1,6 1,2 2,2 1,4 1,0 0,5

In 2010, the 15-24 = 5mn, entries in the LF 350,000, Dep
In 2010, the = 5mn, entries in the LF 350,000, Dep. ratio 114/ yrs Ghana 2010: 24 million 80 + 80 + 70-74 70-74 65 years + 60-64 60-64 50-54 Men Potentially Active Women Potentially Active 40-44 30-34 30-34 20-24 20-24 Mais, sous l'hypothèse fécondité décroissante, la réduction de la fécondité se répercute entièrement sur les tranches d'âge les plus jeunes. Certes le nombre d'enfants continue à augmenter, puisque ceux-ci apparaissent encore en 2020, en augmentation de 50% environ sur le nombre de Mais cette augmentation est deux fois moindre que sous l'hypothèse fécondité constante. Après l'âge de 30 ans, les effectifs sont identiques sous les deux hypothèses puique celles-ci ne différent que pour la fécondité. En effet les personnes qui auront 30 ans et plus en 2020 étaient déjà nées en 1990. < 20 years 10-14 10-14 0-4 Population by five-year age group (million)

By 2050, with a TFR of 2.0 15-24= 6.5mn & entries in the LF 450,000, Dep.ratio 65/100 20-64
Ghana 2050: 40 millions 80 + 80 + 70-74 70-74 65 years + 60-64 60-64 50-54 Men Potentially Active Women Potentially Active 40-44 30-34 30-34 20-24 20-24 Mais, sous l'hypothèse fécondité décroissante, la réduction de la fécondité se répercute entièrement sur les tranches d'âge les plus jeunes. Certes le nombre d'enfants continue à augmenter, puisque ceux-ci apparaissent encore en 2020, en augmentation de 50% environ sur le nombre de Mais cette augmentation est deux fois moindre que sous l'hypothèse fécondité constante. Après l'âge de 30 ans, les effectifs sont identiques sous les deux hypothèses puique celles-ci ne différent que pour la fécondité. En effet les personnes qui auront 30 ans et plus en 2020 étaient déjà nées en 1990. < 20 years 10-14 10-14 0-4 Population by five-year age group (million)

But with a TFR of 3. 0, 15-24 = 9. 2mn, entries in the LF 650,000, Dep
But with a TFR of 3.0, = 9.2mn, entries in the LF 650,000, Dep. ratio 86/ Ghana 2050: 52 millions 80 + 80 + 70-74 70-74 65 years + 60-64 60-64 50-54 Men Potentially Active Women Potentially Active 40-44 30-34 30-34 20-24 20-24 Mais, sous l'hypothèse fécondité décroissante, la réduction de la fécondité se répercute entièrement sur les tranches d'âge les plus jeunes. Certes le nombre d'enfants continue à augmenter, puisque ceux-ci apparaissent encore en 2020, en augmentation de 50% environ sur le nombre de Mais cette augmentation est deux fois moindre que sous l'hypothèse fécondité constante. Après l'âge de 30 ans, les effectifs sont identiques sous les deux hypothèses puique celles-ci ne différent que pour la fécondité. En effet les personnes qui auront 30 ans et plus en 2020 étaient déjà nées en 1990. < 20 years 10-14 10-14 0-4 Population by five-year age group (million)

But by 2050, 70% to 75% of Ghanaians will live in urban areas
Urban pop. will triple from # 13 mn to 35 mn: Accra from nearly 3 to 7 million and Kumasi from 2 to 6 million -# 40% of urban pop Engine of growth? Explosive slums? Need to review existing local governance, legal structures in order to permit cities to deliver selected local services without competing with parallel central gov. structures Have predictable transfer system to allow them for effective planning (5 yrs? horizon) with performance incentives built into them, Increase transfers as cities demonstrate their capability to create the dynamic activities of the future

A window of opportunity may open soon (in the 2020s) in Ghana & close in Korea
Ghana, 2.0 children by 2050 Korea

The window of opportunity may open much later if fertility does not decline rapidly
Ghana, 2.0 children by 2050 Ghana, 2.0 children by 2050 Ghana, 3.0 children by 2050 Korea

Ghana missed its contraceptive revolution
Can fertility transition be accelerated ? GHANA: Pct pt increase: :+0,65pt/yr =1,06pt/yr 25.4%

