Demographic Dividend

As countries develop, birth rates often fall. For a period, this means fewer children to support while the large generations born earlier reach working age. With more workers relative to dependants, there is potential for higher output, saving and investment per person.

For example, several East Asian economies, including South Korea, experienced rapid growth in the late twentieth century partly because their working-age populations grew quickly relative to dependants.

A demographic dividend is an opportunity, not a guarantee. To benefit, countries need enough jobs, good education and health systems and policies that encourage saving and investment. Without these, a large working-age population can instead mean high unemployment.

The dividend is temporary. As the large working-age generation grows older and retires, the share of older dependants rises, which can slow growth and strain pension and healthcare systems. Many developed economies, and some emerging ones such as China, now face this ageing challenge.