For decades now, economists and demographers have studied the economic boost (often called the “demographic dividend”) that can occur when a nation’s fertility rate falls and the youth dependency rate declines. 

The term “demographic dividend” is never used, but the final report ("The Growth Report: Strategies for Sustained Growth and Inclusive Development") of the Commission on Growth and Development gives us another perspective on the relationship between population change and economic development.

The Commission, an independent group of policy makers, business leaders and scholars, supported by the World Bank, the Hewlett Foundation, and the governments of Australia, Netherlands, Sweden, and the United Kingdom, released its report in late May.

The Commission examined 13 economies that since 1950 have grown at an average rate of seven percent a year or more for 25 years or longer.  At that rate, an economy nearly doubles in size every decade.   The 13 “economic miracles” were: Botswana, Brazil, China, Hong Kong (China), Indonesia, Japan, the Republic of Korea, Malaysia, Malta, Oman, Singapore, Taiwan (China), and Thailand.  The report identified several factors that accounted for these strong economic performances, including high rates of savings and investments and reliance on market mechanisms. 

While the report did not highlight possible demographic factors, all of these countries underwent a significant demographic transition in the last half century.  The total fertility rate in all but two of the countries (Botswana and Oman) is below 3.0 today  Most of them have a total fertility rate today that is below the “replacement rate” needed to maintain population growth.

The Commission did not directly address the possible role of family planning in helping to achieve sustained economic growth, but the report did talk about birth rates and the importance of educating girls:

The education of girls provides one strong test of a government’s commitment to equality of opportunity. Many formidable obstacles stop girls completing their schooling: family financial pressure, lack of safety, even things as basic as inadequate toilet facilities. But if these obstacles can be overcome, the payoff is very high. Educated women have fewer, healthier children, and they have them at older ages. Their children are then more successful in school, largely because they benefit from their mother’s education. Educating girls and integrating them into the labor force is thus one way to break an intergenerational cycle of poverty.

After evaluating these and other reasons for the success of these 13 “economic miracles,” the Commission looked at future economic growth prospects and again touched on demographic factors. 

With respect to the growth prospects of economies with aging populations, the Commission offered a cautiously upbeat appraisal:

Aging societies account for about 70 percent of global GDP, large enough to be significant. As their populations gray, must their economic growth slow? According to simple arithmetic, if the number of working-age adults stagnates or falls, and the number of retirees increases, this must surely squeeze income per head. There are fewer people to earn the income, but no fewer people to divide it among.

But this gloomy projection assumes that the definition of “working-age” remains the same as it does today. That is unlikely to be true. In many countries and regions (including most of Europe, North America, Japan, and China), the graying of the population threatens the solvency of the country’s pension arrangements. As a result, reforms are needed to extend the working life in these countries, or to give people a different set of choices with respect to retirement, income, and consumption before and after retirement.

The current fixed retirement ages cannot survive. Thus the reforms needed to restore the fiscal viability of many national pension systems will also change the length and pattern of working lives. If these reforms are undertaken gradually, as we expect, then the research suggests there is no compelling reason to expect a major slowdown in global growth.

The Commission, however, raised a few warning flags about the growth prospects of countries with younger demographic profiles: 

Aging is mostly a problem for the richer countries but does include China. Many of the world’s least developed countries have the opposite problem. Populations are young, and in countries ravaged by diseases like HIV/AIDs, the “anti-aging effect” is dramatic.

As a result, some countries have millions of young people leaving school and entering job markets that cannot absorb them. Moreover, as new entrants to the labor force, youth are often at a disadvantage to more experienced workers. The result is a worrying youth unemployment problem. It is a predicament that goes well beyond economics, posing a moral challenge and a security risk. And it is very widespread.

In some areas, even very high growth rates will not be quick enough to absorb the forecast labor supply. The numbers are striking. From now until 2050, the world is projected to add 3 billion people. Only 100 million will be in rich countries. One billion will be in fast-developing countries, like India and China. The remainder, which is to say two-thirds of the world’s population increase, will be added in countries that do not yet have a solid track record of growth. Thus, the supply of labor is not where the jobs are being created.

This demographic problem cannot be solved by individual countries alone. The solution will have to span national boundaries. For many countries, it is clear to us, migration for purposes of work is the only potential solution. Workers will have to move from countries where labor is abundant to countries where it is scarce. Migration for work needs international supervision to prevent abuses in the treatment of mobile labor.

Unfortunately, many of the papers written for the Commission were completed before the latest round of commodity price shocks. The report, however, did allude to the challenge posed by rising commodity prices:

One big question remains. Do these rising prices mark the beginning of a period in which natural resources, broadly defined, impose new limits on global growth? It is possible. Growth, both globally and in developing countries, may be somewhat slower than the pace set in the recent past. But it is not possible to know in advance how tight the new limits might be.

That is a big question, too big in fact to receive so little attention in this report.  The 13 economic success stories profiled by the Commission’s report occurred, for the most part, during a time of rapidly expanding oil production and sharp increases in agricultural production.  If global oil output stagnates and/or global food production fails to keep up with the world’s growing appetite for food, “economic miracles” may be a lot harder to come by in the future.