As a research firm that focuses on market research, polls and surveys, among others, we hope to bring insights to you through today’s article which investigates the way the demographics of a population affect the economy.
Vital records are essential for any country or economy for various reasons such as legal purposes, planning, resource allocation, public health, genealogy, historical research, and demographic analysis. Demographics are indicators of certain phenomena in economies that attract the attention of governments as policymakers.
Birth, death and marriage registration data, for example, are a source of fertility, mortality and nuptial indicators in a country. In Botswana, the Department of Civil and National Registration (CNR) is responsible for maintaining the civil registration system and is mandated with recording all significant occurrences in the nation. Through various efforts and partnerships, Botswana attained a 100 percent rate of birth registrations in 2019 and has maintained the standard to-date.
Other data like age, income and education level are among key factors that influence how people spend their money. For instance, younger people are more likely to spend money on entertainment and technology while older people are more inclined to spend more on healthcare and insurance. Thus, knowing the age distribution of a population can help businesses tailor their products and services to meet the specific needs of their target customers.
Demographics also influence the economy through their impact on workforce participation and productivity. Younger people and those with higher levels of education are more likely to be employed and earn higher wages. This means that countries with a larger portion of young and educated workers are likely to have higher productivity levels and a more competitive economy while the opposite is true for older populations.
In an IMF Working Paper (2016), it was reported that Japan at that time was aging at an unprecedented speed. The old-age dependency ratio had more than doubled since 1990 and was expected to exceed 50 percent by 2030. These demographic headwinds have progressively caught the attention of policymakers, particularly in light of Japan’s prolonged state of economic stagnation and low inflation. To some extent, Japan’s stagnant growth performance could be a result of its shrinking working-age population as the availability of productive labour is reduced.
On the other hand, older workers may enjoy higher productivity due to the accumulation of work experience. However, the younger workers have an upper hand when it comes to better health, higher processing speed, the ability to adjust to rapid technological changes, and greater entrepreneurship leading to more innovation. The aging are likely to increase the relative demand for services such as healthcare, pension and insurance, thereby causing a sectorial shift towards the more labour-intensive and less productive service sector.
A consensus has not been reached yet on the relationship between demographics and inflation. In an OECD cross-country analysis, Yoon et al (2014) observe that a declining and aging population has a significant deflationary impact which is characterised by a general reduction in prices for goods and services. In contrast, another study found, based on a panel of 22 advanced countries, that a larger share of dependents is associated with higher inflation while a larger share of working-age cohorts is associated with lower inflation.
Understanding demographic trends is critical for ensuring sustainable economic growth and development. As these trends continue to evolve, it is essential to monitor and understand their impact on the economy to make informed decisions about resource allocation and economic growth strategies.
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