Macroeconomics, Poverty, Population and Development
There is solid evidence, based on two generations of experience
and research, that there is a "population effect" on economic
growth. Since 1970, developing countries with lower fertility and
slower population growth have seen higher productivity, more
savings and more productive investment. They have registered
faster economic growth.
Investments in health (including reproductive health) and education
needs, and reducing gender inequality, have contributed to
this effect. These investments attack poverty directly. They empower
individuals, especially women. They enable choice.
Given a real choice, poor people in developing countries have
smaller families than their parents did. This downturn in fertility
at the "micro" level translates within a generation into potential
economic growth at the "macro" level, in the form of a large group
of working-age people supporting relatively fewer older and
This demographic window opens only
once. Several countries in East Asia and a few others
have taken advantage of it. The effect of declining
fertility in Brazil has been equal to economic growth
of 0.7 per cent of GDP per capita each year (1).
Mexico and other countries in Latin America have registered
Countries that have ignored the potential benefit have done
less well. They have not made the necessary direct investments in
poor people. They lack the good governance and social accountability
that ensures that some of the benefits of economic growth
go directly to the poor and towards alleviating poverty. The demographic
window will close within a generation, as populations
age, and with it a historic opportunity.
It will be a long time before the demographic window opens
for the poorest countries, but work towards it now will safeguard
the future. It will also protect the present. Pregnancy and childbirth
are heavy risks for poor women. Many, and unplanned for,
children impose a heavy burden on them. High levels of fertility
contribute directly to poverty, reducing women's opportunities,
diluting expenditure on children's education and health, precluding
savings and increasing vulnerability and insecurity.
Additionally, the poor suffer from the direct effects of their
numbers: lower wage rates for large pools of unskilled workers,
landholdings divided among more inheritors, classes too crowded
for educational improvements. High fertility means that poor
people have less capacity to take advantage of opportunities to lift
themselves out of poverty.
The big question for national leaders, legislators, policy experts
and decision makers is whether to make the necessary changes
in policy and practice in the next decade; and whether the international
community will make the necessary efforts to help them
succeed. If they do, women and men will be healthier and better
educated. They will have access, among other things, to a full range
of reproductive health information and services. Fertility and
population growth will fall. The demographic window will be open
for the next generation. Mass poverty could become a matter of
history, not a threat to the future.
LEARNING FROM EXPERIENCE Intuition tells us that rapid
population growth in poor countries expands the demand for services
such as health care and education faster than the capacity
to satisfy it. It is equally obvious that economies need to grow in
order to reduce poverty. Experience has deepened and refined
both of these perceptions, and taught some lessons about how to
break out of the vicious circle of increasing demands and overstretched
Evidence supports the perception that large families and
rapidly growing populations hold back development.
First, in the household, children have a variety of needs, all
of which have a cost. A large number of children compete for limited
family resources for food and clothing, health and education,
and some are left behind. In rural communities, farmland is a
fixed resource. Dividing it too often impoverishes successive generations.
Without resources for development, supplies of fuel or
water must also be shared among growing numbers. In urban communities,
those without some education can find only low-level,
ill-paid work, if they can find work at all. Most countries officially
frown on child labour, though implementation varies, and it
is becoming socially and politically unacceptable from a humanrights
Second, at the national level, rapidly
growing numbers of relatively unskilled workers force
down wage rates and reduce savings. Spending on health
care, education and other services for large numbers
of children further reduces savings. Since economic
growth comes from investment, and funds for investment
from savings, rapid population growth acts as a brake,
not a spur (2). The
chances for development are greatly improved if external
resources are available to invest in health and education,
support innovation, and find ways for people to build
their savings. Countries also need to generate and redirect
domestic resources for health and education.
UNDERSTANDING THE RELATIONSHIP The impact of population
growth on economic development has been debated along these
lines for decades. With hindsight, we can see that many positions
were based on poorly framed questions and inadequate responses.