Fertility, contraceptive use and family planning in Ghana
Fertility, contraceptive use and family planning in Ghana? What to conclude The slow pace of fertility decline can be attributed to an overall slow/stalling in CPR. The current/recent levels of TFR (#4) are largely the result of still high (but decreasing Post Partum Insusceptibility ) higher proportions of non-married women, and to a lesser extend the result of contraceptive use and abortion CPR is low, ideal number of children still high & not changing quickly enough to lead to the fertility decline that would be needed to allow Ghana to be in a position to harness DD in the near future These are two of the most obvious matters for policy makers and planners to address

“Health is priceless but still has a cost”
Half (53)% of the deaths are caused by communicable diseases, maternal, prenatal and nutrition conditions (2008) Health expenditure per capita = 75US$ (2011), 60% paid by public sector, this represents 12% of government expenditure and 5 % of the GDP 14% of the expenditure for health come from external resources Still too many “too early, too close, too often, too late pregnancies”

Half of children are the results of pregnancies with a high level of mortality risk
First birth Birth order 4+ Age 35+ & birth order 4+ Birth interval < 24 Mother's age <18

Half married women are exposed to multiple factor high-risk pregnancies
First birth Birth order 4+ Birth interval < 24 & birth order 4+ Birth interval < 24

The costs of persisting high level of fertility are very high
High levels of maternal mortality High levels of mortality < 5 years AND High % of stunted children (low height for age) among the children who survive These children are less resistant and have more difficulties to learn at school. These outcomes affect more the poorest households and jeopardize the chances of the country to achieve a more inclusive growth and fulfill its objectives

Sector Policy Priorities Health
NOW Phase 2 of the Demographic transition Expand/improve reproductive health & FP outreach to reduce fertility Meet contraceptive demand Promote later marriage Invest in child health

Education also has a cost
The performance of the system is not satisfactory at all levels Education = 24% of government expenditure and 8% of GDP School enrollment: Primary 82% (net) secondary (59%), Tertiary (12%) , Expenditure per student: primary: 180 U$ secondary: 420 U$ (<2 times ) tertiary: 2400 U$ (6times and 13 times more) Improving Ghana’s human capital will require much more resources

Sector Policy priorities Education
NOW Phase 2 of the transition Expansion of school enrolment & attainment Improve quality of education , ensure match between skills taught and skills in demand Lower spending in primary (because of fertility decline ) will allow to invert more in higher education Start to focus on high-value tech driven economic growth

Few countries maintained high economic growth for more than a generation, and even fewer continue with high growth rates once they reach middle-income status Countries (mainly East Asia) that avoided the middle-income trap have in common : Openness to the global economy Macroeconomic stability A future-oriented mindset with high rates of saving and investment A reliance on markets and market-based prices to allocate resources Leadership committed to growth and inclusion with a reasonable capacity for administration

Avoid the middle-income trap GDP per capita (constant 2011 US$)
Source: IMF World Economic Outlook, October 2012

Reduce inequalities: Gini Coefficients for Selected African Countries, 2010

Sector Policy Priorities Economy
NOW Phase 2 of the demographic transition Promoting free trade Promoting household savings Diversifying trade: goods and destination Investing in infrastructures Attracting investors Building an inclusive economy and society

Doing business index and corruption in Ghana
The 2013 Doing Business Report ranks Ghana 64 out to 185 countries But the “ease of doing business” varies according to the topics, i.e. : registering is not too difficult, but trading across borders and starting a business is a bit more difficult The Global Corruption Barometer 2013, ranks Ghana 54 out of 95 countries but the score varies according to the topics

% of respondents who think that the following are corrupted or extremely corrupted

Better governance to deliver results
Individual & property rights to all citizens Successful entrepreneurs, whether domestic or foreign, should be able to reap the fruits of their efforts Physical infrastructures providing transport, communications, electric power, and water needs for a dynamic economy A business environment that fosters competition and supports innovation

The major challenge of the coming years will be promoting youth employment (ADB 2012)
Women 100% 75% 50% 25% 0% Wage employed Wage employed Vulnerable employed Vulnerable employed Unemployed, discouraged not in the labor force Unemployed, discouraged not in the labor force In education In education AGE AGE

How many jobs, and what kind of jobs?
Need about 350,000 new jobs every year (1,5 million over the next 4 years) just to absorb the youth entering the working age population. the question is whether these youth will be: unemployed (but is that an option?) or employed in low-productivity traditional agriculture and household enterprises (survival jobs) or employed in higher-productivity agriculture, manufacturing, and services jobs that are transformational. The answer depends on whether workers have the needed skills and private investors have the confidence to invest.

