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Post-2015 Consensus: Population and Demography Assessment, Kohler Behrman

Summary of Targets from the Paper

Population and Demography Targets Annual Benefits ($B) Annual Costs ($B) Benefit for Every Dollar Spent
Universal access to sexual and reproductive health (SRH) services by 2030 AND eliminate unmet need for modern contraception by 2040. $432 $3.6 $120
Reduce barriers to migration within low- and middle-income countries, as well as between low and middle-income countries and high-income countries.     >$45
Elimination of age-based eligibility criteria for retirement.     High
Promote more efficient and more equitable urbanization.     High
Increase low fertility in high-income countries.     <$1
Maintain and expand public pension eligibility at “relatively young old ages.     Low

Summary

Prioritizing the Post-2015 UN Development Agenda on Population and Demography requires recognition that national demographic trajectories are currently more diverse than in the middle and late 20th century. Wealthy countries of Europe, Asia and the Americas face rapid population aging, while Africa and some countries in Asia prepare for the largest cohort of young people the world has ever seen. And many of the world's poorest countries, particularly in sub-Saharan Africa, continue to face premature mortality, high fertility and often unmet need for contraception. Policy priorities for the area of population and demography fall therefore in four thematic areas: high fertility and population growth, low fertility and population aging, migration and human mobility, and urbanization. In addition, ‘population quality’, including human capital factors such as health and education, is an important further aspect of the challenge of population changes. It needs to be seen as an inherent component of development priorities and in some cases, for example when addressing aging, policies related to population quality are the primary ones.

Thematic priority 1: High Fertility and Population Growth

A significant part of 21st Century population growth will occur in countries that still have relatively high fertility levels while having experienced major declines in infant and adult mortality. While currently having only 18% of the world’s population, high fertility countries contribute 38% of the population growth. Population growth after 2060 is projected to come exclusively from these countries. This rapid population growth is importantly related to unmet need for modern contraception. For example, during 2003-12, the number of women wanting to avoid pregnancy and therefore needing effective contraception increased substantially, and unmet need for modern contraceptives continues to be very high, especially in sub-Saharan Africa, south Asia, and western Asia.

Priorities with High Benefit-Cost Ratios

Recent research that has strengthened the evidence that (a) reduced fertility in high-fertility contexts results in improved child outcomes (including better child health and more schooling), reduced maternal mortality and increased female human capital, (b) reduced fertility can facilitate more rapid economic development, and (c) voluntary family planning programs, which provide sexual and reproductive health (SRH)  information, education and services, can make important contributions towards reducing fertility.  The UN Secretary General, for example, concluded that that “sexual and reproductive health and rights, and an understanding of the implications of population dynamics are critical foundations for sustainable development.” He also highlighted that “protecting and fulfilling the human rights of young people and investing in their quality education, effective livelihood skills, access to sexual and reproductive health services and information, including comprehensive sexuality education, as well as employment opportunities, are necessary for the development of their resilience and create the conditions under which they can achieve their full potential.”

To address concerns about high fertility and ongoing population growth as part of the post-2015 development agenda, we therefore propose a SRH-related priority of

  • achieving universal access to SRH services by 2030, and eliminating unmet need for modern contraception by 2040,

The benefit-cost ratios of expanding access to SRH information, education and services through voluntary family planning programs is likely to be large (> 90). Returns to investments in SRH are likely to be particularly high among vulnerable populations, including adolescents and poor individuals, who are often most affected by limited access to SRH information and services, and youth, who present a large and growing fraction of the population in many low- and middle-income countries.

We also emphasize that the benefits of reduced fertility and slower population growth are critically related to the capacities of countries to deal with reduced population growth and the resulting age-structure changes. A number of East Asian countries successfully exploited this ‘demographic dividend’ in the late 20th Century by increasing labor market flexibility. Investment in human capital, including greater access to, and better quality of, education is also an essential component of population-related development strategies.

 Discussion

The response to the continued population growth during the next decades in all likelihood needs to be two-fold. On the one hand, as population growth will partially result population momentum and expected further increases in longevity, policy responses will need to focus on (1) accommodating additional population growth through urbanization, migration and increases in population density, (2) increasing investments in health and human capital, and (3) institutional reforms that will facilitate the realization of potential demographic dividends as a result of the age structure changes during the demographic transition.

On the other hand, while the majority of the population is now estimated to live in regions with below replacement fertility, high fertility, poor reproductive health outcomes and relatively rapid population growth remain an important concern in a number of low-income countries. International and national spending devoted to family planning, however, has declined significantly in recent years. Recent research has brought about a revision in the understanding of the interactions between population growth and economic development, as well as the effects of voluntary family planning programs in terms of reduced fertility, improved reproductive health outcomes and other life cycle and intergenerational consequences. Based on recent evidence that suggests high benefit-cost ratios for such programs, we argue that an ongoing investment in and expansion of SRH information, education and services should be a high-priority component of development policies in the next decades.

