The Demographic Dividend

PRISHTINA, 23 June 2016 – UNICEF and Kosovo Agency of Statistics have presented during a round table held today, the findings of a Demographic Dividend analysis. Attended by the Minister of Labour and Social Welfare, Arban Abrashi, representatives of ministries, local public authorities and international organisations, the round table represented an opportunity to reflect about the potential benefits of the demographic dividend, and actions to ensure Kosovo benefits fully from this opportunity.

In demographic transition, the population moves from one demographic structure to another. Secular shifts in fertility and mortality levels change the age structure of a population from many children and few elderly to few children and many elderly, thereby leading to a situation where the growth rate of the labour force exceeds that of dependents, resulting in surplus resources for investments in economic development and family welfare. The situation of having a relatively larger working-age population is related to the so-called first demographic dividend. As the working-age population matures, the prospect of retirement can provide the motivation to save for financial security. The additional savings can either be consumed or used to prolong economic growth. This stage of economic growth has been termed the second demographic dividend which can occur in the later stage of the demographic transition.

In Europe, only Kosovo is classified as being in the early demographic dividend stage. Fertility levels and child mortality rates have already reached post transition levels, and dependency ratios will decline. The window of opportunity for Kosovo will be short, opened in the mid-2000 and closing by 2036.

The demographic dividend is seen as a window of opportunity for accelerating economic growth, but this is not automatic and it may or may not be realized in practice. It fully depends on the capitalisation of opportunities and implementation of effective policies. Key policy recommendations for countries in early demographic dividend stage focus on investment in human capital; enhancing labour market mobility; reducing barriers for female labour participation; strengthening conditions for savings and creating new opportunities for employment.

Although Kosovo has a much younger population than the neighbouring countries, it can be expected that, due to the current age structure, the population structure will shift, and will undergo an ageing process in the future due to relatively few births rejuvenating the pyramid from the bottom. Migration of young Kosovars to countries in search of employment opportunities and better living conditions will further accelerate this process of Kosovo losing the potential of a young population staying and working in Kosovo.

Education is an important driver of economic growth which is associated with individual empowerment and a decrease in poverty. Evidence suggests that the average return rate for an additional year of schooling contributes to a 10 percent increase in income per individual. Data for Kosovo indicate the need to increase access to education particularly for pre-primary, upper secondary levels and early childhood education programs. In terms of investments in human capital, it is essential that policies in Kosovo focuses on skill gap assessment for professions in demand, investments in vocational and technical training, implementation of career guidance corresponding to professions in demand by the labour market and increasing opportunities for life-long learning to provide the increasing labour force with necessary skills. Emphasis should be put in the creation of new jobs in expanding economic sectors including agriculture, manufacturing etc., that become available and match with the production of skilled.

Low labour force participation of females contributes to the extremely low level of employment rate for women in Kosovo. Increasing labour participation of females can increase the overall activity rates in Kosovo. For young women during the productive years, policies should focus on combination of training, placement and other support including expanding access to child care and elderly care services. Improvements in health systems and programs can contribute to the development of a population which is healthy and capable to maximize the economic growth.

Expanding community-based services, such as home visiting throughout Kosovo would contribute to the promotion and improvement of good nutrition practices for children all over Kosovo and reach out to the most disadvantaged groups. Domestic savings and investments: the early demographic dividend stage for Kosovo will close soon, it is therefore critical to act now to get prepared and benefit from the second demographic dividend opportunity in the near future. Realization of the second demographic dividend fully depends on the support mechanisms provided for the elderly people in a country.

In Kosovo, only a reduced portion of residents can live solely from their work, they have to rely on other persons and/or other sources of income. To reap the second demographic dividend, it is therefore important to focus on productive investments in creating new jobs; promoting and strengthening savings programs; create mechanisms to support workers to accumulate their wealth for the future.