Demographic Dividends: Gender and Youth Dynamics of Population

Bienvenido “Nonoy” Oplas Jr.

Presentation at the Institute of Labor Studies, DOLE The Bayleaf Hotel, Intramuros, Manila

18 November 2013

Outline

I. Demographic deficit, demographic dividends

II. Some Say Big Population is Scary

III. Labor and Gender Policies

IV. Conclusions

Source: Barun Mitra, 2011

Top 31 Countries in Population Size by Age: the Young and the Ageing

Countries with red numbers generally have demog. deficit, those with green numbers have demog. dividends.

Top 31 Countries in Population Size by Age, the Young and the Ageing

Source: http://www.worldometers.info/world-population/

Source: Standard and Poor’s, “Global Aging 2013: Rising to the Challenge”, March 2013

Demographic Deficit Means More Public Debt

• Except for Norway, Sweden, Australia, all developed countries expected to have net debt/GDP ratio of 100+ percent.

• Big age-related welfare spending will punch big holes on their younger people’s pockets.

Source: Standard and Poor’s, “Global Aging 2013: Rising to the Challenge”, March 2013

Demographic Dividends Somehow Means Less Public Debt

• Countries with young popn like PH, India, Indon., are spared from the burden of high public debt.

• Net debt/GDP ratio of less than 100 percent.

• Other emerging markets with aging popn are less lucky: Russia, Ukraine, Lithuania, etc.

Projected GDP Growth Rates 2013 and 2014, and Latest Unemployment Rates, Selected Economies, in Percent

Source: The Economist, November 16th 2013

• Other factors at play but high public debt, costly welfare spending contribute to more econ uncertainty in the rich world.

• PH proj. growth rates nearly comparable to that of China.

Source: The Economist, Longevity and Economic Growth, July 3rd 2013

Percent of Total Population who are 80 years or older, 2013 and 2050. • Countries with high elderly population like

Japan, Germany, Italy, France, Netherlands, Canada, Switzerland, will need more external support to take care of their elderly and economic expansion. Either more robots, or more humans.

• More humans from where? From countries with many "unwanted pregnancies" and "surplus/unwanted children", like the Philippines.

Source: The Economist

• China’s depopulation has begun, decline of 3+ million people in the working age population in 2012. Special credit to “one child policy.”

• They still have a big number of young workers, true. But they also have a rising number of ageing people who need more healthcare, more pension, other retirement benefits.

• Burden of taking care of the ageing people will really fall on the shoulders of the younger population

Source: Dr. Charles Horioka, “Determinants and L-Term Projections of Savings Rate in Developing Asia”, 37thFAEA Conference, Nov. 28, 2012, PICC, Manila. • Japan, HK, have already

reached the 14% of total population threshold, people above 65 years old.

• PH, India, Indonesia, Malaysia, Vietnam, still far away.

• Econ regression showed that domestic saving rates in developing Asia determined primarily by age structure of the population (negative effect), the level of per capita GDP (positive effect).

Source: Dr. Miguel Ramos, “Overview of PH Retirement Market”, RHC Forum, Manila, October 29, 2013

The Philippines Far from a Demographic Deficit Even By 2040 (140 M total popn., about 20 M senior citizens or 14% of total)

World’s Top 12 Population Size: 1950, 2013 and 2050

• By 2050, #9 Russia and #10

Japan in 2013 will be out of

the top 12. Those with clear

demographic dividends are:

• India, to overtake China as #1

by 2050. Pakistan to retain its

#6 position by then.

• Nigeria, to jump from #7 this

year to #3 by 2050. Ethiopia

to rank #9, Congo #12, by

2050.

• Philippines, currently #12 to

rise to #10 by 2050.

II. Some Say Big Population is Scary

Source: http://www.w

orldometers.info/world-

population/

* 10 Asian countries

in top 20, 4 from

Africa (Nigeria,

Ethiopia, Egypt,

Congo)

* 3 from N. and S.

America (US, Brazil,

Mexico; and 3 from

Europe (Russia,

Germany, Turkey.)

* By 2050, 9 from

Asia (Thailand out),

6 from Africa ( incl.

Tanzania, Kenya); 3

from the Americas;

only 2 from Europe

(Germany out).

Source: Dr. Joseph Yap, Delivered during the Philippine Economic Society (PES) conference, October 2011.

“Higher family size is related to higher poverty.” But the smaller household size (bet. 0 to 2 or 3 kids) have higher income partly because they have a nanny, house helper, a family driver, etc. from households with plenty of children at low salaries. So productivity of the smaller households are higher.

Wages, Benefits

Employment

Supply

Demand

III. Labor and Gender Policies If Various Government Interventions in Labor Market is Absent…

Demand is downward-sloping. As wages increase, demand for labor decreases. Supply is upward-sloping. As wages increase, supply of labor increases. Ceteris paribus. Result: many “equilibrium points”, or intersection bet S and D within each firm, each ind. .

Wages, Benefits (Pesos per month)

Employment (million)

Aggregate Supply

Aggregate Demand

With Various Government Interventions, Distortions are Created

E2 E* E1 . E4 E3 E* is equilib and employment-optimizing level. E1 – E2 is unemployment & underempl. level, temp or permanent. E3 – E4 is additional unemployment & underemployment.

Ave. equil wage

Min wage law

Mandatory contributions

Costs of Hiring Workers, Formal Sector

• Wages & bonuses (WB): basic pay, 13th mo. pay, overtime pay, bonuses & commissions, transpo, etc.

• Mandatory social security contributions (SS): PhilHealth, SSS, PagIBIG, HMOs

• Other contributions (OC): maternity leaves

• Compliance costs (CS): human resources (HR) office, law firm/para legal to deal with L disputes.

So total costs = WB + SS + OC + CS

Wages, Benefits

Employment of women

Aggregate Supply 1

Aggregate Demand

Forcing social equality, including gender equality, will further distort the labor market

E2 E* E1 • E* is equilib and employment optimizing level. • E1 – E2 is reduction in employment of women

Ave. equil wage

Gender wage inducement

Aggregate S 2

IV. Concluding Notes • Companies providing more leaves with pay to married

women or single mothers, providing more maternal facilities in the company, other similar schemes on their own is an ideal set up.

• But when such set up is to be forced via legislation or

Department Order or similar schemes, assuming similar productivity levels with male counterparts, companies will hire less married women and get only single women, or hire less women as much as possible.

• Government should leave private enterprises whom they should hire. If a company retrenches people, if not goes bankrupt, DOLE or Congress will not pay for the salaries of the laid off workers.

• Almost all ratings agencies look at our young and big population as an asset, not liabilities. There is a limit to what robots and machines can do, even the most industrialized, more robotized economies will need migrant workers to fill up their labor-deficient economies.

• People are assets, not liabilities. They are producers and consumers, buyers and sellers. More people, more assets. The real liabilities – the thieves, murderers, rapists, extortionists, corrupt officials -- government should get them, have rule of law.

• To help SMEs, create more jobs, often it is not “what

government should do and provide.” Rather, it is “what government should NOT do and provide.” In particular, bureaucratizing entrepreneurship.

Heavy regulation & taxation of business and job creation may be good if one intends to become an employee forever. Many workers do not aspire that. They wish to become start up SMEs someday to. And these are among the things they will face yearly.

• The main function of government is to promulgate the rule of law. To protect the citizens’ right to life, right to private property, and right to liberty. To enforce and protect obligations and contracts.

• Lack of respect for the rule of law, lack of protection of property rights results in big and bad governance. Like the pork barrel scandal.