World Bank, IMF say migration to be a long-term issue

12 Oct '15

6 min read

Countries can earn a first demographic dividend when a workforce grows as a share of a nation's population, providing a powerful acceleration to growth. As changes in age structure expand production and resources, a second dividend is possible as savings build up and investment rises.

Although low-income countries can expect to see the largest growth in their working age populations, many of these countries are held back by conflict and fragility, putting these gains at risk. Sub-Saharan Africa's high fertility and population growth will make the region home to an increasing share of the world's children and working-age population in decades ahead, the report says.

“As heartbreaking images of families desperately fleeing conflict remind us, many migrants leave home due to conflict, instability and shrinking economic opportunities at home,” said Kaushik Basu, Senior Vice President and Chief Economist at the World Bank.“While refugees are moving to rich countries what is often overlooked is that the flows into middle and low income countries are vastly greater. Creating economic opportunities for countries with growing proportions of youth will contribute to economic stability and development and will help countries lower fertility rates, which contributes to stronger growth.”

Countries that are lagging in development and have high fertility rates are classified as pre-dividend, such as Niger. They would benefit from improving health care and education, facilitating lower fertility rates and accelerating the transition to a greater share of their populations that are working age, the report says.

Early-dividend countries that have already seen a drop in fertility but that still have young populations, such as Ethiopia, could benefit from speeding up job creation. An expanding workforce is linked to growth: an increase of 1 percentage point in the working age population can translate to a rise in the GDP per capita of as much as 2 percentage points, the report says.

In late-dividend countries where the share of the working age population is declining, such as Brazil, economic dynamism is at risk of fading. There, governments should encourage savings for productive investment, female participation in the workforce, and strengthening of social welfare systems. Post-dividend countries such as Japan, which are characterized by declining workforces and rising numbers of elderly, would do well to complete health care and pension reforms and take further steps to raise workforce participation and productivity, the report says.

“To leverage demographic change within countries, the centers of global poverty need to facilitate the demographic transition to slower population growth and accelerate job creation to absorb the swelling working-age population,” said Philip Schellekens, the report's lead author. “The engines of global growth need to address demographic headwinds and adapt institutions and policies to aging. In today's interconnected world, effective policies will also arbitrage demographic change across countries. Freer flows of capital, trade and—especially—labor present tremendous opportunity to turn this era of intense demographic change into one of sustained development progress.”

The report notes that world economic growth in 2015 is set to disappoint, down to 3.1 per cent, from 3.4 per cent in 2014, on the basis of slower growth in many emerging market economies. Growth is expected to pick up to 3.6 per cent in 2016, helped by strengthening recoveries in major advanced economies - led by the US - and some turnaround from weak situations in several emerging market and developing economies. (SH)

Fibre2Fashion News Desk – India

More World Bank News... More Textiles News - Global...