See discussions, stats, and author profiles for this publication at: https://www.researchgate.net/publication/271733028
DEMOGRAPHIC TRANSITION AND DEMOGRAPHIC DIVIDEND IN ETHIOPIA:
OPPORTUNITIES AND CHALLENGES
Technical Report · December 2012
CITATIONS
6
READS
5,330
1 author:
Assefa Hailemariam Addis Ababa University 113PUBLICATIONS 924CITATIONS
SEE PROFILE
All content following this page was uploaded by Assefa Hailemariam on 03 February 2015.
The user has requested enhancement of the downloaded file.
DEMOGRAPHIC TRANSITION AND DEMOGRAPHIC DIVIDEND IN ETHIOPIA:
OPPORTUNITIES AND CHALLENGES
Country Case Study
by
Assefa Hailemariam (PhD)
Associate Professor of Population Studies Addis Ababa University
December 2012 Addis Ababa Ethiopia
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 2 TABLE OF CONTENTS
List of Tables ... 3
List of Figures ... 3
Executive Summary ... 4
1. Introduction ... 6
2. Trends in Population Size, Growth and Structure ... 8
2.1 Population size and Growth ... 8
2.2 Trends in Fertility and Mortality ...10
2.2.1 Fertility Trends ...10
2.2.2 Mortality ...11
2.3 Age structure ...12
2.4 The Dependency Burden ...14
3. Is Ethiopia ready to harvest the demographic dividend? ...15
3.1. Demographic Dividend ...15
3.2 Pre-conditions for Reaping the Demographic Dividend ...15
3.2.1 Labor Supply ...16
3.2.2 Human Capital Investment ...18
3.2.3 Infrastructure...22
3.2.4 Savings ...22
4. Opportunities and Challenges facing Ethiopia ...23
4.1 Opportunities ...23
4.2 Challenges ...24
5. Policies needed to take advantage of the Age Structure Transition...25
5.1 For reducing unwanted pregnancies and better health ...25
5.2 For Labor, Financial Markets, and Human Capital ...25
6.Conclusions ...25
REFERENCES...28
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 3 List of tables
Table 1: Total Fertility Rate: Ethiopia and sub-Saharan Africa ...11
Table 2: Age structure of the Ethiopian Population: 1960-201024 ...23
List of Figures Figure 1: Trends in Population size (millions) in Ethiopia, 1950-2030 ... 9
Figure 2: Population Growth trends (%) in Ethiopia, 1950-2010 ... 9
Figure 3: Trends in CBR and CDR in Ethiopia, 1950 -2010 ... 9
Figure 4: Actual and Projected Total Fertility Rate in Ethiopia, 1950 – 2035 ...10
Figure 5: Infant and under-five Mortality ...11
Figure 6: Life expectancy: 1950 – 2010 ...11
Figure 7: Population Pyramid for Ethiopia ...12
Figure 8 Age structure of the population of Ethiopia in 2010 and 2030 ...14
Figure 9: Age Dependency in Ethiopia, 1960-2010 ...15
Figure 10: Total Population and Labour Force ...15
Figure 11: Population and Labor Force Growth Rate in Ethiopia ...15
Figure 12: Percentage of Labor Force in the population ...16
Figure 13: Labor Force Participation Rate in Ethiopia ...18
Figure 14: Net Enrolment in Primary Education...19
Figure15: Gross enrolment in Secondary education ...19
Figure16: Enrolment in Tertiary education ...23
Figure 17: Per capita Health Expenditure: Ethiopia vs sub-Saharan Africa ...23
Figure 18: Gross domestic savings (% of GDP) in Ethiopia ………..24
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 4 Executive Summary
Ethiopia has been undergoing demographic as well as socio-economic changes of historic proportions since the early 1990s. Demographically, it has registered significant changes in vital rates. IMR declined from 97 to 59; U5MR from 123 to 88; and TFR declined from 6.6 to 4.8 between 1990 and 2010. Its population has increased by about 60% between 1994 and 2010, from 53 million to 83 million. Currently, the country is undergoing the process of a demographic transition. It has already evolved to the third stage of the demographic transition where reduction in mortality led to rapid population growth and subsequent decline in fertility led to a relatively slower population growth.
The population is characterized by a young age structure with a median age of not more than 18 years.
The proportion of children under the age of 15 ranged between 44% and 45% and the proportion of the working age population remained a little over 50 percent for most of the time until 2010 when the proportion of children under 15 declined to 41.3% and that of the working age population increased to 55%. The proportion of the elderly remained below 4% due to low life expectancy. Consequently, child dependency declined from 90% to 75%.
However, due to the ongoing demographic transition, both the size as well as the age structure of the population have been changing. Between 1990 and 2010, total population increased by 70% (from 49 million to 83 million) and labor force almost doubled (from 20 million to 40 million). The share of labor force to total population has also increased. It increased from 44% to about 50%. The proportion of total population of working age is projected to increase from about 55% in 2010 to 60% in 2030. The transition from high mortality – high fertility to declining fertility and mortality led to increasing support ratio. The support ratio is expected to continue to increase and is projected to reach 1.9 if the decline in fertility is maintained.
Ethiopia has also made considerable progress in the education, health and economic sectors in the past two decades. Literacy has more than doubled, enrolment in primary education increased from 20% to more than 80%; that of secondary education increased from 10% to 35%. Tertiary education has increased from about 1% to 5% between 1990 and 2010. The gender gap in education and labor force participation rate is narrowing; women’s reproductive health status has improved greatly, and many more women have the ability and decision-making power to plan their pregnancies, and the number using modern methods of contraception is increasing. Among married women, use of modern contraceptive methods has grown from 6 percent in 2000 to 27 percent in 2010. 2 In the economic sector, the Ethiopian economy has been growing by about 11%. Considerable effort is also being made to develop the infrastructure (road network, communication, power and energy, etc) as well as markets and financial institutions. In general, Ethiopia has made considerable demographic and socio-economic progress during the recent past.
