The demographic dividend isn’t everything

The annual Human Development Report of the UN Development Programme usually matters because it provides a broader measure of development than the ones based on gross domestic product (GDP). See here for the 2013 report and here for The Economist’s account of it.

But this year’s report is notable for different reason: it contains the first appearance in the non-academic literature of an influential body of research conducted over many years by Wolfgang Lutz of the International Institute for Applied Systems Analysis (IIASA) near Vienna. This concerns the implications of educational attainment for the demography. The central idea is that educational attainment matters for the demographic dividend (the potential benefits countries get when they get lots of young working adults as a share of their total population); that high educational standards moderate the negative impact of ageing and low ones blunt the potentially beneficial results of the dividend.

In a recent book, "Whither the Child?" (Paradigm press, available here) Mr Lutz and two co-authors argue that if you take improving educational standards properly into account, the optimum fertility rate is lower than the replacement rate – 1.8 not 2.1. This happens because, they say, education is expensive (hence having slightly fewer children is rational) and also because better-educated people earn more and can therefore support more children and retired people through their labour.

The Human Development report takes a slightly different approach to make a similar point. These charts compare two strikingly different Asian countries.