null
Demographic change

Demographic change

More people, growing prosperity?

Every day, the number of people on Earth increases by 233,280, with most of them born in developing countries. To ensure that this population growth can reach its positive potential, investments must be made in creating jobs, in education, health and social protection.

The authors
null

Annette Gabriel is a senior sector economist at the Competence Centre Sustainable Economic Development, Education and Health of KfW Development Bank, where Dr Detlef Hanne also works as a project manager in the Southern and Eastern Africa division.

The world population is growing, most strongly so in economically struggling countries in Africa and Asia. Africa has 1.1 billion inhabitants, of whom 43 percent are under 15 years of age, with this expected to rise to 2.4 billion by 2050. But will this population growth become a burden for the countries in question? Or will it be possible to utilise the growing potential workforce for positive development?

There are two factors that essentially facilitate the positive overall development in modern economies: firstly, economic growth and a sufficient supply of jobs, and secondly, a skilled labour force.
The age distribution of a country helps to reveal how many people can work and how many people the working population needs to provide with support.
The industrialised nations are heading for a situation where the population diminishes and ages. Skilled labour forces are dwindling away from these societies. From a demographic perspective, developing countries are in a better current situation.

The tigers have led the way

But what would it take to set a positive trend in motion in these countries? The Asian Tiger nations – first and foremost South Korea – can serve as an example, having jumped ahead economically and socially since the 1970s.

Interesting fact about africa

For instance, per capita income in South Korea rose from USD 81 in 1960 to USD 22,489 in 2011. The average birth rate per woman fell from 4.5 to 1.2 children between 1970 and 2009.

The positive trend in the emerging economies of South East Asia materialised successfully because of several parallel processes underway there. Firstly, more favourable general conditions for economic development were created through political reforms; secondly, manufacturing companies were built up; thirdly, investments in education helped to produce skilled workers; and fourthly, efficient and effective health and social protection systems were instituted.

As a first step, life expectancy increased and birth rates dropped as a result of improved provision of basic services. The importance of having children for old-age care purposes decreased. This saw the employable share of the population increase, while the number of young and old people needing to be cared for was reduced. A “demographic bonus” was achieved.

The tiger nations then managed to take a second step, transforming the bulk of the employable population into people who worked for an income. The demographic bonus was successfully translated into a demographic dividend and the once developing countries became emerging economies or industrialised nations.

Support from KfW

KfW Development Bank promotes numerous projects worldwide, including in Sub-Saharan Africa.

Find out more

Support is the key

However, a series of obstacles make it difficult for many developing countries – especially in Sub-Saharan Africa – to follow in the tigers’ tracks and achieve a demographic dividend. Many of these countries have insufficient economic income, leaving them no opportunity to stimulate the economy or launch a structural transformation. Production costs in Africa, despite the rock-bottom wages, are too high to be able to compete in the global market. In addition, Africa is over 70% rural in composition, meaning that potential workers can be expected in rural areas, rather than in manufacturing industries as in the tiger countries.

Another frequent factor here is ineffective government in politically fragile contexts. As the particularly large youth group often only has a primary education, and with jobs in the formal sector being rare, many search in vain for paid work.

Most countries need external financial and technical support to break this vicious circle. This alone is able to foster private initiatives for employment alongside public ones, and to ramp up healthcare, education and social protection.

German development cooperation assists in shaping the demographic transformation in partner countries by various means. Project work is currently focusing on supporting young women, for instance. A high level of education makes it easier for them to autonomously engage in family planning and generate income for their family.

SOURCE
Cover CHANCEN Age

This article appeared in the spring/summer 2014 issue of CHANCEN magazine focusing on age.

To German issue

For example, KfW Development Bank is training engineers in Ethiopia, upskilling workers throughout Ghana, and providing targeted maternal and child health support in Kenya from the funds of the German Federal Ministry for Economic Cooperation and Development (BMZ). KfW’s subsidiary DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH – supports companies becoming active in developing countries, thus creating jobs.

German development cooperation is working in the key sectors to help create the demographic bonus and turn this into a dividend. But amid all the support contributed by Germany and other industrialised countries, the fundamental efforts need to come from the partner countries themselves. That is the only way to create the broader political and economic conditions that are necessary, and to seize the opportunities presented by population growth.

Published on KfW Stories: Wednesday, 30 August 2017

SDG logo

All United Nations member states adopted the 2030 Agenda in 2015. At its heart is a list of 17 goals for sustainable development, known as the Sustainable Development Goals (SDGs). Our world should become a place where people are able to live in peace with each other in ways that are ecologically compatible, socially just, and economically effective.