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Unit 5: Human Population Dynamics // Section 7: Other Consequences of Demographic Change

The environmental consequences of population growth are a subset of broader interactions between population and national economic development. Scholars have debated for many years whether population growth helps or hinders economic growth. And the issue of economic growth (which is affected in various ways by demographic change) is relevant to the environment because people in wealthier nations are generally healthier, more interested in environmental quality, and better able to afford cleaner technologies than those in poor countries (although, as discussed above, they also tend to choose high-consumption lifestyles and generate relatively large amounts of waste and air, land, and water pollution per capita).

It may seem intuitively obvious that large family size is associated with poverty. Indeed, family planning efforts in the 1960s were spurred by worries that rapidly growing populations would lead to slower economic growth in developing countries. However, some scholars have argued that population growth helps the economy by stimulating innovation and providing bigger markets. Recent studies confirm that high fertility tends to slow economic growth and keep poor families poor, while declines in fertility reduce poverty (footnote 20). They also cite another important factor: the age structure of the population.

All societies can be divided into dependents (people who are too young or too old to work, so they depend on their families or on pensions for support) and workers who generate economic activity, generally defined as people ages 15 to 64. The ratio of dependents to the working-age population is called the dependency ratio. For example, as shown below in Table 2, there are 81 dependents (75 children and 6 elderly people) for every 100 working-age people in Africa. Developing countries tend to have higher dependency ratios than developed nations, and children account for a larger fraction of dependents in developing countries.

Table 2. Dependency ratios by region, 2005. (Because of rounding, Child + Old-age does not necessarily equal Total.) Source: UN, World Population Prospects: The 2006 Revision, Population Database.
Region Total (Dependents per 100 working-age people) Children per 100 working-age people Old-age per 100 working-age people
World 55 44 11
Africa 81 75 6
Latin America/Caribbean 57 47 10
Oceania 54 36 16
Asia 52 43 10
North America 49 31 18
Europe 47 23 23

Dependency ratios are key influences on economic growth. Nations with high dependency ratios spend large shares of their resources taking care of dependents, while those with lower ratios are able to devote more resources to investment in physical capital, technological progress, and education. When countries lower their fertility rates, they reduce the child component of the dependency ratio, which lightens the financial burden on wage earners and frees up more women to enter the work force.

Countries that reduce fertility rates have an important opportunity to reap a demographic dividend. As discussed above in section 2, the demographic transition produces a "bulge" generation—a large cohort of people who are born after mortality rates fall but before fertility rates decline in response. Many developing countries are currently at this stage, with large numbers of people at or near working age and relatively few older dependents (Fig. 16).

Ratio of working age to non-working age population

Figure 16. Ratio of working age to non-working age population
See larger image

Source: 2004. United Nations, World Population Prospects.

Nations that have a particularly high ratio of working-age people to dependents can quickly build up capital and increase national per-capita income. Economists estimate that this demographic dividend accounted for roughly 20 to 40 percent of East Asia's economic boom between 1965 and 1990 (footnote 21). But the dividend does not pay out automatically. To earn it, nations must invest in education to train the large generation of young workers, and then manage their economies so that conditions are stable and workers can find rewarding jobs. Countries will not be able to reap the demographic dividend if they fail to create productive work opportunities.

The window of opportunity to earn a demographic dividend lasts for at least several decades, with the time depending largely on how quickly national fertility rates fall. As the boom generation matures and starts to retire from the work force, the dependency ratio goes up again since fewer workers follow in the wake of the boom cohort. In developed countries, the population of older citizens is growing more quickly than the population of workers. But nations that provide strong support for elderly citizens and that encourage workers to save for retirement may reap a second, longer-lasting demographic dividend spurred by such savings (footnote 22).

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