The socio-economic and demographic progress that have been taking place in the country in the recent past might lead one to conclude that Ethiopia is poised to accelerate economic growth even further through a demographic dividend. However, there are a number of challenges that outweigh the opportunities such as low level of saving, heavy dependency on rain fed agriculture, dependency on export of few primary agricultural products; being land locked, etc. In addition, a closer look at Ethiopia's population projections and age structure changes reveals that the country has not yet created the age structure necessary for reaping the demographic dividend. More than 40% of the population is under 15 years of age and the population pyramid is still dominated by a large base of young people. As the UN median variant projection shows, the population will continue to be youthful and the dependency ratio will remain large.
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 5 Ethiopia with broad-based age structure and high dependency ratio has a long way to go before it starts harvesting the demographic dividend and accelerate economic growth. The transition to low fertility is slow and the increase in support ratios that it generates is not large enough to produce the demographic dividend. Fertility decline must be accelerated, investment on infrastructure, health, technical and vocational education and training must be scaled up. Effort has also to be made to increase job opportunities to absorb the large numbers of teenagers joining the workforce; savings must be encouraged amongst the working age population. Moreover, more investment is needed to increase access and improve quality of family planning services, improve maternal and new born health, and to reduce morbidity and mortality from malaria, HIV/AIDS and TB, among others. In addition, the effort to design and implement suitable policies in health, education and infrastructure, promoting industrialization and strengthening the financial sector will speed up harvesting the demographic dividend and increase the magnitude of the dividend. Unless measure are taken now, the effect on future prospects will be detrimental, as unemployment rises, the social fabric crumbles, and rising numbers of old people begin to overwhelm available resources. Ethiopia, must, therefore, embrace and understand the demographic challenges as a priority.
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 6 1. Introduction
Ethiopia with a total land area of 1.1 million sq. km, is the 10th largest country in Africa. However, in terms of population, it is the second most populous country after Nigeria in sub-Saharan Africa and the 15th in the world. It has an estimated population of 83 million in 2011 of which 41.2 million were males and 41.8 million were females. It has a youthful population with 41.3 percent below the age of 15 years.
The elderly population (65 and over), constitute 3.7% of total population and the population of working age (aged 15-64) constitute 55 per cent in 20101. This indicates that there is high age dependency in the country. In terms of urbanization, Ethiopia is the least urbanized country in the world with only 17% of its population living in urban areas. About a third of the total urban population lived in only five cities (Addis Ababa, Dire Dawa, Adama, Mekekele and Gondar), Addis Ababa being the primate city.
Primary health service coverage has considerably increased. In 2011, access to primary health care services was 96% and access to potable water was 73.3%. Nutritional status of children has also considerably improved between 2000 and 2011. Stunting decreased from 58% in 2000 to 44% in 2011;
underweight decreased from 41% in 2000 to 29% in 2011. However, there has not been any significant change in wasting; it declined from 12% to 10% between 2000 and 2011.2 Contraceptive use increased from 14% in 2005 to 28% in 2011 and fertility declined from 5.4 to 4.8 children per woman in 2011, under-five mortality was 88 and infant mortality was 59 per 1000 births and Maternal Mortality was 676 deaths per 100,000 births in the same year3. HIV Prevalence in Ethiopia among adults aged 15-49 in the 2011 EDHS was 1.5 per cent and it is projected to decline to 1.1% in 2015.
Ethiopia has transformed from a centrally planned socialist economy closed to the outside world and plagued by low efficiency and stagnation, to a market based economy. Although it is still among the least developed countries in the world, ranking 157th of the 169 countries in the 2010 Human Development Report4, it has made substantive sustained economic progress and has become one of the most dynamic and fastest-growing economies in sub-Saharan Africa. In the last seven years (between 2003/04 and 2010/11), it has recorded more than 11% average growth per year. This growth is complemented by a strong performance in the Agricultural sector5, Industry (construction and manufacturing) and service sec- tors with an average growth rate of 10%, 10% and 13.2%, respectively6 . The total poverty and food poverty levels declined to 29.6 and 33.6 per cent in 2010/11 from 38.7 and 38.0 per cent in 2004/05, respectively. However, about 30% of the population (25 million), still live below the poverty line.
In general, Ethiopia has been undergoing demographic as well as economic changes of historic proportions since the early 1990. Demographically, it has observed remarkable declines in infant and under-five mortality and modest decline in fertility and its population has increased by more than 60%
between 1994 and 2011. Currently, the country is undergoing the process of a demographic transition.7 During demographic transition, decline in birth rates followed by decline in death rates bring about an era of rapid population growth. Before the onset of the transition, population growth (which equals the difference between the birth and death rate in the absence of migration) is close to zero as high death rates more or less offset the high birth rates. During the intervening transition period, rapid demographic
1 UN, 2012
2 CSA and ICF International, 2012
3 Ibid
4 UNDP, 2011
5 Ethiopia's economy is predominantly agricultural. Agriculture accounts for 83.4% of the labor force, over 45% of the gross domestic product (GDP) and 80% of exports.
6 FDRE (2010)
7 Warren Thompson, (1929); Frank W Notestein, (1945)
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 7 change occurs, characterized by two distinct phases. During the first phase, the population growth rate rises as the death rate declines while the birth rate remains high. In the second phase, the growth rate declines (but remains positive) due to a decline in the birth rate. Population growth is again near zero after the completion of the transition as birth and death rates both reach low levels. The entire demographic transition took more than a century in Western Europe, but today it can be completed within a much shorter period of time depending on a country’s level of socio-economic development. Ethiopia has evolved from the first stage of the demographic transition8 to the third stage, where reductions in mortality led to rapid population growth and subsequent decline in fertility led to a relatively slower population growth.
At the start of these historical transformations, Ethiopia's leaders made improving the standard of living of the Ethiopian population their new political mandate and the basis for political legitimacy. They accordingly formulated several basic national policies (population, gender, economic, education, health, etc) for developing the economy and balancing the population growth with that of the economy to the end that the level of welfare of the population is maximized over time9.
