The demography of a country is important from several lenses and defines a nation’s economy, social practices and even politics. However, its relation with economics is one of the most studied, with a literature devoted to it, called the demographic dividend. In simple words, demographic dividend is the economic growth potential that results from alterations in a population's age structure, especially when the share of the working-age population is larger than the non-working-age proportion of the population. Bhutan’s demography has seen huge transformations, due to which opportunities to harness the dividend existed. The question though is if we managed to do it. Further due to the pandemic, increased youth unemployment and thousands of people leaving for other countries, Bhutan may not be able to reap the dividends, unless effective interventions are put in place.
Basically, demographic transition, like decline in fertility, leads to alterations in a population’s age structure, which can affect economic growth. A country that has the advantage of increasing working-age population and low proportion of young dependents may reap the benefits of good health, quality education and decent employment which in turn would result into economic advantage. Commonly known as the demographic dividend it lasts for a certain number of years. When this window of opportunity is passed, the dividend is no longer available and will never repeat.
According to a study conducted by the National Statistical Bureau (NSB) in 2019, Bhutan’s population has increased to 735000 in 2017 from 634000 in 2005. The projection is that it will reach 883000 by 2047. NSB says that due to rapidly declining trend in fertility and population growth, Bhutan’s population is not expected to reach the one million mark. Even if population increases in absolute numbers, after 2047, there is the likelihood of seeing an equal number of deaths and births or even more deaths than births due to higher proportion of older population. Thus, Bhutan may not see any growth in its population after 2047 and it is this changing population structure that is emerging as an issue of critical importance.
NSB’s population projections says the proportion of children will decline from 26% in 2017 to 19% by 2047, whereas the proportion in the working-age(15-64) would increase from 68% in 2017 to 70.8% in 2037 and slowly decline to 69.5% by 2047. The proportion aged 65+ would increase from 5.9% in 2017 to 13.4% in 2047. This change in the age composition of the population opens up the opportunity of demographic dividend.
The demographic dividend is the effect of an increase in the share of working-age population and commonly measured by the dependency ratio, purely based on number of children (those aged 0-14), working-age population (those aged 15-64) and the elderly (those aged 65+). “In general, a lower dependency ratio is desirable but as the share of elderly population increases over a period of time, the dependency ratio cannot remain low for a long time. Thus, the dependency ratio falls and rises again. The time when there is low dependency ratio is the period of demographic dividend and is expected to be a short phase in any population depending upon the pace of fertility decline,” NSB says. It is stated that the results of the population projections in Bhutan for the period 2017 to 2047 clearly indicates that the age-sex structure of the total population will undergo a notable change. “The projected age-sex distribution by broad age group reveals that the share of the young population, below 15 years of age, will fall from 26% to 17% and that of elderly population, aged 65 and over will increase from 6% to 13% between 2017 and 2047. Similarly, the size of the young population will decline from about 189 thousand to 151 thousand during the same period. The share of the working-age population (15-64 years) will increase to over 70% and the dependency ratio will fall to about 40% during 2027-42.” These provides a huge demographic dividend.
However, the window of demographic opportunity will begin to close soon after that, as the share of the working-age population will decline. The share of elderly will continue to increase and is projected to cross 100 thousand by 2043. In 2017, there were 395 thousand persons aged 15-64 years, and this is projected to increase further to 615.3 thousand by the year 2042. This the highest number of working-age population observed during projection period. It will reduce slightly and reach around 614 thousand by 2047.
When a country experiences demographic dividend, more young people are expected to be in the labour force. Over the next decades the peak in labour force is observed to be moving from 20-24 to the older age groups. By the end of 2047, Bhutan’s labour force will be composed of those persons in the ages 60-64 years. In terms of size, it would double from 15 thousand in 2019 to 38 thousand in 2047. Bhutan will also experience the shrinking of young labour force (15-39 years) from 61% in 2019 to 39% in 2047. “This is a clear indication that the window of opportunity for Bhutan to reap the demographic dividend will start to close over the next few decades,” the study says.
NSB has noted that the time-bound window to take advantage of favorable demographic conditions is quickly closing. Looking at the projected change in the dependency ratio, the region has approximately 30 years to exploit the growing labour force before the number of elderly persons starts to significantly increase, thus limiting savings, investment and future output potential.
Another study conducted by the Asian Development Bank (ADB) says the same. It says that with the change in population structure, the share of working age population will rise, yielding the demographic dividend. This will be at peak during the mid-2020s through the mid-2040s favouring rapid economic development. However, the window of demographic opportunity will begin to close soon after mid-2040s. Therefore, it is imperative that this imminent dividend is efficiently harvested by making investments in education and by providing scope for utilization of the increased labour force.
