Demographic Dividend

The demographic dividend is a rise in the rate of economic growth due to a rising share of working age people in a population. This usually occurs late in the demographic transition when the fertility rate falls and the youth dependency rate declines. The magnitude of the demographic dividend is primarily dependent on the ability of the economy to absorb and productively employ the extra workers rather than a pure demographic gift. Richer economies, where birth rates are lowest, are likely to suffer first. The effect in developing regions will be different: as fertility rates fall in countries such as India (births in India have dropped from 6 children per woman in 1950 to only 3 today - and fertility is continuing to fall) the number of dependents on each worker will decrease markedly. With a bulk of working age people and relatively few dependents, this might prove a demographic dividend for developing countries and will be important in increasing the global weight of countries like Brazil, China and India.
Developing nations can engulf the benefits of demographic dividend at par with developed economies because when fewer children are born; more women will now join the work force; so this can give a further fillip to the bread-winner ratio.
Human beings save most during the working years of their lives. When they are children, they clearly consume more than they earn, and the situation is the same during old age. Hence, a decline in the nation's dependency ratio is usually associated with a rise in the average savings rate.
The demographic dividend, however, does not last forever. There is a limited window of opportunity. In time, the age distribution changes again, as the large adult population moves into the older, less-productive age brackets and is followed by the smaller cohorts born during the fertility decline. When this occurs, the dependency ratio rises again, this time involving the need to care for the elderly, rather than the need to take care of the young. In addition, the dividend is not automatic. While demographic pressures are eased wherever fertility falls, some countries will take better advantage of that than others.
Some countries will act to capitalize upon the released resources and use them effectively, but others will not. Then, in time, when the window of opportunity closes, those that do not take advantage of the demographic dividend will face renewed pressures in a position that is weaker than ever.
Sub-Saharan Africa, on the other hand, is just now starting to enter its window, under the assumption of declining fertility rates over the next several decades. If those declines come to pass, and if the governments involved take actions that follow, to some extent, those of East Asia, the dividends may become real rather than potential.

The demographic dividend can be delivered through several mechanisms-
Labor Supply
Savings
Human Capital

Demographic situation in developing nations can be described as follows-
Childbearing and population growth rates in most of the developing countries has either declined or rising at a high diminishing rate.
The labor force growth rate has exceeded the total population growth rate.
There has been a massive increase in longevity.
Concomitant with these demographic trends, there has been massive economic growth.
There were several, interacting reasons for the East Asian economic success story:
1. Most countries were able to successfully meet the employment challenge posed by the growth of the working age population (i.e. more and more people seeking jobs), mainly through a rapid industrialization. The greater involvement of women in the labor force concomitant with improved female status, was a subsidiary factor.
2. Savings and investment rates grew rapidly. There is controversy over the contribution of different causes to this growth, especially the contribution of demographic factors like the increasing proportion of the working age population.
3. East Asian countries in the late 1950s and early 1960s changed from having positive views on large and expanding populations, to having concerns about the possible adverse effects of rapid population growth. They adopted and promoted corresponding population policies – adopting development plans with specific population growth reduction targets, legalising the manufacture and distribution of contraceptive devices and drugs. Some governments adopted comprehensive sets of incentives and disincentives to encourage small rather than large families. And population growth slowed down substantially during the 1960–1990 period.
4. Asian countries generally, experienced more political stability than in most of Latin America and sub–Saharan Africa. Consequently, their governments could realistically pursue long–term goals.
5. Taiwan and South Korea had relatively high levels of literacy and received substantial foreign assistance for reconstruction.
This account of change in East Asia is a general one. The picture is of an economic success story, partly brought about by a successful exploitation of the demographic dividend.



CONCLUSION
Demography lies at the heart of our socio-economic system. There is virtually no area that is not influenced by it, and the related trends around the world are not all pointing the same way. Especially the developing and emerging nations will see further population growth, while Europe and Japan will witness noticeable declines and an ageing of society due to the speed of fertility transaction. It is observed that in developed economies the second stage of demographic transaction, implying relative increase in the proportion of the work force (increasing with decline in fertility rate) goes unnoticed. This is causing enormous economic, political and social challenges in the “First World Countries.”
Timing is critical to harnessing the demographic dividend. Some countries—China, Brazil, and have “missed that demographic window of opportunity,” as the relative numbers of youth are now decreasing and dependency ratios are increasing. But in Egypt, India, and the Philippines, the window is still open: the number of youth relative to other age groups will continue to rise until 2015 when the relative number of youth will begin to level off and eventually decline, the World Development Report projects.