NEDA EXPLAINER: REAPING DEMOGRAPHIC DIVIDEND

A family of 10 cramped in a half-finished house in Barangay Commonwealth in Quezon City, the Aguases live on a meager income of P12, 000 a month.

Stretching their monthly budget for expenses on food, utilities, transportation, and education is a usual challenge, Aida Aguas, 46, mother of eight, says.

Having eight children to raise, she would constantly look for odd jobs in their neighborhood, such as cleaning and laundry services, to augment the income that her husband gets as an electrician.

With six of their children currently in school, the family still makes ends meet but not without hardships.

Aida admits that family size matters. Sa tingin ko, dalawa o tatlo ang anak para sa maginhawang pamilya (I think a family should have two or three kids to live comfortably), she says

The Aguas household could be viewed as a microcosmic example of the strong connection between wealth and population.

No wonder, demographic dividend has become a development buzzword, sought after by emerging economies like the Philippines.

In a nutshell, demographic dividend is the economic growth experienced by a country as a result of the change in the country's population structure.

It is the product of the demographic transition, which is characterized by markedly declining mortality and fertility rates, resulting in the shrinking of the dependent age (0-14) group and expanding of the workforce (ages 15-64). This transition leads to steadily rising savings and investment rates and, hence, faster economic growth and improved living standards.

Demographic transition has three phases. An initial decline in infant mortality (death rate), with fertility rate remaining high, marks the first phase of the demographic transition. The second phase happens when the share of working-age population becomes large relative to the young dependent ages and the older population (65 years and above).

With the number of productive working-age population at its highest, the economy's growth sharply accelerates. With a bigger workforce that can generate higher income and a less dependent population, the government can allocate its resources for economic development and social services (education, health and nutrition). This is also often referred to as the demographic-economic window of opportunity.

The success stories of the Philippines' neighboring countries are examples of how governments can fully maximize dividend from this demographic transition.

In East Asia, countries like South Korea, Taiwan and Hong Kong started reaping the dividend as early as the 1980s. Singapore and Thailand got to this point in the 1990s.

Let's look at the Philippines and Thailand's economic growth stories through the World Bank's open data. Thailand and the Philippines were previously referred to as twins, having about the same population size (40 million) and growth rate (5%) back in 1975.

But Thailand's population structure entered the second phase of the demographic transition in the 1990s.

Thailand's total fertility rate (TFR) dropped from 4.48 children per woman in 1975 to 2.1 children in 1990 and 1.7 in 2000. The Philippines' TFR slowly declined from 5.7 children per woman in 1975 to 4.3 children per woman in 1990. By this time, the Philippines and Thailand were called diverging twins.

By 2000, Thailand was already enjoying high economic growth. In 2011, the World Bank upgraded Thailand's income categorization from a lower-middle income economy to an upper-middle income economy. This is based on the country's gross national income, which was at USD4,210 in that year.

Source: The National Economic and Development Authority