An Opportunity, A Burden

Indian Express, Published 23 February 2017

An Opportunity, A Burden

Pakistan currently has a unique opportunity to reap a demographic dividend. The
debatable point, however, is whether it will be able to do so. When Thomas Robert Malthus propounded his theory of population growth, he was looking at the population of a country as a whole. Modern-day demographers have, however, looked at age structures rather than the total population. This is based on the reality that while the young and the old tend to consume more than they produce, the working-age population tends to produce more than it consumes. Thus, countries that have a larger proportion of working-age population relative to young and elderly dependants have the opportunity to reap a “demographic dividend” through potentially greater economic activity.

The moot point is that the demographic dividend only creates the conditions for an economic spurt and which have to be harnessed. Additionally, a demographic dividend is a time-specific window of opportunity. Over time, the age-structure changes again, as the adult population starts ageing and becomes less productive.

Pakistan’s working-age population (15-64 years) reached 52 per cent in the late 1980s and early 1990s and is currently estimated to be 60.4 per cent creating the possibility of a demographic dividend. The share of the working-age population is expected to peak at 68 per cent around 2045 by when it will start declining. The once in a lifetime window for Pakistan for a demographic dividend is roughly between 1990 and 2045. Of these 55 years, 25 have already passed without any significant spurt in economic activity.

In order to actualise the demographic dividend, the basic question to be asked is whether those entering the labour market can be absorbed productively in an increasingly technologically advanced world? Based on population projections, 3.1 million persons are expected to enter Pakistan’s labour force every year over the next four decades. Pakistan’s economy, however, even with a GDP growth of 5 per cent, generates employment for less than 1 million persons per year. What Pakistan needs is a sustained GDP growth of over 7 per cent to generate employment to absorb these numbers.

Unfortunately, Pakistan’s GDP growth during 2012-13, 2013-14 and 2014-15 was 4.03 per cent, 4.24 per cent and 4.7 per cent respectively. Prospects for an accelerated growth in the near or even medium-term look bleak. Agriculture will not be able to absorb part of the growing labour force since it is in disarray. Despite employing nearly 43 per cent of the country’s labour, with strong backward and forward linkages, it recorded a negative growth of 0.19 per cent in 2015-16 compared with a targeted growth of 3.9 per cent and a growth of 2.53 per cent in 2014-15. Ominously, the rate of unemployment among literate workers is more than twice the rate among illiterate workers. In fact, the highest rate of unemployment, three times above the national average, is observed in the case of workers with either degree or post-graduate qualifications.

Apart from structural imbalances, the inability of Pakistan’s economy to absorb the growing working-age population is due to the snowballing effect of insufficient investment in education over decades. This weakness has manifested itself when an educated work force is needed the most in order to reap the demographic dividend.

So what happens to the two million young people entering the labour market year on year for the next four decades and who remain unemployed? The flipside of an unrealised demographic dividend is that the massive “youth bulge” could degenerate into a “demographic horde” with all its attendant consequences of frustration, alienation and violence. It will then pose a threat to law and order including, in Pakistan’s case, of terrorism. An unproductive population would also put huge pressures on resources like food, water and energy.

Time clearly is not on Pakistan’s side and there are no shortcuts here. Failure to anticipate the needs of a changing age structure, not making timely investments in education and the continuing sluggish growth of the economy can have explosive social and political consequences hastening the country’s slide.

An Opportunity, A Burden

 

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