Thematic Priority 2: Low Fertility and Population Aging

Populations are aging in high-income and increasingly also in middle-income and even low-income countries. As a result of continued progress in reducing mortality (including at old and oldest ages) and decades of low – sometimes very low – fertility, many high-income countries face very rapid population aging in the next decades. The most rapidly growing age segments in these countries are the old or very old. Old-age dependency ratios are therefore going to increase significantly in most high-income countries. Population aging, however, is no longer a concern that is restricted to high-income countries, and while the pace and levels of aging are lower, population aging is emerging as an important trend and policy challenge in many middle-income countries.

In terms of population dynamics alone, increases in fertility rates in low-fertility countries are the primary demographic mechanisms that can affect rates of population aging. However, the effect of increases in fertility is long-term, and few empirically-supported policy options exist for doing so. Current evidence suggests that policies and institutional reforms that increase gender equality and the compatibility of child-rearing with labor force participation are most promising in terms of stabilizing and/or moderately increasing fertility levels in high-income countries with very low TFR levels. But even in the presence of such policies, below-replacement fertility is likely to persist in many high-income and middle-income countries. And while migration is an important adjustment mechanism through which the effects of population aging on the size and quality of the labor force can be managed, migration is generally not able to stop or even reverse the general trend towards increasing population aging in middle- and high-income countries during the 21st century.

Priorities with High Benefit-Cost Ratios

In light of significant future population aging in high- and middle-income countries over the next decades, the most promising policy options in the area of low fertility and population aging should be focused on accommodating aging populations in social, economic and environmental development, and creating institutional environments where possible negative consequences of population aging are lessened.

For the post-2015 development agenda we therefore highlight one policy option that is likely to have high – albeit difficult to quantify – benefit-cost ratios:

  • Elimination of age-based eligibility criteria for retirement, including the creation of actuarially neutral public pension systems, and the development of pension systems that are based on expected years of remaining life given fixed characteristics.

This policy priority implies that individuals close to retirement ages would accurately gain in terms of their future retirement income the benefits of retiring later, and they would bear the costs of retiring earlier. In many high-income countries, such policies would make early retirement less attractive, and would encourage more-educated individuals (who tend to enjoy longer life expectancies) to work longer. The above priority would also reduce the inherent inequality resulting in pensions systems from differential life expectancies based on characteristics such as gender, race/ethnicity, and formal schooling.

Other promising policy priorities to address concerns about low fertility and population aging include: untying social safety nets and health and pension systems from formal labor market participation to benefit poorer members of society; renewing efforts to make life-long education more effective; promoting investments in adult health and human capital; adapting institutions and legal restrictions to accommodate child-rearing outside two-parent households; and promoting more effective market provision of care for elderly, disabled and vulnerable populations and improve access to insurance markets for care-taking needs.

There are also other policies that are regularly discussed as potential responses to population aging but that would have fairly low benefit-cost ratios. These includes providing generous parental leave, child benefit and related social programs with the aim of increasing fertility in high-income countries. For example, a detailed analysis of expansion of Norwegian parental leave concluded that “…the generous extensions to paid leave were costly, had no measurable effect on outcomes (such as children’s school outcomes, parental earnings and participation in the labor market) and regressive redistribution properties.” Expansion of early childhood education and high-quality day care seem to be possible exceptions, with several studies having indicated sizable benefit-cost ratios for high-income countries. They may be higher still for low-income countries, as Psacharopoulos reports in his contribution to the Copenhagen Consensus.

Discussion

The rise of low fertility and population aging in high- and (increasingly) middle- and even some low-income countries is the result of the unfolding demographic transition, and the remarkable progress during recent decades in terms of increasing life expectancies, reducing fertility and improving human capital of individuals across the globe. From the narrow perspective on population dynamics that this chapter addresses, there do not seem to be policies and/or interventions with high benefit-cost ratios that can significantly affect or reverse these broad trends towards persistent low fertility and increasingly older populations. The policy challenge in the next decades will be adjust to this reality of low fertility and longer lives, and develop social, economic and policy contexts that are sustainable with these demographic trends. Policy options with high benefit-cost ratios include reforms of pension systems to eliminate age-based incentives for retirement, focus on remaining life years as compared to accumulated life years and an untying of social safety nets and health and pension systems from formal labor market participation.

Thematic Priority 3: Migration and Human Mobility

The global stock of migrants is estimated as 214 million (2010), and people born in other countries tend to represent relatively large shares of the prime working age populations and people over 65 in many countries.  While the current stock of migrants is concentrated in developed regions (128 million migrants or nearly 60%), the largest population movements currently occur not between developed and less developed regions, but between South and West Asia, from Latin to North America, and within Africa.

