Declining fertility result in higher proportion of working-age population. The large proportion of younger population (15-29 years) indicate that more people are available for work who could contribute to economic growth, thereby creating an opportunity to realize a demographic dividend.
The declining fertility and a large working-age population in South Asian countries have created a demographic window. Afghanistan is poised to enter a potential demographic dividend phase, with its large youth population (over two-thirds under 25 years of age). Bangladesh is currently experiencing limited demographic dividend. With one of the world's youngest populations, India provides a considerable opportunity for demographic dividend. Nepal and the Maldives are experiencing limited demographic dividend. Pakistan has a considerable "youth bulge"(over three-fifths under 30 years) creating a potential demographic dividend. Sri Lanka has been experiencing a demographic dividend.
There are three major challenges affecting the South Asian region. The first relates to constraints in the size of the labour supply. Annually around 20 million young workers enter the labour force in South Asia. However, the size of the labour supply is constrained by at least two factors. First, those in the "Not in Education, Employment, or Training" (NEET) category reduce potential workforce, thereby increasing dependency and hindering economic growth. Worldwide, NEET rates affect around 1.3 billion young people. It is considerably higher among young women compared to men. In Afghanistan, the NEET rate is extremely high, almost four times as high among females (around 78%) compared to males (20%). In Bangladesh, the rate is high at around 40%, and even higher among females (around 60%).In India, the NEET category represents a significant portion of young adults, especially females and those from marginalized backgrounds, who are disconnected from both the workforce and educational opportunities. In the Maldives, it is around 20 percent of young people (aged 15-24 years), with higher percentages among young women. In Pakistan, the rate among young population (15-29 years) exceeds 30-40 percent, especially among young women(around 62%) Sri Lanka has high rates exceeding the global average, and higher among females. Second, a large proportion of females get married by 18 years of age and remain out of labour force for extended period due to child bearing and other household chores. South Asia has the highest burden of child marriage, accounting for around half of all child brides.
The second relates to inadequacies in human capital. The South Asian countries do not spend adequate amounts of their GDP on healthcare and education of their children. Spending as a percentage of GDP in South Asia on healthcare is relatively low, with averages at around 2-3% (compared with the UNESCO recommended 6%), with huge out-of-pocket (OOP) spending, and lower public spending (often below 30% in major countries like India, Pakistan, and Bangladesh).
Despite progress in enrollment, South Asia's human capital faces challenges like poor quality education, skills gaps, limited emphasis given to technical and vocational education and training (TVET),inequalities, and poor effectiveness of public education services.
The third relates to the limited economic capacity of the South Asian countries to generate adequate number of decent jobs for their rapidly growing workforce, coupled with persistent challenges in quality, informality, skill mismatches, low capital deepening, and low Total Labour Productivity. Although employment is growing (though at a slow rate), it is predominantly in low productivity, low-wage informal sectors, with millions of workers employed in such jobs, especially among women in vulnerable employment. Further, there are structural barriers, with limited growth in the manufacturing sector, poor infrastructure, and restrictive labour regulations hindering formal, high-quality job creation.
What about job creation in the manufacturing sector? The South Asian countries are struggling to keep pace, with only around a third of the new workers finding employment in the manufacturing sector. While trade-related manufacturing is a key driver for jobs, the region's overall employment ratio has lagged behind other emerging economies; and the region is facing slow job creation in this sector despite overall economic growth.
Further, the transition from education to employment remains stubbornly broken. Graduate unemployment in an increasingly challenging labour market is quite high, especially when compared with the less educated who have no choice but to accept, more or less, any job for their survival.
THE WAY FORWARD: The demographic dividend is not automatic. There is need for appropriate policies to harness the demographic dividend through required investments in education, healthcare, and creation of adequate number of decent jobs.
First, the countries in the region must strategically invest in healthcare and nutrition. Second, there should be adequate investments on education and skill development (with due emphasis given to technical and vocational education and training, digital literacy, and STEM). Third, budgetary allocation should be increased; and effective spending in health and education should be ensured. Fourth, there is need to strengthen public-private collaborations for better health and education outcomes. Fifth, adequate number of decent jobs should be created, thereby providing job opportunities for the educated workforce as well as reducing youth out-migration for work. Sixth, there is need to raise capital deepening and enhance marginal productivity of labour through adequate use of appropriate technology, and infrastructure to transform this demographic potential into sustained economic growth and poverty reduction. Seventh, there is need for proactive policies to link education with industry; support Small and Medium Enterprises (SMEs); and build robust social security for future aging. Finally, there is need for inclusive policies for women.
Barkat-e-Khuda, PhD, is former Professor and Chairman, Department of Economics, University of Dhaka.
barkatek@yahoo.com