Demographic Dividend, Human Capital and Accelerated Economic Growth: Lessons from Asian countries and its implications for Eritrea

asmarahutBy Teweldeberhan Gebre

Part IV-Final

7. Lessons and Policy Implications for Eritrea

Eritrea’s Population Trend

Population Pyramids are used to show the distribution of males and females across 5-years of age groups. To read a pyramid, first look at the legend to see what is being measured. Next, look at the x-axis to identify the units of measurement, and then up the pyramid and across to the y-axis to identify the age group. Eritrea’s population in 1990 was characterized by high birth rate and rapid fall in each upward age group due to high child mortality and short life expectancy at birth. As in the second population pyramid (2015), 26 years later, the Eritrean population structure slightly changed where birth rate is still high but mortality rate has fallen, and more living in the middle age and life expectancy at birth was higher compared to where it was in 1990.

In 2035, Eritrea’s population structure is projected to enter into a new phase of population age-structure where the proportion of the working-age adults (15-64 years of age) begins to exceed the total dependency ratio (TDR = (0-14+65+)/(15-64) x 100)). In the demographics language this is the new widow of demographic opportunity, meaning the demographic dividend or bonus begins to take place in the form of adult working age youth bulges (see Figure 2 below).

The youth bulge is a common phenomenon in many developing countries, and in particular, in the least developed countries. It is often due to a stage of development where a country achieves success in reducing infant mortality but mothers still have a high fertility rate.

Figure 2: Eritrea’s population pyramids by age and sex, medium population variant, 1990-2030.

Source: UN, The 2015 Revision, custom data acquired via website.

Eritrea will encounter new widow of demographic opportunity by 2035

As stated above and illustrated in Figure 3 below, Eritrea’s demographic window of opportunity is projected to open up by 2035. By 2035, the proportions of the working age population (15-64 years of age) and the total dependency ratio (=(0-14+65+)/(15-64)) correspond indicating a new phase of population age structure transition. After 2035, the proportion of the working age will begin to overtake the total dependency ratio (TDR) and is projected to go beyond the year 2100. Singapore’s window of demographic opportunity has opened up in 1975 and is projected to close by 2035, the year Eritrea’s window of demographic opportunity begins to open. One can note from Figure 3 below that the size of demographic dividend between the two countries is not the same. The fact is that after the window of demographic opportunity opens by 2035 a relatively high child dependency ratio will continue in the case of Eritrea compared with that of Singapore.

Figure 3: Demographic window of opportunities, Singapore and Eritrea, UN medium variant.

Source: UN, The 2015 Revision, custom data acquired via website.

Eritrea’s state of human capital-current and projected

The Wittgenstein Centre, based in Vienna, has made an interesting exercise on the world population projections by integrating education attainment into the traditional population projection based on age and sex. Integrating education into the traditional population projections based on age and sex as demographic indicators gives completely different picture. In doing so, the Centre identified four education scenarios into its population projection model in which it uses the six education attainment categories by UNESCO: no education, incomplete primary, primary, lower secondary, upper secondary, and post-secondary. The education scenarios are the global education trend (GET)[i], the fast track (FT)[ii], the constant enrollment rates (CER), and the constant enrollment numbers (CEN). The last two scenarios are pessimistic and assume no further state capacities to expand schools and universities. For this reason they are excluded from this discussions. However, it is important to note that the above education scenarios are interpreted on ‘what if” reasoning like the variant projections of the traditional demographic indicators (age and sex) and not predictions or forecasts.

Figure 4 below shows the population pyramids for Eritrea disaggregated by age, sex, and level of education based on the Wittgenstein Centre (2015, Data Explorer Version 1.2). Currently (2015) Eritrea’s population is young and about 41% of the population falls below the age of 15 years (see Table 2 below). From Figure 4 below it is clear that existing human capital base, especially at lower, upper, and post-secondary levels, is quite low.

Figure 4: Eritrea’s population (000’s) by 5-year age group, sex, and by education scenarios

Source: Wittgenstein Centre (2015), Data Explorer Version 1.2. Available at: www.wittgensteincentre.org/dataexplorer

The above population projections illustrate the outcomes of different policy environments on the different kinds of education trends on human capital (Lutz, et al, 2008). Eritrea has two alternative education scenario options: the conservative global education trend (GET) and the fast track (FT) scenarios. For the definition of GET and FT see endnote. For Eritrea, the GET scenario results moderate increase in the level of human capital or education while the optimistic scenario, the fast track (FT) education scenario, is a rigorous measure to increase the educational levels of the future workforce. Table 2 below summarizes the outcomes of the two education scenarios also illustrated in the pyramids above.

t-2

Source: Wittgenstein Centre (2015), Data Explorer Version 1.2. Available at: www.wittgensteincentre.org/dataexplorer

GET scenario is a conservative education trend with moderate increase in educational attainment and is clearly not a preferred goal for Eritrea if the country aims to knowledge based economy. In other words, for Eritrea the continuation of the current/global education trend (GET) should not be the option, the option should be at least what the FT scenario is showing, i.e., to achieve the universal lower secondary education and specifically more than 80% in the next 20 years before the official window of demographic opportunity begins by 2035. In cumulative terms, under FT scenario, by 2035 the proportion of population with at least completed primary, lower, upper and post-secondary educations will be 17.7%, 12.7%, 15.9%, and 8.3%, respectively.

