South Africa’s Demographic Direction

South Africa is experiencing a decline in fertility rates, resulting in a lower ratio of working age population to consumers. South Africa will now be in a position to take advantage of the first demographic dividend, in which the working population will constitute a higher share of the overall population. However, for the demographic dividend to really pay off, the working-age population needs to have strong employment and income prospects.

This is where South Africa runs into trouble. Unemployment among 15-34 year-olds is 46%, compared to 21% for the 35-65 year old population. Additionally, the young population in South Africa earns less than the comparable young in South America and Southeast Asia. Such poor earning and employment prospects are problematic because it limits the positive effects of a demographic dividend–even if the working population is high, savings, capital accumulation, and growth will not happen as rapidly. Or put another way, it reduces the amount of time that income outpaces consumption. This is especially true in South Africa because the young constitute such a high portion of the populace.

South Africa’s youth employment problem also has implications for the second demographic dividend. While workers should save more due to a relatively long period of retirement in the future, this is not the case. Thus, as the wealth of South African individuals decreases, so do the resources for the future. These resources could have been devoted to areas like education and health, leading to improvements for the future generation.

This is a serious problem. This generation must correct its employment issues if it desires a sustained and sustainable economy for the future. Hence, what are some approaches the country could take?

To expand this discussion, what have you all found on the development of the demographic dividends in your chosen country?

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11 Responses to South Africa’s Demographic Direction

  1. ferrise20 says:

    Is it possible that the demographic dividend could still benefit the country in some way, even though unemployment is a problem? (Will income still outpace consumption to some degree?) What strategies have the country implemented thus far to combat unemployment? In Jamaica’s case, working-age population appears to be on the rise with demographic and fertility shifts. The Jamaican Diaspora, however, has huge effects on Jamaica’s educated workforce, as people emigrate to places like the U.S., U.K., and Canada, essentially rendering the country unable to tap into a demographic dividend.

  2. khanm18 says:

    Interesting facts. What income prospects do individuals in South Africa really have? I am aware that a good portion of the South African economy is attributable to mining, E&P, etc. but are there certain industries within the economy that can be capitalized on?

  3. the prof says:

    As to the demographic dividend, one way to rephrase this: to what extent is it a long-run growth story, and to what extent a short-run macro balance story? Need the two be consistent?

    • inglism18 says:

      The two need not be consistent in the short-run. However, as time progresses, this short-run macro balance story must return to one that is consistent with the long-run growth story if the country is to indeed see long-run growth. Otherwise, the country may enter a downward spiral that has lasting negative impacts. However, the downward pressure may cause a spring back in the positive direction once this cohort moves on, especially if savings incentives are implemented by the government.

  4. wheelers19 says:

    The levels of unemployment were shockingly high to me. In other cases, high unemployment has often led to rising crime rates. Are crime rates in South Africa high? I also have questions as to the level of social welfare in the country. If unemployment rates are so high, how are people sustaining?

  5. platerb18 says:

    The disparities between different age groups may be a bit misleading, because the first group includes ages as low as 15. I wonder if students are accounted for in this group? If not, it may be that the youth are not as educated and are unable to enter into higher-paying, more stable jobs that they hold for many years. There may also be cultural influences that impact the youth employment problem, where the support systems are not in place for the youth to acquire jobs.

  6. Mac Zheng says:

    This growing trend is similar to what is happening in Japan with too many old people and not enough individuals in the younger demographics. China may also experience something similar with that missing generation from the One-Child policy. Demographic balance matters!

  7. willinghamt19 says:

    How did this unemployment come to exist? Is it a similar situation as Spain or other nations which demonstrate remarkably high unemployment rates among younger individuals?

    Also, does a culture in South Africa exist where people as young as 15 are consistently working? If someone is 15 and is not a student, but is not involved in the labor market quite yet, they are likely to be included in these unemployment rates. That could heavily influence these rates.

    • bryantc18 says:

      Difficult to say for sure. Part of it lies in South Africa’s slow but gradual pace of growth. Part of it is the lackluster education system. All of this, to some extent, is rooted in apartheid. The effects of it still persist today, and are reflected in the lower levels of education and higher unemployment among blacks in SA. Since 1994, the cycle has probably sustained itself, of blacks being disadvantaged in labor markets from a lack of tradeable skills, poverty, and discrimination.

  8. nutiw18 says:

    What policy implications could be put in place to encourage youth employment? Should the government focus on creating more jobs to fill the void? It absolutely presents an issue, but it is imperative to identify a source of the problem, to find the appropriate solution.

  9. inglism18 says:

    Something to further highlight here is the HIV/AIDS prevalence in the country. Roughly one in five are infected with the virus, resulting in severely negative macro-
    and micro-economic consequences. It is difficult for a household to save if one or more of the prime working age adults need constant expensive treatment. Furthermore, it is difficult for a household to save if an adult in the family unit dies from an opportunistic infection that resulted from the virus. Should the government therefore intervene?

    We can indeed evaluate the demographic dividends using the typical framework, but I argue that there are additional factors that disproportionately affect this population that should be considered.

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