The Ethiopian Government launched its population policy in 1993, an unprecedented act of governmental intervention in population. The policy came at a time when an Ethiopian woman would, on the average, give birth to about 7 children at the end of her reproductive cycle, one of the highest in sub-Saharan Africa.
The rationale for Ethiopia’s population policy was based on the analysis of the interrelationship between demographic and development variables. This analysis revealed that demographic factors such as rapid population growth and young age structure, fueled by high fertility regime, exacerbated the severe state of underdevelopment in the Ethiopian society at that time.
The architects of the various policies pointed out that the recorded progress in socio-economic development is the outcome of the socio-political and economic processes undertaken in Ethiopia since 1991.
Ethiopia is currently making good progress economically and important changes are also occurring in its population age structure. It has a youthful and growing population (median age is 18 years), which if managed properly can bring a considerable population bonus. In light of the ongoing demographic transition and socio-economic changes that have been taking place, is Ethiopia ready to experience a
“demographic dividend”? This paper, by reviewing existing literature and analyzing demographic and socio-economic data, attempts to give policy makers a clear understanding on the preconditions that must be addressed in order for the country to benefit from the changing age structure resulting from the demographic transition.
The study was informed by an extensive literature review to explore the approaches and experiences in other countries and how they have managed to reap the demographic dividend to contribute to social and
8Demographic Transition is refers to the shift from high mortality and fertility to low mortality and fertility. There are 4 stages in
the demographic Transition. Stage one refers to high fertility and mortality where population growth is stationary; stage two when mortality decline is underway while fertility is high (early expanding); stage 3 is when both mortality and fertility are declining (late expanding; and stage four where both fertility and mortality are low and the population is stationary.
9 TGE, 1993
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 8 economic development. It drew on various Government policies and strategies, including the Industrial Development Strategy, Education Sector Development Strategy and the Health Sector Strategy. A range of research and reports from Ethiopia and across the world were considered and analyzed. Data were obtained from national and international sources, including the three population and housing censes of Ethiopia and the three rounds of demographic and health surveys. The medium variant UN population projections were used to show future trends, while national data were used to show past trends and current situation. Graphs and charts are used for the analysis, which is supplemented by review of literature.
Including this introductory section, the paper has four sections. Section two presents a brief review of trends in population dynamics in Ethiopia and shows where the country stands in the demographic transition. Section three deals with the issue of whether or not Ethiopia is ready to harvest the benefits of the demographic transition. The paper concludes with a review of the comparative advantages and disadvantages Ethiopia has in harvesting the benefits from the ongoing demographic transition and suggests policy implications.
2. Trends in Population Size, Growth and Structure
This section presents the size and growth of the population of Ethiopia along with the demographic components of fertility and mortality. The analysis is based on data obtained from various sources including the three rounds of Censuses, the demographic and health surveys and the UN Population Prospects, the 2010 Revision.
2.1 Population size and Growth
Absence of accurate time series of population data limited the estimation of past growth rates of the Ethiopian population. Although figures on the size of the population started appearing as early as mid-nineteenth century, these were based on guesses made by travellers and visitors.10 The first Population and Housing Census was conducted in 1984 and based on this and earlier surveys, the Central Statistical Agency (CSA) made a reconstruction of the population until 1900. The Second Population and Housing Census of Ethiopia was conducted in 1994 and the third in 2007.
From the dawn of the human race to the turn of the 20th century, the population of Ethiopia grew to a total of only 12 million people11. After decades of very slow and uneven growth, it reached 19 million in 1950 and in just 10 years, it further increased to reach 22.5 million in 1960. It has grown even faster since then with greatest gains occurring after the 1980s. Figure 1 depicts the pattern of Ethiopia's population growth since 1950 based on the estimates and projections from the three rounds of censuses, various surveys, as well as the UN projections, while Figure 2 shows the rate of growth of the population. The rate of population growth increased from less than 2% in the 1950s to a peak of 3% in the late 1980s and early 1990s. Since then the population growth rate has been declining. Currently, Ethiopia’s population growth rate is estimated to be 2.2% (UN, 2012).
10 Woldemariam, (1961).
11 Central Statistical Authority (1988).
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 9 Figure 1: Trends in Population size (millions) in
Ethiopia, 1950-2030
Sources: CSA, 1988; UN, 2012. World Population Prospects: the 2010 Revision
Figure 2: Population Growth trends (%) in Ethiopia, 1950-2010
Source: UN, 2012. World Population Prospects:
the 2010 Revision
High mortality owing to disease and famine has been implicated with past low growth rates of the population.. Subsequently, continued decline in disease-related mortality (malaria, small pox, etc) has been responsible for the rapid growth of the population since the 1970s. In addition, increasing fertility due to reduced incidence of STIs, reduced adult mortality leading to longer life in union and no or little fertility control also contributed to the rapid population growth from the 1970s. The Crude Birth Rate (CBR) remained high and relatively constant until the mid-1970s and then slightly increased until mid- 1990s while the Crude Death Rate (CDR) moderately declined during the same period.
Figure 3: Trends in CBR and CDR in Ethiopia, 1950 -2010
Source: UN, 2012. World Population Prospects: the 2010 Revision.
More rapid mortality and fertility declines started from the mid-1980s (figure 3). As the net effect of migration on population growth is negligible, Ethiopia’s population has been growing due to natural increase, the difference between birth and death rates.
Consequently, Ethiopia’s population increased
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 10
from about 53 million in 1994 to 73.9 million in 2007 (CSA, 2008). The estimated population in 2012 is 85 million. This puts the country as the second most populous country next to Nigeria in Sub-Saharan Africa and the 15
thin the world. Although population growth rate after peaking in the late 1980s began a downward trend in the mid-1990s (Figure 3), the rate of this decline is slow. The youthful age structure generated by high fertility levels guarantees a continuing future rapid population increase as population with a high proportion of young dependents (0-14) and young adults (15-29) has an in-built impetus for future growth. Thus, the population may increase to 106 million in 2020 and to 129 million in 2030. By 2040, Ethiopia may have a population of 155 million.