The ADB study says that realizing the potential demographic dividend that results from a changing population age structure is not automatic. Rather, the extent to which a country can convert this potential into actual growth depends on its policy response. Given that Bhutan is already halfway through its dividend phase, with only about 2 decades remaining, the country must seize the opportunity to fully realize this potential. The right policies should include investing in human capital, implementing growth-promoting economic policies and improving governance, and preparing for population aging.
What the studies have not mentioned is Bhutan’s unemployment rate which continues to soar. As per the Bhutan Labour Force Survey conducted by the National Statistical Bureau (NSB) in 2019, the overall unemployment rate was 2.7% and youth employment rate 11.9 percent. This would change the demographic dividend and have a negative affect. As mentioned by the Economic Times, with this ‘pandemic generation’ joining the workforce in an economy that is failing to provide adequate employment opportunities to its current strength, India’s chances of levering upon its demographic dividend are soon becoming obscure. There is little to no hope that things will be any different moving forward.
Additionally, the ADB has said that international migration is perceived to be not substantial for Bhutan, due to which this has not been factored in the national projection. However, we are now witnessing unprecedented movement of Bhutanese, especially those in the working age groups. Thus, the period for demographic dividend will be further reduced.
Both NSB and ADB has provided some recommendations, with investment in human capital first in the list. “The remaining benefits will be largely determined by the human capital base of the workforce. The kind of skills needed for the future labour force entrants needs proper planning in line with the occupation diversifications options. Young people has to be prepared so that they are fully equipped with competencies to suit the diversified occupational categories. For example, if the country wish to promote IT sector, training institutions are to be opened up now; those existing strengthened,” NSB recommends, adding various training avenues needs to be planned for creating a cadre of geriatric care providers which will be required in future.
The need to create more jobs is also pointed out, with focus on occupational diversification. “There is a need to plan for occupational diversification to accommodate the new entrants into job markets by keeping the pace of digital development, Information Technology (IT) sector and others,” NSB has said.
Similarly, the ADB has recommended that converting the demographic dividend to economic growth and sustaining the growth momentum, requires intensification of Bhutan’s human capital development in order to capitalize on the remaining dividend period. “The expanded working-age population must therefore be provided with adequate education and vocational skills that match market needs to enhance their employability. At the same time, more employment opportunities must be created to absorb the increased labor supply. Scaling up of investments to build human capital through vocational and skills development training is particularly important to respond to the changing labor market.”
The studies were conducted two years back. Were any measures taken based on the study? The studies further outline challenges that would be faced in future. Is anything being done?
Basically, demographic transition, like decline in fertility, leads to alterations in a population’s age structure, which can affect economic growth. A country that has the advantage of increasing working-age population and low proportion of young dependents may reap the benefits of good health, quality education and decent employment which in turn would result into economic advantage. Commonly known as the demographic dividend it lasts for a certain number of years. When this window of opportunity is passed, the dividend is no longer available and will never repeat.
According to a study conducted by the National Statistical Bureau (NSB) in 2019, Bhutan’s population has increased to 735000 in 2017 from 634000 in 2005. The projection is that it will reach 883000 by 2047. NSB says that due to rapidly declining trend in fertility and population growth, Bhutan’s population is not expected to reach the one million mark. Even if population increases in absolute numbers, after 2047, there is the likelihood of seeing an equal number of deaths and births or even more deaths than births due to higher proportion of older population. Thus, Bhutan may not see any growth in its population after 2047 and it is this changing population structure that is emerging as an issue of critical importance.
NSB’s population projections says the proportion of children will decline from 26% in 2017 to 19% by 2047, whereas the proportion in the working-age(15-64) would increase from 68% in 2017 to 70.8% in 2037 and slowly decline to 69.5% by 2047. The proportion aged 65+ would increase from 5.9% in 2017 to 13.4% in 2047. This change in the age composition of the population opens up the opportunity of demographic dividend.
The demographic dividend is the effect of an increase in the share of working-age population and commonly measured by the dependency ratio, purely based on number of children (those aged 0-14), working-age population (those aged 15-64) and the elderly (those aged 65+). “In general, a lower dependency ratio is desirable but as the share of elderly population increases over a period of time, the dependency ratio cannot remain low for a long time. Thus, the dependency ratio falls and rises again. The time when there is low dependency ratio is the period of demographic dividend and is expected to be a short phase in any population depending upon the pace of fertility decline,” NSB says. It is stated that the results of the population projections in Bhutan for the period 2017 to 2047 clearly indicates that the age-sex structure of the total population will undergo a notable change. “The projected age-sex distribution by broad age group reveals that the share of the young population, below 15 years of age, will fall from 26% to 17% and that of elderly population, aged 65 and over will increase from 6% to 13% between 2017 and 2047. Similarly, the size of the young population will decline from about 189 thousand to 151 thousand during the same period. The share of the working-age population (15-64 years) will increase to over 70% and the dependency ratio will fall to about 40% during 2027-42.” These provides a huge demographic dividend.
