U.S. Development Policy in an Aging World Richard Jackson - PowerPoint PPT Presentation

U.S. Development Policy in an Aging World Richard Jackson President Global Aging Institute USAID Washington, DC September 29, 2016

The Demographic Transition

Global population growth is slowing. Global Population in Billions and Global Population Growth Rate, 1950-2060 2.5% 12 Total Population at End of Decade Population Growth Rate: Decade Average 9.6 10 9.3 2.0% 8.9 8.3 7.6 8 6.9 1.5% 6.1 6 5.3 4.4 1.0% 3.7 4 3.0 0.5% 2 0.0% 0 1950s 1960s 1970s 1980s 1990s 2000s 2010s 2020s 2030s 2040s 2050s Source: UN Population Division (2011)

The developing world is due to age dramatically.  Like the developed world Median Age of the Population, 1975-2050 before it, the developing world has now entered the 1975 2010 2030 2050 1975 2010 2030 2050 demographic transition — Nigeria Mexico 18.3 18.5 19.8 23.1 16.8 26.6 34.2 41.8 the shift from high fertility S. Africa Turkey 18.9 24.9 29.1 33.5 19.1 28.3 35.9 42.3 and high mortality to low Pakistan Russia 18.4 21.7 28.0 34.7 30.8 37.9 43.3 43.1 fertility and low mortality Egypt Brazil 18.3 24.4 30.5 36.9 19.5 29.1 37.4 44.9 that accompanies development India Vietnam 19.7 25.1 31.2 37.2 18.3 28.2 38.5 45.8 and modernization. US Iran 28.8 36.9 39.1 40.0 18.1 27.1 39.5 47.2 Bangladesh China 17.2 24.2 32.7 41.3 20.7 34.5 42.5 48.7  Indonesia S. Korea As the transition unfolds, 18.5 27.8 35.1 41.6 20.0 37.9 47.0 51.8 population growth slows and the age structure of the Source: UN Population Division (2011) population shifts upward.

Two Forces Behind the Demographic Transition: Falling Fertility and Rising Life Expectancy  The first phase of the Total Fertility Rate and Life Expectancy at Birth, 1950-2010 transition: Declining mortality rates trigger rapid population growth. Total Fertility Rate Life Expectancy at Birth 1950-55 1970-75 1990-95 2005-10 1950-55 1970-75 1990-95 2005-10  The second phase of the East Asia transition: Declining 6.0 4.7 2.0 1.6 44.9 64.5 70.1 72.9 birthrates create a Eastern Europe 2.9 2.1 1.6 1.4 64.1 69.2 67.7 68.6 “demographic dividend.” Greater Middle East 6.6 6.2 4.6 3.2 43.4 53.9 63.6 68.0 Latin America 5.9 5.1 3.1 2.3 52.0 61.2 69.1 73.6  The third phase of the South Asia 6.0 5.5 3.6 2.6 39.9 50.9 61.0 66.1 transition: Low fertility and low mortality ultimately Sub-Saharan Africa 6.5 6.7 6.1 5.1 37.3 45.6 49.3 52.7 lead to rapid population aging and population Source: UN Population Division (2011) stagnation or decline.

Two in five people in the developing world now live in countries with below-replacement fertility. Percent Distribution of Developing-World Population by Fertility Level, 1950-2050 100% 80% Fertility rate of 3.0 or higher Fertility rate between 2.1 and 3.0 60% 40% Fertility rate below 2.1 20% 0% 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: UN Population Division (2011)

The Timing and Pace of the Demographic Transition. Youth Bulge (15-24) as a Percent of the Adult Population, 2010 and 2030  In some regions of the developing world, including much of sub-Saharan Africa and 36% 40% 35% 33% 30% parts of the Greater Middle East, the 26% 30% demographic transition has stalled in its 21% 20% 2010 early stages. 10% 2030  In other regions, especially East Asia, the 0% Developing-World High-Fertility Sub-Saharan Africa transition is proceeding at a breathtaking Average Countries of Greater Middle pace, with countries traversing the entire East* *Includes Afghanistan, Iraq, Mauritania, Palestine, Sudan, Somalia, and Yemen demographic distance from young and growing to old and stagnant or declining Elderly (Aged 65 & Over), as a Percent of the 30% Population, 1970-2050 within little more than a generation. 25% 20%  Most of the developing world, however, is 15% now in the middle of the transition, when 10% China demographic trends are most favorable to 5% US economic and social development. 0% 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: UN Population Division (2011 and 2013) 7