2.2 Trends in Fertility and Mortality 2.2.1 Fertility Trends
The main feature of fertility in Ethiopia is that it has been at a high level. For most of the period since the 1950s, a woman in Ethiopia gave birth to about 7 children on average. However, starting from the mid-1990s, fertility began declining. The TFR was 6.6 children per woman in 1990 but in 2010, it declined to 4.8 children per woman (Figure 4).
Figure 4: Actual and Projected Total Fertility Rate in Ethiopia, 1950 – 2035
Sources: CSA 1993; CSA and ORC Macro 2000, 2005; CSA and ICF International 2012; UN, 2012. World Population Prospects: the 2010 Revision.
Ethiopia has registered faster fertility decline than all countries in sub-Saharan Africa combined. Fertility in Ethiopia was higher than the sub-Saharan Africa average during the period 1995 -2000. Between 2000 and 2005, the TFR in Ethiopia was the same as the sub-Saharan Africa average but by 2005-2010, Ethiopia’s TFR was lower than this average (Table 1).
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 11 Table 1: Total Fertility Rate: Ethiopia and sub-Saharan Africa
Period Total Fertility % Change
Ethiopia SSA Ethiopia SSA
1995-2000 5.9 5.7 7.8
2000-2005 5.4 5.4 8.5 5.0
2005-2010 4.8 5.1 11.1 6.3
Sources: CSA, 1984, 1994, 2007; UN, 2012.
Changing norms and values about children, increasing age at marriage, increasing female participation in education and increased use of contraception are among the drivers of fertility decline in Ethiopia. With increasing urbanization and modernization, the value of children has been changing; girls’ enrolment in primary education has been improving and the proportion of married women using contraception is increasing dramatically, all contributing to reducing fertility12.
2.2.2 Mortality
Some decline in mortality level occurred in the population during the last two decades. Mortality indices such as infant and child mortality rates and life expectancy at birth shown in Figures 5 and 6 reveal a pattern of consistent mortality decline. Infant mortality rate declined from 153 deaths per 1000 live births in 1965 to 112 in 1990 (CSA, 1993) and it further declined to 97 in 2000 (CSA and ORC Macro, 2001). In 2005, it was 77 per 1000 live births and in 2011, it declined to 59 deaths per 1000 live births (CSA and ICF International, 2012). Similarly, mortality of children under the age of five also declined considerably between the 1960s and 2010. It declined from over 200 deaths in 1990 to 166 in 2000, to 123 in 2005 and to 88 in 2010. This shows that during the 20 years since 1990, Ethiopia registered rapid declines in both infant and child mortality (2.4% and 5.6% per year for IMR and U5MR respectively).
Figure 5: Infant and under-five Mortality
CSA, 1984; 1993; 1994; CSA and ORC Macro 2000, 2005; CSA and ICF International 2012; UN 2012
12 The percentage of population living in urban areas increased from 11% in 1994 to 16% in 2007. CPR among currently married women increased from less than 5% in 1990 to 28% in 2011; net enrolment of girls in primary school increased from 45% in 1990 to 88% in 2010.
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 12 Following the decline in infant and under 5 mortality, Ethiopia has also registered significant increases in life expectancy. Life expectancy at birth increased from about 35 years in the 1950s and 60s to about 45 years during the 1975-80 and remained constant until 1980-85. It then began to increase and in 2011, it stands at above 57 years. In fact, life expectancy increased at an average pace of about 4.6 years per decade since the 1950s (Fig.
6).
Figure 6: Life expectancy: 1950 - 2010
Source: UN 2012 2.3 Age structure
The age structure is both the determinant and consequence of population growth. The Ethiopian population is characterized by a young age structure with a median age of not more than 18 years - a feature of rapidly growing populations. Table 2 presents the distribution of the population by broad age groups for the past 50 years and the future 20 years based on observed data and projections. The age structure of the Ethiopian population did not change much from 1960 to 2010.
Table 2: Age structure of the Ethiopian Population: 1960-2010.
Broad age group
Year < 15 15-59 60 +
1960 43.5 53.8 2.6
1970 44.1 53.3 2.7
1980 44.5 52.6 2.9
1990 44.9 51.9 3.1
2000 45.8 51.0 3.2
2010 41.3 55.0 3.7
2020 40.0 55.8 4.2
2030 36.0 59.2 4.8
Source: CSO, (1972); CSA 1993; 1999; UN ,2012.
As the data in Table 2 show, the proportion of children under the age of 15 years has remained high. It ranged between 44 and 45% for most of the time except for 2010 where a slight decline was observed. The proportion of the population of working age on the other hand, declined from about 54% in the 1960s to 51%
in 2000, it then began to increase in 2005 and stood at 55% in 2010 as a result of declining fertility. The proportion of the elderly has increased by a little over 1% during the period 1960 to 2010. It appears that the proportion of children under age 15 will continue declining if the fertility decline continues and the
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 13 proportion of the elderly will continue increasing if life expectancy continues to increase. The values for 2020 and 2030 obtained assuming the UN medium variant projection (Table 2) suggest that more rapid change will occur in the age structure of the population. The proportion of children under age 15 will drop to 36% of total population and that of the elderly will increase by about 1% between 2010 and 2030.
The decline in CBR and CDR is changing the age structure of the population. However, the change is sluggish. When the population pyramid for 1960 presented in Figure 7 is compared with that of 2010 in Figure 8 (left pyramid), the pyramid for 2010 is not very different from that of the 1960 except that it is narrower at the bottom indicating the declining in fertility.
Figure 7: Population Pyramid for Ethiopia
Although, there is a modest change in the age structure of the population, still children under the age of 15years constituted a very high proportion of the total population. Even if Ethiopia continues with its rapid progress and achieves the United Nations’ medium variant population projection, the population pyramid will still be dominated by a large base (the pyramid on the right) in 2030. The percentage of children under 15 is substantially higher than that of the East Asian countries when they started reaping their demographic dividend. The proportion of children under age 15 was 30% or less for most of the south east ASEAN countries when they started harvesting the demographic dividend13.
