Saturday, September 17, 2011

Demographic dividend or population explosion?

Counting the millions

2010 was the year of census operations and billions were spent in enumerating and profiling the populations of the largest countries in the world. The greatest contemporary world power, the United States, as well as the future powers of China and India undertook the onerous but important task of counting their residents. Currently China retains the crown of the most populous country in the world, though its status is increasingly threatened by India. China announced that it added 73.9 million Chinese from 2000 to 2010, taking the current population to 1.37 billion. India on the other hand exhibited a much higher level of productivity and added 181 million Indians in the same decade, taking its population to 1.21 billion - a mere 160 million short of China's. US on a more modest base only added 27.3 million Americans. But its growth rate in the decade was nearly twice as high as that of China but only half as much of India.

Demographic dividend

Historically India's high fertility rate and rapid population increase was often referred to by economists and experts as "population explosion" - an ominous phenomenon threatening the country’s multitudes with misery and starvation. However, economists are a malleable tribe, who like to show flexibility and often change their views with the direction of the wind. Today, India's teeming millions are being referred to as the country’s "demographic dividend" and expected to help it maintain its economic growth engine, even help it surpass China’s economic pace some time in the future. The logic of having a large proportion of the population in the economically active age group (that is to have a favourable dependency ratio) is irrefutable - this group has to generate the resources not only for themselves but also look after the youth and care of the elderly who are no longer in the work force. However this needs to be balanced with the cost of over population and low share of family resources that each child enjoys in large families. Surely it does not condone having hordes of children by penurious parents who do not have the wherewithal to bring them up, educate and prepare them to be economically productive citizens. The logic of having large families just to ensure a good supply of income earners for the nation does not seem to stand scrutiny in today's resource scare and over populated world.

Even if we do accept that having an adverse dependency ratio, places a burden on the society, the answer for the developed countries could be in other measures, including higher retirement age and relaxed immigration policies, which will attract migrants of income earning age into the country and redress the imbalance. This is precisely what is happening in the US - where the population increase is mainly contributed by the Hispanics and the Asians, rather than white population. In fact this may offer the best of both worlds - ensuring that there are enough income earners, without having to invest in creating, educating and developing them! Like running its IT services, US can consider outsourcing the task of maintaining its demographic dividend to India!

Additionally while comparing the "demographic dividend" of India and China the economist also need to take into consideration the economic potential of the population. On this criterion, China scores a lot higher, given higher education levels and a much higher participation of women in the workforce.

Wanted : 24 million brides

The census also indicated that both China and India continued to suffer from a gender imbalance with China having 51.3% of its population as male. Experts estimate that 24 million Chinese men will be unable to secure a bride in the next 10 years. Unfortunately neighboring India will not be able to help much as it is likely to face its own scarcity of marriageable women – India’s population is 51.5% males (but only 914 girls for every 1,000 boys under the age of six). US could come to rescue - as it has more females than males (50.8% females) though currently one sees more evidence of American men succumbing to the charm of Chinese women, than Chinese men seeking American brides!

Written by Ashok Sethi