Demographic dividends, Labor market and Government


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Presentation at the Institute for Labor Studies, DOLE, on demographic dividend and having more economic freedom.

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Demographic dividends, Labor market and Government

  1. 1. 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
  2. 2. Outline I. Demographic deficit, demographic dividends II. Some Say Big Population is Scary III. Labor and Gender Policies IV. Conclusions
  3. 3. Source: Barun Mitra, 2011
  4. 4. 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.
  5. 5. Top 31 Countries in Population Size by Age, the Young and the Ageing Source:
  6. 6. 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
  7. 7. 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. Source: Standard and Poor’s, “Global Aging 2013: Rising to the Challenge”, March 2013
  8. 8. 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.
  9. 9. 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, Longevity and Economic Growth, July 3rd 2013
  10. 10. • 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: The Economist
  11. 11. 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).
  12. 12. The Philippines Far from a Demographic Deficit Even By 2040 (140 M total popn., about 20 M senior citizens or 14% of total) Source: Dr. Miguel Ramos, “Overview of PH Retirement Market”, RHC Forum, Manila, October 29, 2013
  13. 13. II. Some Say Big Population is Scary 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.
  14. 14. Source: http://www.w * 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).
  15. 15. “Higher family size is related to higher poverty.” Source: Dr. Joseph Yap, Delivered during the Philippine Economic Society (PES) conference, October 2011. 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.
  16. 16. III. Labor and Gender Policies If Various Government Interventions in Labor Market is Absent… Wages, Benefits Supply Demand Employment 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.
  17. 17. With Various Government Interventions, Distortions are Created Wages, Benefits (Pesos per month) Aggregate Supply Mandatory contributions Min wage law Ave. equil wage Aggregate Demand E2 E* E1 Employment (million) . E4 E3 E* is equilib and employment-optimizing level. E1 – E2 is unemployment & underempl. level, temp or permanent. E3 – E4 is additional unemployment & underemployment.
  18. 18. 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
  19. 19. Forcing social equality, including gender equality, will further distort the labor market Wages, Benefits Aggregate S 2 Aggregate Supply 1 Gender wage inducement Ave. equil wage Aggregate Demand E2 E* E1 • E* is equilib and employment optimizing level. • E1 – E2 is reduction in employment of women Employment of women
  20. 20. 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.
  21. 21. • 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.
  22. 22. 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.
  23. 23. • 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.