13 Navaneetham,K. 2009
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 14 Figure 8 Age structure of the population of Ethiopia in 2010 and 2030.
Source: www.prb.org/Articles/2012/ethiopia.aspx?p=1 2.4 The Dependency Burden
One important implication of the age structure is the age dependency. Not everyone in the population earns a living; one who does not relies on one who does. As a matter of convention, those aged between 15 to 64 years are considered the working age population while those under 15 years of age and those aged 65 years and over are their dependents14. At the aggregate level, dependency burden is measured by the ratio of the size of the dependent population to that of the working age population. Since the need of children and the nature of support they require differ from those of older dependents, dependency ratios are often decomposed according to these two groups of dependents. Figure 9 presents trends in these ratios for the Ethiopian population for the last five decades.
Figure 9: Age Dependency in Ethiopia, 1960-2010
Source: CSA, 1984, 1994, 2007; UN, 2012. World Population Prospects: the 2010 Revision.
It may be observed that high age dependency has been prevailing in Ethiopia. Due to high mortality, old-age dependency remained very low (less than 6%) throughout the period from 1960 to 2000 but recently, it began increasing with decreasing adult mortality. Childhood dependency ratios increased from 80% in the 1960s to 90%
in 2000 and subsequently, it has been declining. In 2010, child dependency declined to 75.5% while old age
14 In the Ethiopian case, the lower age limit for old age dependency is 60 years
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 15 dependency increased to 6.5%. As explained earlier, fertility has been declining during the last 20 years or so. The downward trend in the youth dependency ratio may be the outcome of this decline in fertility. The total dependency ratio increased from about 86 dependents for every 100 persons of working age in the 1960s to 96 in 2000. Starting from 2000, it has been declining (Figure 9).
While it is obvious that not many people live beyond age sixty15 at the moment, old age dependency is likely to increase rapidly as fertility and mortality decline continues. As the experience in many developing countries show ageing will soon be an issue unless policies to address the needs of the elderly are designed and implementation begins immediately.
To sum up, from what has been presented so far, there is convincing evidence that, during the last 20 years, Ethiopia has moved from high fertility-high mortality stage to intermediate stage. CDR declined from about 20 per 1000 population in 1990 to 10 in 2010; CBR declined from 48 in 1980 to 33 in 2010; IMR declined from 97 to 59 and U5MR declined by almost 50% between 2000 and 2010. TFR declined from 6.616 in 1990 to 4.8 children per woman in 2010, a decline of about 2 children over a period of 20 years.
The available data and the preceding discussions clearly reveal that Ethiopia has made significant stride in population dynamics and is in the process of considerably changing its demographic picture. Based on this rapid progress, one might expect Ethiopia to be ready for benefiting from the demographic transition.
The following section attempts to show whether or not Ethiopia has started harvesting the benefits of the demographic transition or what is known as the demographic dividend.
3. Is Ethiopia ready to harvest the demographic dividend?
3.1. Demographic Dividend
Demographic dividend is the accelerated economic growth that may result from a decline in a country’s mortality and fertility and the subsequent change in the age structure of the population. It is a window of opportunity that opens up with increase in working age population as a society goes through the demographic transition. When there is transition from high fertility and high mortality to low fertility and low mortality, there is an increase in the number of effective workers compared to consumers. These workers are able to produce more because of higher productivity and earn higher income per capita, which leads to virtuous cycles of economic growth17. With fewer births each year, a country’s young dependent population grows smaller in relation to the working-age population. With fewer people to support, a country has a window of opportunity for rapid economic growth if the right social and eco- nomic policies are developed and effective investments made.
3.2 Pre-conditions for Reaping the Demographic Dividend
The Demographic dividend is delivered through 3 mechanisms: (i) Labour supply – the numbers available to work are larger. Also, women are more likely to enter the workforce as family size decreases because of reduced time required for childbearing and rearing. (ii) Human capital investments – with smaller numbers of children, there will be greater investment in education, health, etc. Hence, primary
15 Life expectancy is less than 57 years.
16 Teller, et al (2011)
17Bloom and Canning, 2003
www.rand.org/pubs/monograph_reports/2007/MR1274.pdf
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 16 and secondary enrolment ratios are increased. (iii) Savings – younger working age people tend to have a higher level of output and also a higher level of savings, which will increase the potential for investment.
3.2.1 Labor Supply
The demographic transition, in which mortality rates decline first, followed by fertility rates, leads to a situation in which the population first gets younger (mortality declines are disproportional among infants and children), leading to baby boom which then leads to increase in the workforce. The fertility decline that follows the mortality decline is also likely to free more women to participate in the labor force directly. Thus, an increasing proportion of the population that is of working age provides an opportunity to reap a “demographic dividend” 18 through both the increase in the numbers of potential workers and an accelerated accumulation of capital due to reduced spending on dependents.
In Ethiopia, high fertility and declining mortality has resulted in an accelerated growth in both the population as well as in labor force during the last two decades (Figure 10) However, the growth in labor force was larger than that of the total population. Labor force almost doubled between 1990 and 2010, while the total population increased by 70%.
Figure 10: Total Population and Labour Force
Source: UN 2012; World Bank. data.worldbank.org/indicator/SE.PRM.NENR
When the rate of growth of total population and that of labor force are considered (Figure 11), the growth rate of labor force was lower than that of the total population between 1990 and 1996. After 1996, however, the growth rate was much higher for labor force compared to that of total population. Although it has been fluctuating, labor force has been growing by more than 3% between 1996 and 20010, whereas the rate of growth of the population has been well below 3% and declining. Growth rate of labor force began an upward trend until 2000 and then remained somewhat constant until 2004, then declined for a few years and started moderately increasing. The rise and fall in the rate of growth of labor force in
18 Ibid
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 17 Ethiopia may be due to HIV/AIDS related mortality in the early 1990s19, the war between Ethiopia and Eritrea as well as out migration20.