Sector Policy priorities Employment
NOW Phase 2 of the Demographic transition Measures to improve worker productivity and prospects of better paying jobs in both the formal and informal sectors Improve the informal sector’s access to inputs, finance, markets, and opportunities to link up with formal sector vocational training, on-the-job training, apprenticeships to help the youth adapt better to the work environment

Conclusions: the future is unknown, but it can be explored, and prepared for
Global Drivers—Need to be Leverage multipolar global economy, tightening competition for resources, aging societies, technological development and climate change African Drivers-Get good Outcomes Demographics: dividend or social time bomb? Urbanization: agglomeration benefits/ explosive slums Oil and minerals—blessing or curse? Major Risks—Needing Active Management Growing Security or Contagious Conflict? Disparities—Inclusive Growth or Growing Inequality? Middle-income Stage-Road to Prosperity or Trap?

“GOOD JOBS CREATIONS” will be the major issue
Possible scenarios ? Convergence scenario associated with a vision “Business as usual” (assume recent favorable trends will continue unabated) Downside (Term of Trade deteriorates conflicts etc.) But overall “GOOD JOBS CREATIONS” will be the major issue

Tackling the issue requires simultaneously
An overall population in good health A well educated population Important domestic savings Major investments in competitive activities (manufacturing and services) geared towards international, regional and national markets High standards of governance and credibility A demographic window of opportunity In fact, most of what must be done is known, but in many fields, effective implementation is either lacking, lagging behind or not sustained. There is clear need to break with the past, and this requires a cultural change

Benefits of action with TFR of 2.0 or less are:
stabilized numbers of children & entries in the LF, & favorable dependency ratio (65/100) Ghana : 40 millions 80 + 80 + 70-74 70-74 65 years + 60-64 60-64 50-54 Men Potentially Active Women Potentially Active 40-44 30-34 30-34 20-24 20-24 Mais, sous l'hypothèse fécondité décroissante, la réduction de la fécondité se répercute entièrement sur les tranches d'âge les plus jeunes. Certes le nombre d'enfants continue à augmenter, puisque ceux-ci apparaissent encore en 2020, en augmentation de 50% environ sur le nombre de Mais cette augmentation est deux fois moindre que sous l'hypothèse fécondité constante. Après l'âge de 30 ans, les effectifs sont identiques sous les deux hypothèses puique celles-ci ne différent que pour la fécondité. En effet les personnes qui auront 30 ans et plus en 2020 étaient déjà nées en 1990. < 20 years 10-14 10-14 0-4 Population by five-year age group (million)

Costs of inaction with of TFR of 3.0 or more:
doubling numbers of children & entries in the LF, & unfavorable dependency ratio (86/100) Ghana 2050: millions 80 + 80 + 70-74 70-74 65 years + 60-64 60-64 50-54 Men Potentially Active Women Potentially Active 40-44 30-34 30-34 20-24 20-24 Mais, sous l'hypothèse fécondité décroissante, la réduction de la fécondité se répercute entièrement sur les tranches d'âge les plus jeunes. Certes le nombre d'enfants continue à augmenter, puisque ceux-ci apparaissent encore en 2020, en augmentation de 50% environ sur le nombre de Mais cette augmentation est deux fois moindre que sous l'hypothèse fécondité constante. Après l'âge de 30 ans, les effectifs sont identiques sous les deux hypothèses puique celles-ci ne différent que pour la fécondité. En effet les personnes qui auront 30 ans et plus en 2020 étaient déjà nées en 1990. < 20 years 10-14 10-14 0-4 Population by five-year age group (million)

YOUR CHOICE Ghana 2050: 40 or 52 millions
80 + 80 + 70-74 70-74 65 years + 60-64 60-64 50-54 Men Potentially Active Women Potentially Active 40-44 30-34 30-34 20-24 20-24 < 20 years Mais, sous l'hypothèse fécondité décroissante, la réduction de la fécondité se répercute entièrement sur les tranches d'âge les plus jeunes. Certes le nombre d'enfants continue à augmenter, puisque ceux-ci apparaissent encore en 2020, en augmentation de 50% environ sur le nombre de Mais cette augmentation est deux fois moindre que sous l'hypothèse fécondité constante. Après l'âge de 30 ans, les effectifs sont identiques sous les deux hypothèses puique celles-ci ne différent que pour la fécondité. En effet les personnes qui auront 30 ans et plus en 2020 étaient déjà nées en 1990. 10-14 10-14 0-4 Population by five-year age group (million)

MEDAWOASE THANK YOU

The challenge of harnessing the demographic dividend

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