Much of the research questioned whether population growth
restricted, promoted or had no overall effect on economic growth.
Another debate asked whether economic growth was a precondition
or consequence of slower demographic growth.
Both arguments revolved around aggregate
growth in population and the economy, but the chances
for economic development and poverty alleviation do
not depend only on aggregates. Data on over four decades
of economic and demographic change provide new insights
into how development prospects are shaped (3).
In 1986 a study on relationships
between population and development from the National
Research Council in the United States concluded that,
despite its important effects at the household level,
population growth had no effect on overall economic
This seemed to settle an old argument. But the council's
study did not have all the evidence. It used data from the 1960s
and 1970s, when many countries were still relatively early in the
"demographic transition" from high to low birth and death rates,
and when centralized planning prevented some countries from
making the most of increasingly favourable population dynamics.
The study continued to rely on analyses of aggregate growth, both
in population and economic development.
BETTER DATA, BETTER ASSUMPTIONS In the 1990s the scientific
community looked at the question again. By this time it was
possible to use data from longer periods, during which the demographic
transition progressed in many countries. This time the
conclusion was different. More important, researchers recognized
that the demographic transition was reflected in changes in the
age structure of populations-as life expectancy increased and fertility
declined-not just in decreasing aggregate growth rates.
global demographic situation and
future implications are increasingly varied.
Fertility in developing regions has been cut
in half (from 6 children per woman to 2.9)
since 1960. Contraceptive prevalence has
increased from 10 to 62 per cent of women,
and life expectancy has increased from 48
to 64 years. In the least-developed countries,
fertility has declined only to 5.2, from
6.6, and life expectancy increased to just
over 50 years from roughly 39.
Projections are not forecasts: they
depend on assumptions about fertility,
mortality and migration-and assumptions
are adjusted to changing circumstances.
The projections of the United Nations
Population Division have been strikingly
accurate, even over relatively long periods.
They suggest that global population will
increase to 9.3 billion by 2050. Belying
suggestions of a global "birth dearth", the
less-developed regions will add 3.2 billion
(going from 4.9 to 8.1 billion) by 2050-the
same number as were added between 1950
(when there were only 1.7 billion) and 2000.
In 2001 and 2002 the Population
Division held a series of expert discussions
on fertility and mortality change, and
the demographic futures they imply. Two
meetings addressed different assumptions,
the first in countries where fertility is
already low, the second in persistent highfertility
countries. Experts suggested that
earlier projections of declines from high
fertility might have been overly optimistic.
A third consultation looked at intermediate-
fert i l i ty countries (those with
between two and five children per woman)
and concluded that these countries might
stabilize somewhat below the replacement
level of 2.1 children per woman. They also
recognized that the pace of fertility decline
often becomes very gradual. The prospects
for each country would have to be assessed
and updated regularly.
The consultations emphasized that
future fertility decline depends on preventing
unwanted fertility and on continued
investments to strengthen family planning
and reproductive health efforts.See Sources
TAKING ADVANTAGE OF THE OPPORTUNITY The change from
high to low mortality and fertility can create a "demographic
bonus" for countries. Mortality declines first, followed by fertility.
What happens as fertility declines is that the working-age population
increases relative to younger and older dependents. That
creates a one-time opportunity for growth. The opportunity can
be realized if countries have made the appropriate investments,
not only in family planning, but in health and education generally,
with special attention to the needs of girls and women, and in
employment opportunities for the new and enabled workforce.
Open and responsive governance makes these adjustments possible.
Such a combination could be seen
in the "Asian tigers" of the 1980s and 1990s: while
the proportion of their working-age populations (15-60
(5)) started to increase
as late as the mid-1970s, the pace of change was extremely
rapid up to the early 1990s. They made the supporting
adjustments of investments in health and education early
in the development process, and also created a framework
for more open markets and social participation (6).