Figure 11: Population and Labor Force Growth Rate in Ethiopia
Source: UN 2012; World Bank. data.worldbank.org/indicator/SE.PRM.NENR
The share of labor force to total population presented in Figure 12 shows that labor force has been increasing steadily since 2000. It increased from about 44% in 2000 to 49% in 2010.
Figure 12: Percentage of Labor Force in the population
Source: UN 2012; World Bank. data.worldbank.org/indicator/SE.PRM.NENR
The proportion of total population of working age has also been increasing. It is projected to increase from about 53% in 2010 to 60% in 2030. With the decline in fertility, the proportion of working age
19 HIV/AIDS mortality
20 Migration of young men and women to the middle east, US and other countries
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 18 population will continue increasing. However, the opportunity to reap a demographic dividend comes from the positive change in the proportion of the population that is in the labor force.
Though growth in the working-age population provides an opportunity for a country to reap a demographic dividend, the extent to which this occurs depends on the socioeconomic and policy environment. Obviously, there must be a demand for the increased supply of labor, and conditions must enable its productivity, which requires effective policies in key areas, including strong health and educational systems to increase the productivity of potential workers; flexibility and competitiveness in the labor market to enable it to absorb the rapidly increasing number of young people entering the job market; openness to trade that leads to a growth of productive and rewarding jobs; modern infrastructure and technology to reduce transactions costs and enable economic efficiency; good governance, stable macroeconomics, and a sound financial system to promote savings and investment; and low levels of crime and corruption, which can impede economic progress.
As can be observed from Figure 13, male labor force participation rate has been stable at about 90%
during the two decades since 1990, female labor force participation increased from as low as 70% to 80%
during the same period. The gender gap in participation rate has begun narrowing. It appears that with declining fertility more and more women are freed from the burden of childbearing and rearing and joined the workforce. Moreover, the growth in the labor intensive floriculture and hotel industry, as well as the leather footwear, textile and handicraft industry has created better opportunities for female employment.
Figure 13: Labor Force Participation Rate in Ethiopia
Source: Source: UN 2012; World Bank. data.worldbank.org/indicator/SE.PRM.NENR
Ethiopia has undertaken reforms, beginning in the late 1990s that have increased the roles of markets, opened its economy to international trade, designed policies to enhance private sector investment and improve the health and educational quality of its population.
We present some recent data to show the changes that have taken place in key areas since the 1990s that are likely to facilitate the demographic transition and reaping the dividend.
3.2.2 Human Capital Investment
Human capital is the main sources of sustainable economic growth. Increase in life expectancy during the transition period cause individuals think differently about education, families, retirement, position, and role of women.
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 19 Education:
Education has been used as a vehicle for national economic development as well as for individual advancement. Education can affect people’s lives through several channels. It affects access to knowledge, information, and new ideas. It enhances overall efficiency, market opportunities, and social status. It also changes attitudes and behaviors, among other things, bringing about openness to new ideas and experiences, an increasing independence from traditional norms and values, and a questioning of passivity.
Education increases the availability of skilled workforce, one of the pre-conditions for reaping the demographic dividend. The demographic transition gives a greater opportunity for parents to invest more in their children’s educational attainment and human capital development. As a consequence, the labor force becomes more productive, skilled, earns higher wages and standard of living improve. The reduced number of school age children lowers the burden on the basic education needs and countries can better focus on improving the quality of education and invest in higher education.
The Ethiopian Government has made remarkable progress in expanding access to education at all levels.
The Government is working towards universal primary education. In this regard, net primary enrolment increased from less than 30% in the late 1980s to about 80% in 2010. Both female and male primary enrolment has increased considerably during the period (Figure 14).
Figure 14: Net Enrolment in Primary Education
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0
1987 1989 1995 1998 2000 2002 2004 2006 2008 2010
Female Male Both Sexes
Source:data.worldbank.org/indicator/SE.PRM.NENR
Figure15: Gross enrolment in Secondary education
0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0
Female Male Both sexs
So urce:data.worldbank.org/indicator/SE.PRM.NENR
In a similar manner, secondary and tertiary education has also been increasing since the mid 1990s (Figures 15 and 16), with greater numbers of students completing secondary education and continuing on to postsecondary study. However, more rapid increase in gross secondary enrolment occurred after the mid 1990s. Gross secondary enrolment increased from less than 15% in mid 1990 to about 40% in 2010.
Although still very low, tertiary enrolment has also increased considerably during the period. It increased from less than 1% in the 1970s to 5% in 2010 (Figure 16). According to Ministry of Education statistics, during the 2000-01 academic year, undergraduate enrollment at public universities (not including distance and evening enrollment) was approximately 34,000. By 2007-08, regular undergraduate enrollment increased to more than 125,000, an increase of more than 33% annually.
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 20 Figure16: Enrolment in Tertiary education
0 1 2 3 4 5 6 7 8 9
1971 1974 1982 1984 1986 1988 1990 1994 1996 1998 2000 2002 2004 2006 2008 2010
Female Male Both sexes
Source: data.worldbank.org/indicator/SE.PRM.NENR
There is significant gender gap in enrolment at all levels (Figures 14, 15, 16). Many children, especially girls notably those from poor families and those living in rural or remote areas lack access to safe, nearby school or other quality learning opportunities. However, the gender gap is narrower in primary education compared to secondary and tertiary education. In tertiary education, many more men than women are benefiting from expanded access. Less than 30 percent of the undergraduate enrollment and barely 10 percent of graduate enrollment are by female students.
The Government of Ethiopia has been taking measures to reduce the gender gap in education by incorporating gender issue as one of the priority agenda in its policies and programs. The Education Sector Development Program III (ESDP III), which is a continuation of ESDP I and II, set out special steps and measures to reduce gender gaps in enrolment, academic performance and successful graduation and it suggests several specific activities at regional, woreda levels and for schools. 21 However, the progress made as well as the causal constraining factors for the prevailing gender gaps in enrolment, academic performance, and graduation at different levels of the education system has not been identified.