Although the FT scenario is a huge undertaking it is not an impossible scenario during the next 15 years span of time. It is achievable target as it represents what happened in countries like South Korea and Singapore. At the time of their new window of demographic opportunities (around 1975), South Korea and Singapore, for instance, had adequate gross secondary enrollment ratios, about 54.4% and 51.9% in 1975 and quickly raised to about 90.6% and 72.9% by 1985 (in just 10 years), respectively (see Figure 5 below).

Eritrea’s current (2015) gross secondary enrollment ratio (GER) is 30.5%. There will be no reason why Eritrea will not raise to 90% by the beginning of its demographic window of opportunity which is projected to open by 2035 as discussed above. Thus, Eritrea can reach universal secondary enrollment by 2035 provided the country ventures hugely in expanding secondary education throughout its territory. It is also evident that Eritrea has maximized its secondary enrollment ratio from only 15.2% in 1995 to 30.5% in 2015. This is huge undertaking given the low base of secondary education the years before 1995.

Figure 5: Gross enrollment ratio, secondary, both sexes (%)

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Source: UNESCO, UIS Stat

But, now the infrastructure is there and if pushed there will be no reason why the country will not ensure universal primary and secondary enrollments in the next 10-20 years. If it does the possibility to reap all benefits of demographic dividend through creating jobs is self-evident. Particularly, if Eritrea improves its economy and creates decent jobs young people and parents will be encouraged not only to enroll their children but also invest in education.

8. Conclusions

Having emerged from the debates of population and economic growth, the concept of demographic dividend is an inevitable consequence of population age-structure change in a given country or its sub-regions. Demographic dividend comes along with greater share of population in the working-age, improved human capital and greater saving both at the national and household levels. But, it is important to note that demographic dividend is a time-bound and its benefits are not automatic and has to be earned. Governments must seize the benefits of demographic dividend through opportune policies and strategic investments, especially in education and health and decent employments. If the one time demographic dividend is missed or squandered by governments it could pose threats to the entire economy and society because it will not be fixed afterwards.

Demographic dividend accelerates economic growth as the size of the labor force gets bigger and bigger, freeing more resources for education and healthcare per child, and increases national saving that can be reinvested in productive sectors provided governments adopt a mix of policies, strategic investments and an enabling environment for this one-time opportunity. It is also believed that improved educational attainment is the key variable to explain productivity and economic growth and that considerable share of the demographic dividend is the result of education dividend. The development of human capital is an important source of economic growth and social development, including reducing rural-urban poverty gaps, innovativeness, competitiveness, and sustainable human development. Thus, human capital development in the form of flow (education) and stock (training and job specific skills building) must hand-in-hand take place with employability, and competitiveness so that to fully benefit from demographic dividend by fueling economic growth and sustaining development.

In order to seize and capitalize on their demographic window of opportunities/dividend, less developed countries like Eritrea must draw a lesson from the East Asian demographic model discussed in part III. According the demographic dividend model/framework countries in their earliest demographic transition can transform their society through building the human capital base, accelerating growth and employment, inducing national saving and investment in productive sectors. It would be silly to conclude, however, this section without saying inclusiveness and efficiency in service delivery are equally critical along with voice and accountability to capture the benefits of demographic dividend.

Eritrea’s emphasis on education and healthcare is a positive trend early on before its new window of demographic opportunity is opened up which is expected by 2035. If its policy-makers want to open the window of demographic opportunity before the year 2035 it is a matter of introducing a well-funded family planning program. One major weakness of Eritrea is its extremely low performing economy and lack of productive employment. If this trend is allowed to continue there will be no incentive for education and young people will be forced to abandon education because the return from education is not there. Eritrea must learn a lesson from Asian countries that effectively integrated education, private investment, and productive employment and reaped the benefits of demographic dividend. Thus, as population age structure changes enablers such as investment in health and education, economic upgrading and good governance are keys to reap the benefits of demographic dividend in the form of well-educated and trained youth bulges in the workforce.

Endnotes

[i] The global education scenario (GET) scenario assumes that a country’s education expansion will converge on an expansion trajectory based on the historical global trend; this means it is neither derived by mechanistically applying a statistical model, nor is it a mere ‘expert estimate’. Instead, it is based on the application of domain knowledge to the empirical data globally.

[ii] The fast track (FT) is an optimistic education scenario that assumes the achievement of certain milestones similar to that of the Millennium Development Goals (MDGs) and the Education for All (EFA) goals took the form of a ‘milestones’ approach, and the EFA Fast Track Initiative (FTI).