Demography and Development

The Promise of the Demographic Dividend Dependency Ratio of Children (Under Age 20) Plus Elderly  When fertility first falls, the (Aged 65 & Over) to Working-Age Adults, 1975 – 2050 decline in the dependency 1975 1990 2010 2030 2050 East Asia 113 80 55 59 79 burden and growth in the working-age population tend to Eastern Europe 74 68 53 69 83 Greater Middle East 136 127 89 73 71 boost per capita GDP. Latin America 128 106 78 69 74  South Asia 124 109 81 66 66 The demographic shift may also Sub-Saharan Africa 137 143 130 108 89 encourage higher labor-force Source: UN Population Division (2011) participation, higher savings, and greater investment in human Working-Age Population (Aged 20-64), as a Percent of capital. the Total Population, 1975 – 2050  1975 1990 2010 2030 2050 The dynamic is called the East Asia 47% 55% 64% 63% 56% “demographic dividend,” and it Eastern Europe 58% 60% 65% 59% 55% explains between one-third and Greater Middle East 42% 44% 53% 58% 58% two-fifths of the growth in living Latin America 44% 49% 56% 59% 58% standards in East Asia since the South Asia 45% 48% 55% 60% 60% mid-1970s. Sub-Saharan Africa 42% 41% 44% 48% 53% Source: UN Population Division (2013) 9

Challenge 1: Leveraging the Demographic Dividend Average Annual Growth Rate in Real GDP Per Capita (in 2005 PPP Dollars) by Period, 1975 – 2011  The demographic dividend opens 8.0% 7.4% up a window of opportunity, but Average Annual Growth Rate 6.8% 1975-95 does not guarantee economic in Real GDP Per Capita 7.0% 1975-95 1995-2011 1975-2011 1995-2011 success. 6.0% 1.1% 1.8% 1.4% Brazil 7.8% 9.1% 8.4% China  5.0% 2.5% 5.3% 3.8% Leveraging the dividend requires India -0.8% 4.0% 1.3% 4.2% Russia 4.1% sound macro policies, a business 4.0% friendly regulatory environment, 3.1% 3.0% and massive investments in 2.5% 2.0% 1.9% infrastructure and human capital. 2.0% 0.8% 1.0%  Although economic growth has accelerated in many emerging 0.0% markets since the mid-1990s, none -1.0% are on track to replicate East Asia’s -0.8% -0.9% -1.4% economic performance. -2.0% East Asia South Asia Eastern Greater Sub-Saharan Latin America Europe Middle East Africa Source: World Development Indicators,World Bank, 2012, http://databank.worldbank.org/; Angus Maddison, Historical Statistics of the World Economy: 1-2008 A.D., Groningen Growth and Development Center, February 2010, http://www.ggdc.net/maddison/; and UN Population Division (2011) 10

Most of the developing world is failing to close the income gap with the developed world. Real GDP Per Capita (in 2005 PPP Dollars), as a Percent of G-7 Average, 1975-2011 1975 1980 1985 1990 1995 2000 2005 2011 4% 5% 6% 7% 9% 11% 15% 24% East Asia 2% 2% 3% 4% 6% 8% 11% 20% China 28% 33% 39% 49% 63% 67% 74% 89% East Asian Tigers 45% 42% 40% 39% 21% 21% 27% 33% Eastern Europe 30% 29% 23% 18% 16% 16% 17% 20% Greater Middle East 35% 35% 29% 26% 26% 25% 25% 29% Latin America 5% 5% 5% 5% 6% 6% 7% 10% South Asia 10% 8% 7% 6% 5% 5% 5% 6% Sub-Saharan Africa Source: World Development Indicators 2012; Maddison, Historical Statistics of the World Economy; and UN Population Division (2011)

Challenge 2: Mitigating the Stresses of Development  Societies undergo tremendous stresses The "Inverted U" Relationship as they move from the traditional to the modern. When plotted against development, most of these stresses Level of Stress & Risk of Violence describe an inverted-U — meaning that they become most dangerous midway through the demographic transition and the development process.  These stresses include:  Contact with the global marketplace and culture  Urbanization  Environmental degradation  Growing income inequality  Growing ethnic competition Stage of Demographic Transition & Development  Religious extremism 11

Challenge 3: Preparing for the Coming Age Wave  The developing world’s age waves will  A humanitarian aging crisis of be arriving in societies that are not immense proportions may loom in only less affluent than the developed the future of some developing countries, but which have not yet put countries if they fail to construct in place the full social protections of a adequate old-age safety nets. modern welfare state. Elderly (Aged 65 & Over), as a Percent of the Population, 1975-2050 1975 2010 2030 2050 1975 2010 2030 2050 Nigeria Mexico 3.2% 3.4% 3.6% 4.9% 3.8% 6.3% 11.7% 19.9% S. Africa US 3.2% 4.6% 7.8% 10.1% 10.5% 13.1% 19.9% 21.2% Pakistan Brazil 3.7% 4.3% 6.0% 10.4% 3.8% 7.0% 13.7% 22.5% India Vietnam 3.4% 4.9% 8.3% 13.5% 4.8% 6.0% 12.8% 23.1% Egypt Russia 3.4% 5.0% 8.7% 14.2% 8.9% 12.8% 19.1% 23.1% Bangladesh Iran 3.5% 4.6% 7.6% 15.9% 3.2% 5.2% 10.3% 23.5% Indonesia China 3.4% 5.6% 10.5% 19.2% 4.6% 8.2% 16.5% 25.6% Turkey S. Korea 4.1% 6.0% 11.4% 19.6% 3.5% 11.1% 23.3% 32.8% Source: UN Population Division (2011)

Seven Lessons for U.S. Development Policy