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Unit 3 Reading 1

The document discusses the relationship between demographic changes, particularly population growth and age structure, and economic development, highlighting concepts like demographic deposit, dividend, and debt. It emphasizes the importance of workforce participation, especially women's involvement, and the implications for productivity and support ratios in India. Additionally, it addresses the challenges of caring for the elderly as dependency ratios shift and the need for effective policies to manage health care costs and savings for old age.

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5 views3 pages

Unit 3 Reading 1

The document discusses the relationship between demographic changes, particularly population growth and age structure, and economic development, highlighting concepts like demographic deposit, dividend, and debt. It emphasizes the importance of workforce participation, especially women's involvement, and the implications for productivity and support ratios in India. Additionally, it addresses the challenges of caring for the elderly as dependency ratios shift and the need for effective policies to manage health care costs and savings for old age.

Uploaded by

vijaylakavath4
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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UNIT 3 READING 1

Notes drawn and Compiled from Desai, S., 2015, “Demographic deposit, dividend and debt”,
The Indian Journal of Labour Economics, 58, 217-232.

▪ a number of scholars continued to speculate that population growth may create


technological and societal adaptations resulting in a positive relationship between
population growth and economic development
▪ country’s age structure has been crucial in the growth experienced since 1980s and it has
potential to impact growth more in coming times
▪ Reconciling the dragging down effect of population with the concept of demographic
dividend: Earlier studies which failed to establish a strong link (either positive or negative)
between population size or structure and economic growth (Western industrial nations b/w
18th & 20th century: High dependency ratio compared to 1980 studies which experienced
declining child population
▪ demographic drivers of economic growth facing Europe during the 19th and the 20th century
may be different from those facing East Asia in the later part of the 20th Century
▪ Many studies discuss first and second demographic dividend :

Demographic deposit : first dividend

➢ dividend affected by mortality and fertility of nation and proportion of working age to
non-working age citizens; dividend can be small or big lasting from 20-60 years
➢ declining dependency reduces (e.g. reduced child expenditure) some expenditure which
can be notionally deposited and used later when dependency increases (e.g. senior
citizens)

Demographic dividend: second dividend

➢ capital accumulation, increased investments in human capital resulting in long term


improvements in productivity; Since dependents fall, savings rise and so do investments
thereby increase future productivity
➢ How the demographic deposit created is invested and determines how this dividend is
reaped
Demographic debt : incurred to future elderly because conditions of their living in future will
change and it will depend on the social institutions and safeguards in place

Demographic Deposit and Support Ratio

▪ India - slow fertility decline causing slow decline in dependency ratio at the start of the
demographic dividend phase and slow increase towards the end
▪ Thus, support ratio (proportion of population in working ages) will continue to rise until for
some years before beginning to decline.
▪ Changing composition of dependent population: Below 15 may continue to decline while
that above age 65 will increase, changing the nature of demands placed on the working
population
▪ a substantial decline in period TFR will lead to demographic support ratios fastening the pace
of decline in dependency and increasing the quantum of the demographic deposit while
simultaneously shortening its lifespan by about a decade
▪ more than working age population, the ratio of workers to non-workers is more important ,
leading to focus on two important aspects of workforce participation

Women’s participation:

▪ Women’s participation is in general low in India as can be seen by data which shows between
1993–94 and 2011–12, WPR for rural women fell from 32.7% to 24.8% including both
primary and subsidiary work status
▪ Women’s work participation has a U-shaped relationship with education: initially as
education increases to middle levels, women will not find suitable job opportunities but
further education will make more opportunities available
▪ Increasing household incomes may reduce the imperative of income generation and may
increase the importance of social status
▪ Empirically it may be so that fertility and women’s work is more negative in industrial society
than in developing societies ; larger family sizes are seen to empirically motivate women to
work outside as there are caretakers available for children , than in nuclear families

Age specific labour force participation patterns

▪ proportion of youth in schooling age has declined due to increased school enrolment (both
in rural and urban areas)
▪ this however, maybe seen in positive light as it will lead to higher education and
subsequently higher human capital levels
▪ support rations however might improve if youth unemployment is reduced; same goes for
including older individuals in workforce due to improving health conditions

Demographic Dividend and Accelerating Productivity

▪ Demographic deposit indicates that as long as workers consume less than they produce ,
rising proportion of workers will increase GDP per capita
▪ Improving support ratio indicates a two pronged effect: declining dependency burden
increases savings and along with that it does not let capital per worker fall with increased
number of workers
▪ Demographic dividend is determined by how demographic deposit ( a benefit smaller than
demographic dividend) is used/invested
▪ Empirically fertility can be curtailed by the desire to improve investment in existing child’s
education- for the case of India such improvements by households in private education has
increased even when state was supplementing educational infrastructure through Sarva
Shiksha Abhiyan thereby attempting to reap benefits of demographic dividend
▪ Looking at school educations outcomes however indicates otherwise-many empirical studies
have indicated that only a small edge is earned due to this increased investment in private
education and this is detrimental to reaping rewards of demographic dividend
▪ Another way in which demographic deposit can be plpughed back to real benefits of
demographic dividend is by savings in household, corporate and public sector- A gradual
decline has been seen post 2007-08 in overall savings , even though it is still high which
means that demographic dividend can still be reaped by major modifications in policy

Demographic Debt and Caring For The Elderly


▪ In earlier stages of demographic transition, children’s proportion in dependents falls whereas
those of elderly rises, and potential for their care will be determined by the consumption
patterns and age specific earnings
▪ At present, most of the support for the elderly comes via transfers from other family
members since their earning drop drastically – this support system is fast declining due to
higher migration and lower fertility and might lead to requirement for other sources of
support
▪ In this context three issues are important

a) Increasing work opportunities for elderly:


➢ Mortality declines and improvement in heath of elders in demographic transition is
adjusted by increasing retirement age and even elimination of compulsory
retirement in some cases
➢ In India still since a large number of individuals above 60 are employed in
agriculture, a declining agricultural activity may imply declining work possibilities for
some portion of elderly population
b) Health care cost management:
➢ Could be managed through layered health care financing structures: basic public
health through existing public health systems, emergency care through programmes
like Rashtriya Swasthya Bima Yojana and tertiary care through private health
insurance systems
c) Increasing saving potential for old age
➢ Declining fertility may free up some resources to save for old age, but since
education costs are increasing fast, these saving is not very promising.
➢ Education is vital for higher productivity but the main challenge will be controlling
education costs without compromising the quality of educational services and this
can also be a solution for ensuring that even young parents maybe able to save for
their old age.

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