In figure 2.24, Japan’s population pyramid shows this change. Japan, by 1990, was already moving toward low fertility rates. Two bulges are apparent in 1990. The first is of people ages 40 to 44 who were born as part of the “baby boom” just after World War II. Another smaller baby boom can be seen among 15- to 19-year-olds, who would have been born between 1971 and 1975. By 2017, these two bulges had aged and can be seen in the 65- to 69-year and 40- to 44-year age cohorts. Japan’s ongoing decline in fertility meant that no new bulges in young cohorts formed, resulting in a narrowing base. Projections to 2050 show that the population will continue to age, as previous cohorts get older and low fertility rates result in smaller cohorts of young.
Figure 2.24.Population pyramid for Japan, 1990, 2016, 2050. Low fertility rates are resulting in an increasingly narrow base of young people and wider top of elderly people. Data source: US Census.
The dependency ratio
Changing population structures present distinct challenges to societies, which can be illustrated by the dependency ratio. The dependency ratio measures the proportion of people ages 15−64, compared to those under 15 and over 64. The idea behind this ratio is to calculate the proportion that are of working age in relation to those that are typically considered too young or too old to work.
When birth rates are high (resulting in a wide-based pyramid), there is a large proportion of people under the age of 15 (figure 2.25). With a large, dependent population of young people, a country must make large investments in things such as child care and education. High birth rates and a young population also typically mean that a population is growing quickly and will continue to do so as young people enter reproductive ages and have their own children. This means that food supplies, housing, and jobs must increase at least as fast as population to maintain standards of living.
The Middle East and North Africa had the highest youth unemployment of all regions in 2014, in part from relatively high birth rates combined with weak economies and low levels of job creation. The unemployed, combined with many more who are underemployed in the informal economic sector with unstable work selling goods on the street and working for cash under the table, often become disenchanted with their governments. Some researchers argue that this large group of young people with limited opportunities to better their future is more susceptible to radical ideologies, including terrorism. Demographic trends and economic conditions can thus create volatile situations.
Figure 2.25.High youth dependency ratio. Countries with a high dependency ratio due to many children face costs associated with education. Once these children are a little older, the economy will have to provide sufficient jobs as well. Photo: Schoolchildren in Mombasa, Kenya. Data source: US Census. Photo by Juliya Shangarey. Stock photo ID: 619096334. Shutterstock.
Conversely, when birth rates are low, the eventual result will be a higher proportion of dependent elderly people (a smaller base of the pyramid and larger top), which requires greater investment in health-care and retirement systems (figure 2.26). But with fewer young people entering the workforce, paying for these systems becomes a challenge that can lead to cuts in health-care and retirement benefits, higher taxes on the shrinking working population, or increases in the age of retirement. Obviously, all of these potential solutions face resistance from some segments of the population.
This type of population structure represents a declining population, with few children being born and a larger elderly population dying. Maintaining economic strength with a declining population can be difficult. Continuous increases in worker productivity or immigration are necessary to maintain strong economies.
Many European countries are facing the consequences of rapidly aging populations. In some towns, schools are closing for lack of pupils, and nursing homes are opening at an increasing rate as the elderly population grows. You may have heard concerns about the long-term viability of Social Security in the United States as the population ages, but pension programs are facing even greater demographic pressures in Europe. In six European countries, over one-fifth of the population is already over 65 years of age. Furthermore, many people retire well before 65. The effective age for men to retire in France is 59.4, while in Italy and Greece, it is just over 61. Only in Switzerland and Portugal is the effective age of retirement over 65. Lower retirement age puts immense pressure on pension plans. Again, demographic trends can have profound impacts on societies.
Figure 2.26.High elderly dependency ratio. Photo: Unions protest proposed pension reforms in London. Data source: US Census. Photo by Matt Gibson. Stock photo ID: 80226988. Shutterstock.
The demographic dividend
While countries with high dependency ratios face a series of challenges, what about those with low dependency ratios? When the bulge in the population pyramid is largest among the working-age cohorts, countries have the possibility of taking advantage of a demographic dividend. The demographic dividend occurs when a country with previously high birth and death rates transitions to one with low birth and death rates. As explained previously, when birth rates fall, the proportion of young people (those at the bottom of the pyramid) declines. The demographic dividend comes about twenty years later, as those born in the last high birth-rate cohort mature to the point where they enter the workforce. When this occurs, the population structure has a low dependency ratio: there are fewer young people, not yet too many elderly, and lots of working-age people. Thus, costs associated with supporting the young and old are minimal. At the same time, a large number of workers can help increase economic output. Essentially, the demographic dividend is a several-decade window of opportunity that countries can use to grow their economies. Taxes can be kept low, allowing for more private investment, or tax revenue can be used for roads, ports, and power plants rather than schools and pension plans.
China is an example of a country that took great advantage of its demographic dividend. In 2000, when China entered the World Trade Organization and became fully integrated into the world economy, its population structure was nearly perfectly placed (figure 2.27). A large cohort of people born in the mid-1960s through 1971 were roughly in their 30s by that time. In turn, this group had given birth to a second cohort that was entering adolescence. By opening up to the world economy, China was able to move large numbers of these people from low-productivity farm work to higher-productivity factory jobs, fueling its rapid economic ascent.
Of course, a demographic dividend cannot last forever. Eventually, the large working-age cohorts reach the age of retirement and leave the workforce. Due to ongoing low birth rates, no new large cohort is able to replace them, resulting in a higher dependency ratio with a large number of elderly, as with Italy (figure 2.26). By 2017, China’s population was reaching this point, which will have major impacts on the economic model that has been driving its growth. The days of placing large numbers of low-skilled workers into factories is coming to an end.
Figure 2.27.The demographic dividend: China. Large working-age cohorts helped drive growth of its global industrial export sector. China took advantage of its demographic dividend by moving large numbers of workers from inefficient farm work to more productive factory work. Photos: Women in Jiujiang, China, working in tea fields. Women in a clothing factory in Huaibei, China. Data source: US Census. Farm photo by Humphery. Stock photo ID: 611411201. Shutterstock. Factory photo by Frame China. Stock photo ID: 390471148. Shutterstock.
A big question remains as to how well other developing countries will take advantage of their demographic dividend. As birth rates fall in Africa and the Middle East, they will face great opportunities and challenges. If the bulge of working-age people can find employment, these countries can make a big push toward development. If they cannot find jobs, unemployment and discontent can rise, and the demographic dividend will be squandered.
The sex ratio