It is, therefore, necessary to closely monitor and assess the progressive measures taken by the Government and to realistically analyze the causal constraining factors and explore the possible options to reduce the current gender disparity.
While having school-going population in the right proportion is good, it is unlikely to automatically bring demographic benefits. Science-based knowledge and skills are required to meet the changing needs from traditional agricultural and manufactured goods to more technologically-driven services, agricultural and manufactured products. In the absence of science-based knowledge and skills and well planned strategies, expanding educational access alone will result in large segments of the population that are frustrated, unskilled and ill equipped despite the “educational qualifications” to meet the changing world conditions, at both the micro and macro level. In this regard, Ethiopia has begun giving more attention to science and technology in post secondary education. The National Technical and Vocational Education and Training (TVET) Strategy was prepared in 2008 that replaced an older version adopted in 2002. The New TVET strategy reflects an important paradigm shift of recent years and places quality and relevance of TVET as a priority to solve the problems of unemployment and low productivity of the economy. The strategy was
21 Ministry of Education, 2008
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 21 designed in a way that TVET has to respond to the competence needs of the labor market and to create a competent, motivated and adaptable workforce capable of driving economic growth and development.
Health:
Health affects not only life expectancy and mortality rates, and hence population growth rates, but also the extent to which working-age people becomes productive contributors to the economy. Healthy older people may be able to contribute to the economy even after they otherwise might have retired, while improvements in health and longevity can motivate people to save more for retirement22. The health of a population affects its demand for health care and the resources devoted to it.
Ethiopia has been making considerable effort to improve the health status of its population in the last 15 years or so. Three health sector development programs (HSDP I, HSDP II and HSDP III) have been designed and a number of policies and strategies that provide an effective framework for improving the health of the population have been prepared and implemented. Currently, the country is implementing HSDP IV.
In spite of these, the Country’s health status remained poor as its population still faces a high rate of morbidity and mortality from communicable, maternal, perinatal, and nutritional conditions. More than 90% of child deaths are due to pneumonia, diarrhea, malaria, neonatal problems, malnutrition and HIV/AIDS, and often to a combination of these conditions. Young people, in particular, bear significant burdens of poor sexual and reproductive health outcomes, including early marriage and childbearing;
unmet need for family planning; maternal disability and death; and higher HIV prevalence.
Constraints in the delivery of services include: (i) the low number of health care facilities which are ill- equipped, mal-distributed and in a state of disrepair; (ii) an ineffective health care delivery system which is inefficient and biased towards the curative service; (iii) a undemocratic health care delivery system and management which although decentralized at the regional level still relies on centralized policy making and budgets; (iv) an acute shortage of human and material resources; and (v) inefficient utilization of the available while little involvement and participation of the private and NGO sectors as well as the beneficiary communities.23 In addition to these, some of the critical challenges in the healthcare system include: strengthening primary preventive healthcare through greater investments; where more than 80%
of common diseases, and the disease burden, are communicable and infectious, this is extremely critical.
Moreover, the sexual and reproductive health of young people empowers them to stay healthy and take advantage of education and employment opportunities throughout their lives and at the same time advance social and economic development.
In order to improve the health status of the population, in addition to good policies and programmes, more resources need to be allocated, including increasing the per capita health expenditure, meeting the unmet need for family planning and improving sexual and reproductive health of young people. which has been very low even by sub-Saharan African standard (Figure 17).
22 Bloom et al., 2009
23Richard G. WAMAI, 2009
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 22 Figure 17: Per capita Health Expenditure: Ethiopia vs sub-Saharan Africa
Source: data.worldbank.org/indicator/SE.PRM.NENR
In 2010, the per capita health expenditure in Ethiopia was less than 16 USD whereas for sub-Saharan Africa, it was 84 USD more than 5 times that of Ethiopia.
3.2.3 Infrastructure
Infrastructure is another factor that has been recognized to be a very important element for driving growth in a positive direction. A well-developed infrastructure can reduce transactions costs, increase savings, enable economic efficiency and increase labor productivity by easing movement. The construction of such infrastructure can also provide employment opportunities. Provision of social overhead capital, including public investments in transportation and communications infrastructure, primary education, and health, is a vital function of a growth-promoting government24. Internal infrastructure stocks like telephone lines per capita and road density are expected to improve growth performance because they serve to promote capital and labor accumulation by raising the standards of investment climate prevailing in a country
Infrastructure contributed 0.6 percentage points to Ethiopia’s annual per capita GDP growth over the last decade. In recent years, Ethiopia has made significant progress in infrastructure, and its infrastructure indicators compare relatively well with low-income country peers. It has launched an ambitious investment program to upgrade its network of roads and is establishing a modern funding mechanism for road maintenance. It is also expanding access to water and sanitation (from a very low base) thanks to judicious concentration on intermediate options such as traditional latrines, wells, boreholes and stand posts. Public investment in other infrastructure, such as road, communication, power has also been increasing in recent years. However, raising the country’s infrastructure endowment level further could lift annual growth. This would represent a significant boost over the growth performance of the Ethiopian Economy25.
3.2.4 Savings
Mobilization of savings, in general and domestic savings in particular, is critically important to harness resources for development. Investment financed through domestic savings is considered not only less
24 Ndulu and O’Connell, 2006
25 Vivien Foster and Elvira Morella. (2010). Ethiopia’s Infrastructure: A Continental Perspective
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 23 costly but also more permanent and durable26. However, Ethiopia has had the poorest savings performance even by sub-Saharan African standard. Saving rates in Ethiopia has remained far below that of countries in sub-Saharan Africa. As Figure 18 below shows, Ethiopia has not only had low savings, but starting in 2003, the savings rate has declined significantly. According to a World Bank report published in 2012, the gross domestic savings (% of GDP) in Ethiopia was only 1.82 in 2011.
Figure 18: Gross domestic savings (% of GDP) in Ethiopia
Source: World Bank 2012.