Priorities with High Benefit-Cost Ratios

If workers are much more productive in one country than in another, restrictions on immigration lead to large efficiency losses. Large benefits are potentially achievable by removing restrictions, and it is estimated that a modest 3% increase in the labor force in developed countries through migration could give benefits larger than removing remaining trade barriers. Based on a large body of literature that suggests that liberalizing international migration would result in large benefits in terms of economic growth and income, with gains for both sending and receiving countries and for both migrants and native populations, we propose the following post-2015 development priority:

  • Reduce barriers to migration within and between low- and middle-income countries and between middle- and low-income countries and high-income countries.

Priorities closely related to this reduction of barriers to migration include: for receiving countries to develop migration policies better informed by overall needs, to rationalize criteria for any restriction on migration and to create frameworks to allow more transitory migration.

 Discussion

The benefits of liberalizing migration are likely to be substantial. Increased international migration is likely to have gains that, if undertaken at a moderate pace to allow internal adjustments, will be shared by citizens of both recipient and origin countries. While there is substantial evidence that reducing barriers to migration is beneficial for both receiving and sending countries, the history of migration reform also suggests that the process of achieving liberalizing international migration is challenging, and that the political costs of migration reform and societal “adjustment costs” are often perceived to be substantial.  Nevertheless, our assessment is that the costs of the institutional reforms and political changes that are required for reducing barriers to migration are relatively small as compared to the substantial benefits, and despite the considerable uncertainty about both costs and benefits, we agree with earlier studies that have suggested high benefit-cost ratios for reducing barriers to migration, both within low- and middle-income countries as well as between low/middle-income countries and high-income countries.

Thematic Priority 4: Urbanization

Urbanization is likely to proceed rapidly in coming decades, particularly in low- and middle-income countries. The number of urban residents is projected to increase more than tenfold between 1950 and 2100, with Asia and Africa accounting for 80% of the world’s urban population by then. Within the scope of this paper, however, it is difficult to estimate meaningful global benefit-cost ratios for programs to promote better, more efficient and more equitable urbanization.  Nevertheless, even without such detailed analyses, the global trends towards continued rapid urbanization suggest selected interventions to make urbanization more efficient and equitable are likely to have high benefit-cost ratios.

Population Quality: A Key Aspect of the Development Agenda on Population and Demography in the 21st Century

Population quality, including health, education and other forms of human capital, is an important dimension of the post-2015 development agenda, with important implications also for sexual and reproductive health, gender equality and human rights.  Our above discussion focused primarily on the size, age structure and distribution of the global population, but our discussion would be incomplete if we did not highlight the importance of population quality. In the area of education and schooling, for example, we propose that education should be broadly defined to include all acquisition of knowledge rather than limited to formal schooling. Parental knowledge about the need for stimulation in early years is important, and preschool programs for children three- to five-years-old are likely to have high social rates of return. Expansion of such programs is also likely to benefit mainly children from poorer households. Enrolling more girls into education is likely to yield high social rates of return; more than 100 million have never been to school. Educational policies should be neutral with respect to school ownership, as private schooling has expanded rapidly in recent years. Finally, we should say that social returns to more general education (learning how to learn) and life-long learning are likely to increase in an aging and rapidly changing world. With respect to health and nutrition, we argue that nutritional investments are likely to yield high social rates of return, particularly benefitting poorer families. Investments in adult health and human capital can also promote ‘healthy aging’ and increase productivity of older people. There are also common chronic diseases which can be prevented via behavioural and regulatory changes. At the same time, public and private agencies in low- and middle-income countries need to be reoriented to the changing realities of disease composition (the growing importance of non-communicable diseases and accidents relative to traditional communicable diseases). While we do not provide detailed benefit-cost analyses for policy priorities related to population policy, such analyses are included in the Copenhagen Consensus papers on health and education.

Discussion: Prioritization of Policies Related to Population and Demography

Our key priorities in the area of population and demography are highlighted in the below table. In our opinion, these priorities should be important components of the post-2015 development agenda.

Table: Approximate benefit-cost ratios for key policy priorities with high benefit-cost ratio (BCR)

While we do not provide estimates of benefit-cost ratios, we also emphasise ‘population quality’ as an important aspect of the post-2015 development agenda that has important implications for population dynamics and the social/economic responses to changes in global population size, structure and distribution.

It is also important to point to selected policies that in our opinion have relatively low benefit-cost ratios and thus should not be prioritized as part of the post-2015 development agenda in the area of population and demography. These low-priority policies for example include the maintenance and expansion of public pension eligibility at “relatively young old ages”, and the expansion of family policies aimed at increasing low fertility in high-income countries (with the exception of the expansion of early childhood education and high-quality day care).