Policies to create more and better jobs and strengthen systems for aging can help South Asia manage an accelerated demographic transition
South Asia has an opportunity to capitalize on a working-age population that numbers 1.17 billion people, but this window is gradually closing. In less than a decade, South Asia’s working-age population will peak and start shrinking. By 2049, it will be an aged regional economy with 14% of its population aged 65 and older. These are the key findings of the World Bank report,Demographic Change in South Asia: From Tailwinds to Headwinds for Development, released today.
Since 2000, a growing share of adults in their prime working years has helped expand South Asia’s GDP by 0.4 percent and raise its labor productivity by 1.1 percent per year.
But South Asia has begun to age. South Asia’s transition from an aging to an aged population is proceeding at a faster pace and at a lower level of income per capita than in comparable emerging market and developing economies. The average developing economy has taken 32 years to transition from aging to aged. South Asia will do so in 25 years, and have less time to create jobs and build systems to manage this transition. The annual contribution of demographics to GDP growth will shrink between now and 2050, to 0.1 percent.
“South Asian economies are aging faster and earlier in their development journeys,” said Johannes Zutt, World Bank Vice President for South Asia. “They need to act now to adopt policies and build infrastructure that create more and better jobs and deepen the gains from their ‘youth dividend’, while at the same time preparing for aging. This will enable South Asia to make the most of its large working age population and lay the foundations for a ‘second dividend’ as healthier older people continue contributing to the economy.”
The challenge is compounded by a jobs gap. Only 60 percent of South Asia’s working age population is employed, and 88 percent of employed workers work informally, with lower earnings and less job security. Without healthier and more skilled workers, robust social protections, and more and better-paying jobs, the region risks missing the opportunity to turn its large working-age population into sustained economic gains.
At the same time, health care, long-term care, and pension systems remain ill-equipped to meet the needs of a population that is living longer but not necessarily healthier. Only 17 percent of South Asia’s working age population contribute to a pension scheme, and only 10 percent of older South Asians receive any pension benefits, the lowest coverage globally.
The report offers a roadmap for South Asian countries to act on both fronts. They can sustain the “youth dividend” by creating more productive jobs, expanding access to finance for MSMEs, streamlining regulations, improving health, education and skills, and removing barriers to women’s employment. They can also unlock the “second dividend” through stronger healthcare, long-term care and pension systems that support people as they age, alongside greater savings and investments that raise productivity.