The relative growth of working age populations in these
countries will continue for another decade, though not
as rapidly as in the past. This is a once-only opportunity,
a demographic window that opens as the numbers of younger
children decrease because of lower fertility, and closes
as the proportion of older people starts its rapid growth.
REGIONAL PATTERNS Many countries are entering the transition
period. South Asia will reach its peak ratio of working-age
to dependent-ages between 2015 and 2025 (though with considerable
national variation). In Latin America and the Caribbean, the
relative increase in the working-age population started at least five
years earlier than East Asia, but the proportional change has
been less marked, reflecting the wide disparities within countries
and regions. The wealthier groups have completed the demographic
transition to lower fertility and mortality, but poorer ones
continue to lag. The peak proportion in working ages will be
reached during the period 2020-2030, but at a slower rate and a
lower level than in East Asia.
The countries of North Africa,
and Western Asia and Central Asia are
at a variety of stages in the demographic transition
(7). Some will be
approaching their demographic opportunity within two
decades, while others are over a generation away. These
countries have an opportunity to establish within one
generation the frameworks for accelerated social change
and economic growth. The demographic window in Oceania
is narrower. Fertility was never as high, nor did it
drop so fast as in East Asia. Nevertheless, some of
the same considerations apply.
In sub-Saharan Africa the median age of the population of
the entire region is only 17.6-that is, half the population is
below that age. Meanwhile, the working-age proportion of the population
between 15 and 60 (50.9 per cent) is lower than it was
in 1950 (52.5 per cent). Poverty imposes severe handicaps-severe
resource constraints, underdeveloped health infrastructure,
social instability, high debt, weak governance and the HIV/AIDS
pandemic. Nevertheless, a growing number of countries are beginning
their demographic transition. Continued progress will
depend on the availability of reproductive health services including
Only six of the 46 sub-Saharan African countries have populations
with median ages as high as 20 years (the median age in
more-developed regions is now around 36). By 2050, the regional
median age will reach 26.4, lower than more-developed regions
a century earlier. The working-age population will increase to 62.2
per cent by 2050. Only 11 countries are projected to reach their
maximum working-age proportion prior to 2050 (and eight of these
will do so between 2040 and 2050).
FUTURE PROSPECTS Even beyond the 15-year horizon of the
Millennium Development Goals, population trends will affect the
prospects for a sustained attack on poverty. Population momentum
and high levels of unwanted fertility threaten economic gains
already made. Pervasive gender inequality could undermine the
goal of universal access to reproductive health services.
The HIV/AIDS pandemic further imperils the chance for many
of the poorest countries to consolidate their gains and open the
"demographic window". The growth of working-age populations relative
to young dependent populations is crippled by rapid growth
in adult deaths. The disease both devastates the present and steals
SPENDING THE BONUS The "demographic
window" opens only once, and for a limited time. Most
industrial countries have already settled into a pattern
of gradually increasing life expectancy and continued
sub-replacement fertility. In these countries, the imminent
prospect of population declines and rapid growth in
older age groups are already stimulating intense discussion.
The debate ranges far from demographics and has touched
on race relations, welfare policies, and the state of
marital relations in two-income families (8).
Some observers suggest that immigration
is part of the answer, and immediately tap into emotional
issues about national identity and social tensions among
"ethnically different" groups. Others raise questions
about financing old-age pensions and health care for
the very old, but they often underestimate the variety
of possible adjustments and reforms, or the time available
in which to make them (9).
Changes in the proportion of older
people may have less economic impact than fluctuations
in younger age groups (10).
It cannot be assumed that the elderly (except the "oldest
old") are dependent and a burden on the economy. Continuing
economic activity among the elderly, personal savings,
family support and public programmes may combine to
form new markets and changing demand for goods and services.
They can also supplement pension and health system adjustments.
On balance, the effect on economic
growth might be positive (11).
But both developing and industrial countries need to
understand how long-term demographic change works; they
must base their policy on rational expectations rather
than emotional responses.