What is the demographic dividend, and why is it important?

The demographic dividend is the economic growth potential resulting from shifts in a population’s age structure, particularly when the working-age population is larger than the non-working-age population.

The demographic dividend is a concept in economics that refers to the economic growth potential that can result from shifts in a population’s age structure. This typically occurs when the share of the working-age population (15 to 64) is larger than the non-working-age population (14 and younger, and 65 and older). In other words, it is the economic benefit a country can get when it has a lot of people in the workforce and fewer dependents.

This concept is important because it can lead to a significant boost in economic productivity. When a country has a larger proportion of people who can work, save, and pay taxes, it has a greater potential for economic growth. This is because more people in the workforce means more goods and services can be produced, leading to an increase in gross domestic product (GDP). Moreover, if these workers are properly educated and trained, the increase in human capital can further enhance productivity.

However, it's important to note that the demographic dividend is not automatic. It requires sound policies in areas such as education, health, governance, and the economy. For instance, if the working-age population is not well-educated or healthy, they may not be able to contribute effectively to the economy. Similarly, if the economy does not have the capacity to absorb and provide jobs for the increased labour force, the potential economic benefits may not be realised.

In addition, the demographic dividend is a temporary phenomenon. As the large working-age population gets older, the country will face an increase in the elderly population, which could lead to increased healthcare and pension costs. Therefore, it's crucial for a country to take advantage of this window of opportunity to invest in policies that will sustain economic growth even after the demographic dividend period has passed.

In summary, the demographic dividend refers to the potential economic benefits that can arise from a change in a population’s age structure. It's a crucial concept in economics and development, highlighting the importance of demographic factors in driving economic growth.