However, the window of demographic opportunity will begin to close soon after that, as the share of the working-age population will decline. The share of elderly will continue to increase and is projected to cross 100 thousand by 2043. In 2017, there were 395 thousand persons aged 15-64 years, and this is projected to increase further to 615.3 thousand by the year 2042. This the highest number of working-age population observed during projection period. It will reduce slightly and reach around 614 thousand by 2047.
When a country experiences demographic dividend, more young people are expected to be in the labour force. Over the next decades the peak in labour force is observed to be moving from 20-24 to the older age groups. By the end of 2047, Bhutan’s labour force will be composed of those persons in the ages 60-64 years. In terms of size, it would double from 15 thousand in 2019 to 38 thousand in 2047. Bhutan will also experience the shrinking of young labour force (15-39 years) from 61% in 2019 to 39% in 2047. “This is a clear indication that the window of opportunity for Bhutan to reap the demographic dividend will start to close over the next few decades,” the study says.
NSB has noted that the time-bound window to take advantage of favorable demographic conditions is quickly closing. Looking at the projected change in the dependency ratio, the region has approximately 30 years to exploit the growing labour force before the number of elderly persons starts to significantly increase, thus limiting savings, investment and future output potential.
Another study conducted by the Asian Development Bank (ADB) says the same. It says that with the change in population structure, the share of working age population will rise, yielding the demographic dividend. This will be at peak during the mid-2020s through the mid-2040s favouring rapid economic development. However, the window of demographic opportunity will begin to close soon after mid-2040s. Therefore, it is imperative that this imminent dividend is efficiently harvested by making investments in education and by providing scope for utilization of the increased labour force.
The ADB study says that realizing the potential demographic dividend that results from a changing population age structure is not automatic. Rather, the extent to which a country can convert this potential into actual growth depends on its policy response. Given that Bhutan is already halfway through its dividend phase, with only about 2 decades remaining, the country must seize the opportunity to fully realize this potential. The right policies should include investing in human capital, implementing growth-promoting economic policies and improving governance, and preparing for population aging.
What the studies have not mentioned is Bhutan’s unemployment rate which continues to soar. As per the Bhutan Labour Force Survey conducted by the National Statistical Bureau (NSB) in 2019, the overall unemployment rate was 2.7% and youth employment rate 11.9 percent. This would change the demographic dividend and have a negative affect. As mentioned by the Economic Times, with this ‘pandemic generation’ joining the workforce in an economy that is failing to provide adequate employment opportunities to its current strength, India’s chances of levering upon its demographic dividend are soon becoming obscure. There is little to no hope that things will be any different moving forward.
Additionally, the ADB has said that international migration is perceived to be not substantial for Bhutan, due to which this has not been factored in the national projection. However, we are now witnessing unprecedented movement of Bhutanese, especially those in the working age groups. Thus, the period for demographic dividend will be further reduced.
Both NSB and ADB has provided some recommendations, with investment in human capital first in the list. “The remaining benefits will be largely determined by the human capital base of the workforce. The kind of skills needed for the future labour force entrants needs proper planning in line with the occupation diversifications options. Young people has to be prepared so that they are fully equipped with competencies to suit the diversified occupational categories. For example, if the country wish to promote IT sector, training institutions are to be opened up now; those existing strengthened,” NSB recommends, adding various training avenues needs to be planned for creating a cadre of geriatric care providers which will be required in future.
The need to create more jobs is also pointed out, with focus on occupational diversification. “There is a need to plan for occupational diversification to accommodate the new entrants into job markets by keeping the pace of digital development, Information Technology (IT) sector and others,” NSB has said.
Similarly, the ADB has recommended that converting the demographic dividend to economic growth and sustaining the growth momentum, requires intensification of Bhutan’s human capital development in order to capitalize on the remaining dividend period. “The expanded working-age population must therefore be provided with adequate education and vocational skills that match market needs to enhance their employability. At the same time, more employment opportunities must be created to absorb the increased labor supply. Scaling up of investments to build human capital through vocational and skills development training is particularly important to respond to the changing labor market.”
The studies were conducted two years back. Were any measures taken based on the study? The studies further outline challenges that would be faced in future. Is anything being done?
