The International Monetary Fund describes this first dividend as a "transitory bonus," largely just the result of the shift to an older, working-age population. But while it's transitory, it's certainly not short, lasting for five or more decades.
Many economies also benefit from a second demographic dividend. As that working-age population begins to experience increased life expectancies, it begins to see a future beyond work, along with a need to pay for that future.
In other words, as workers age, they begin to focus on asset accumulation and wealth creation. This second demographic dividend, depending on incentives, policies, and economic opportunities, can last indefinitely as long as policies and economic opportunities exist to support it.
What happens when the dividend demographic ends?
While most developed economies are still seeing some benefit from the second phase, if not the first phase of the demographic dividend, there is certainly the risk that falling fertility and mortality rates eventually swing the demographics too far in the other direction, where an increasing portion of the population is beyond working age.
As a result, the society can be back where it was many decades before, with a large and potentially growing portion of the population unable to contribute economic output but needing care. Countries that have already experienced some of the impact of this shift in demographics include Japan, with a very low birthrate and an increasingly aging population.
Yet, while the demographics in many of the economies that have benefitted greatly from the first phase of the demographic dividend have shifted into the second phase, advances in technology, automation, and healthcare are keeping those economies functioning and healthy. They may not be in the same phase of per-capita income and wealth growth as in earlier decades, but the outcomes for members of those societies are still considerably improved.
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