The demographic edge

Courtesy:- Dr Akmal Hussain
March 19, 2012

Pakistan is undergoing a change in the age composition of its population. The labour force, particularly, the young age group (between 14 to 49 years) is growing faster than the population as a whole. Overall, as much as 60 per cent of the population today is below the age of 30. Let us discuss the nature of demographic change in the country and the subsequent challenges for policymakers.

If the youth is enabled to actualise its talents, Pakistan can achieve a faster economic growth rate and build a more vibrant and enlightened society. If, however, the necessary education, health facilities and economic opportunities are not provided to the burgeoning and increasingly young labour force, then the resultant frustration can have explosive consequences and plunge Pakistan further into economic decline and violence.

The census data shows that the working age population — (between 15 to 64 years) — as a percentage of the total population has increased from 54 per cent in 1998 to 57 per cent in 2005. At the same time more working age people have to take care of fewer dependents than before. Thus, the dependency ratio has declined from 0.86 to 0.75 over the period. These trends are likely to continue till 2050 when dependency ratios will start increasing again. So there is a four decade window in time for providing employment to, and increasing the productivity of, the rapidly growing labour force and thereby getting onto a high growth trajectory. Apart from this, the increased income per head of the labour force will be necessary if the burden of a higher number of dependents per worker is to be borne subsequently.

Within the labour force, the number of persons in the young age group (between 15 to 49 years) is projected to increase from 96 million in the year 2010, to 181 million in 2050. At the same time, the total labour force is projected to increase from 110 million in 2010, to 235 million in 2050. This means that 3.1 million persons out of which as many as 2.1 million are young, will enter the labour force annually, and will continue to do so till 2050.

The question is, can the existing trends in GDP growth provide employment, at least to the new entrants in the labour force, and hence prevent unemployment from increasing? The answer is no. Even when the historical trend rate of about five per cent GDP growth is achieved, annual employment generation of only about one million occurs.

It is clear, therefore, that the first challenge here is twofold: (a) Increase the trend rate of GDP to seven to eight per cent, and (b) Restructure the growth process so as to enhance the employment generation capacity for given GDP growth rates (i.e. increase the employment elasticity of GDP growth).

The second challenge is to improve coverage and quality of education. Primary school education coverage is increasing all too slowly. 56 per cent of boys and 48 per cent of girls were reported to be attending primary schools in 2005-06. Secondary education is essential to prepare girls and boys for vocational, technical and higher education. Here the situation is dismal with only 30 per cent of males and 21 per cent of females, aged 10 to 14 years, attending middle and matric levels. Problems of quality, relevance and drop out rates are acute. Thus, at existing levels of resources devoted to education, a large proportion of the young people entering the labour force over the next two decades will have no education or skills. A massive effort is, therefore, required in terms of financial resources and the organisational capacity to improve outcomes in terms of coverage and quality of education.

If Pakistan is to make use of the opportunities implicit in demographic change, a paradigm shift needs to occur in thinking about economic growth and resource allocation. Failure to do so can convert the potential demographic dividend into a demographic disaster.