The reasons for the low measured savings rates include low per-capita incomes, low deposit rates that reduce incentives to save at financial institutions, and institutional impediments such as the distance to formal financial institutions. Moreover, in rural areas, savings in the form of cash is hardly a common practice. Substantial amounts of savings are in the form of physical capital—livestock, trees (e.g.
eucalyptus tree, coffee, etc) and land improvement.
To recap, in Ethiopia, a demographic bonus is being created. In order to transform this bonus into a demographic dividend, i.e. into a gain for the national economy, the many employable people must have the opportunity to become employed, the many children and adolescents must grow up, be healthy and educated. Increased investment in health, family planning, education, infrastructure development and employment creation seem the most important starting points to transform the demographic bonus into a demographic dividend.
4. Opportunities and Challenges facing Ethiopia 4.1 Opportunities
(i) Favorable policy environment: Since 1992/93, the government began introducing a series of economic reform programs aimed at reorienting the economy from a command to market economy, rationalizing the role of the state and creating legal, institutional and policy environments to enhance private sector investment and enhance economic development. The Plan for Accelerated and Sustained Development to End Poverty and the Growth and Transformation Plan (GTP) are among the many that were designed to enhance development.
26 World Bank, 2007.
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 24 (ii) Youth bulge: Ethiopia is creating the window of opportunity by generating proportionally large working age population, which if supported by the right policies in public health, education, and finance, will give demographic dividend.
(iii) Human capital Development: The Government has increased and strengthened educational and skill development opportunities for youth cohorts, with a focus on improving female participation The focus on technical and vocational training and education, science and technology; the increasing number of institutions of higher learning are all contributing for building human capital and skill enhancement.
(iv) Infrastructure development: Ethiopia has realized that a well-developed infrastructure can reduce transactions costs, increase labor productivity, promote savings and investment, enable economic efficiency, , boost private capital formation and thus the overall rate of accumulation of physical capital. Thus, concerted effort is being made to develop the road network, power and communication infrastructure as well as financial institutions. Ethiopia’s spending on infrastructure is by far the highest on the continent. The country is devoting 10%
of its GDP for infrastructure development annually27
4.2 Challenges
(i) High Fertility: Although fertility rate began to fall in Ethiopia in the mid-1990s, it is still high with an average of about 5 children per woman in 2010. Even under the UN low population growth assumption, TFR will only be as low as 2.65, children per woman by 2030. This means that it will take longer for Ethiopia to complete the demographic transition indicating that it will exert more pressure on the demand for higher education, housing, health care and employment opportunities. Moreover, it will result in high levels of age dependency, reduces saving and downsize investment in human capital. All of these reduce economic growth rates from what they might have been if the age-dependency ratio were lower. On the other hand, if fertility rates can be induced to decline further, it provides a reserve for higher growth rates. As the country is not yet ready to generate adequate employment in the formal sector, the bulk of its first time labor market entrants are expected to join the low paid informal sector, which may lead to poor quality of life, inadequate intra-family transfer of resources, low productivity and lack of social security. Appropriate policy changes are needed to successfully meet these challenges. Failure to do so may have negative consequences (higher unemployment rate, crime rate and increased political instability).
(ii) Being a land locked country: A country that is landlocked incurs higher transport costs and suffer the consequences of barriers of transit countries to reach the world market. This is true for Ethiopia because a significantly higher proportion of the intercontinental and international commerce takes place using water and land (intra-continental trade). Ethiopia, once a maritime country, now faces challenges in accessing the sea. After losing its coastline to Eritrea in 1991, Ethiopia continued to depend on the Eritrean port of Assab for its international trade. However, the border conflict with Eritrea that began in 1998 led to border closures and resulted in a major shift of trading routes from Assab to the port of Djibouti. The port of Djibouti now handles the large majority of Ethiopian trade. This has ontributed to high price increases and seriously affected the country’s potential for saving and investment.
27 http://www.africreview.com
Demographic Transition and Demographic Dividend in Ethiopia: Opportunities and Challenges Page 25 (iii) Low level of savings: Ethiopia is characterized by low savings because of the high ratio of consumers to producers. As children and the elderly consume more than they produce, while working-age people, for the most part, do the opposite, increasing the proportion of working- age to dependent population will automatically increase savings. This is not going to happen any sooner than 2030 or 2040 as the population will continue to be dominated by those under the age of 15.
(iv) High dependency on rain fed agriculture for food, employment and export: Irrigation is expensive and extremely limited, with the result that agriculture remains largely rain fed and subject to periodic drought. As a result, the country remained food in-secure.
5. Policies needed to take advantage of the Age Structure Transition 5.1 For reducing unwanted pregnancies and better health
Evidence suggests that provision of better health services to the population during the window of opportunity facilitates improved economic performance, increased production and development. For example, improving women’s reproductive health and enhancing their knowledge about health (since they play the central role in the health of their families) will improve household income and promote savings.
Focusing on the health of children and teenagers will improve educational performance and contribute to skill development. Given that about one fourth of all births in Ethiopia are unwanted or ill-timed improving access to and quality of family planning services will enhance the fertility decline, reduce unwanted pregnancies and improve maternal health and family welfare; it also hastens the changes in age structure that advance development by releasing women from childbearing and rearing and allowing them to join the workforce. Increased investment is needed to improve maternal and new born health, increase access and improve quality of family planning services, the performance of health workers, and to increase the number of health facilities and to reduce morbidity and mortality from malaria, HIV/AIDS and TB. There is also need to increase government spending on health care to make it affordable and accessible.
5.2 For Labor, Financial Markets, and Human Capital
Policies to improve human resource capabilities and create jobs are essential, to absorb the large numbers of teenagers joining the workforce;
Open trade policies, with open economies, can drive faster growth during the window period;
Policies to generate more capital to fuel growth and flexible labor markets to allow easier entry for young people into the workforce as well as improved flexibility and mobility across sectors;
Greater access to quality education, skill enhancement and focus on improving technical capabilities to match with the industry requirements;
Higher investments in education, skill up gradation and employability by imparting special training to underprivileged and the poor;
Encouraging saving behavior amongst the working age population, by giving various incentives like tax benefits, better returns etc.
