Independence Day: Growing Share of Working Age Population in Pakistan
By Riaz Haq
CA

Dependency ratio, defined as the percentage of children and retirees to the working age population, is rapidly declining in  Pakistan  ( current dependency ratio is 69.03% ) and the rest of the developing nations of Asia and Africa. This demographic shift means that the world's richest and most powerful nations with the largest share of working populations will no longer be in Europe and North America by 2050.

Among South Asian nations, Bangladesh has already joined the list of top 10 nations in terms of the largest share of the working age population. India and Pakistan are expected to join it by 2050. Increasingly  better educated  working age population is expected to significantly enhance their productivity. 

Shift in share of working age populations - Source NY Times

The total dependency ratio reported for Pakistan in 2022 is 69.03%, much higher than Bangladesh's 47.09% and India's 47.5%, according to the  World Bank .  Dependency ratio for  China  is 44.96% but it is rapidly increasing.  China's share of the working age population will no longer be in the top 10 by 2050 due to its aging population, according to the UN projections. 

D eclining dependency ratio in Pakistan - Source Trading Economics/World Bank

New York Times' visual journalist Lauren Leatherby recently  described  this major demographic and economic shift in the following words: "The richest most powerful countries today have long had these really large working-age populations. And economists agree that that’s been a huge, huge advantage economically and geopolitically. And meanwhile, a lot of developing nations have had quite high dependency ratios having a high number of children compared to working-age people. And so, I think we know a lot of these storylines one by one, but putting it all together, it’s just like the world is going to shift really dramatically".

"And then I think what we see (rapidly aging population) in Japan today is only the tip of the iceberg. A lot of East Asia, China, Europe, South Korea will be much older than Japan is today, in just you know, 20 or 30 years. Some countries will have upwards of 40% of their population that are 65 or older in just two or three decades. And meanwhile, on the other end, you have a lot of these other countries that have long been, you know, hindered economically by their age structures. And suddenly a lot of them will start to enjoy the exact same age structures that Europe and East Asia, the US, that a lot of those countries have historically enjoyed", Leatherby added. 

It is based on this demographic shift that  Goldman Sachs  analysts Kevin Daly and  Tadas Gedminas are projecting Pakistan's economy to grow to become the world's sixth largest by 2075.  In a research paper titled " The Path to 2075 ", the authors forecast Pakistan's GDP to rise to $12.7 trillion with per capita income of $27,100.  India’s GDP in 2075 is projected at $52.5 trillion and per capita GDP at $31,300.  Bangladesh is projected to be a $6.3 trillion economy with per capita income of $31,000.  By 2075, China will be the top global economy, followed by India 2nd, US 3rd, Indonesia 4th, Nigeria 5th and Pakistan 6th. The forecast is based primarily on changes in the size of working age populations over the next 50 years.  

Economic Impact of Slower Population Growth:  

Daly and Gedminas argue that slowing population growth in the developed world is causing their economic growth to decelerate. At the same time, the economies of the developing countries are driven by their rising populations.  Here are four key points made in the report:

 1) Slower global potential growth, led by weaker population growth. 

2) EM convergence remains intact, led by Asia’s powerhouses. Although real GDP growth has slowed in both developed and emerging economies, in relative terms EM growth continues to outstrip DM growth.

3) A decade of US exceptionalism that is unlikely to be repeated. 

4) Less global inequality, more local inequality. 

Demographic Dividend: 

With rapidly aging populations and declining number of working age people in North America, Europe and East Asia, the demand for workers will increasingly be met by major labor exporting nations like Bangladesh, China, India, Mexico, Pakistan, Russia and Vietnam. Among these nations,  Pakistan  is the only major labor exporting country where the working age population is still rising faster than the birth rate. 

World Population 2022. Source: Visual Capitalist

 

World Population 2050. Source: Visual Capitalist

Over a  million Pakistani university  students are currently enrolled in STEM courses. Over 10 million Pakistanis are currently working/living overseas, according to the Bureau of Emigration. Before the COVID19 pandemic hit in 2020,  more than 600,000 Pakistanis left the country to work overseas in 2019. Nearly 700,000 Pakistanis have already migrated in this calendar year as of October, 2022. The average yearly outflow of Pakistani workers to OECD countries (mainly UK and US) and the Middle East was over half a million in the last decade. 

Consumer Markets in 2030 - Source: WEF

World's 7th Largest Consumer Market:

Pakistan's share of the working age population (15-64 years) is growing as the country's birth rate declines, a phenomenon called  demographic dividend . With its rising population of this working age group, Pakistan is projected by the World Economic Forum to become the world's  7th largest consumer market  by 2030. Nearly 60 million Pakistanis will join the consumer class (consumers spending more than $11 per day) to raise the country's consumer market rank from 15 to 7 by 2030. WEF forecasts the world's top 10 consumer markets of 2030 to be as follows: China, India, the United States, Indonesia, Russia, Brazil, Pakistan, Japan, Egypt and Mexico.  Global investors chasing bigger returns will almost certainly shift more of their attention and money to the biggest movers among the top 10 consumer markets, including Pakistan.  Already, the year 2021 has been a banner year for investments in Pakistani  technology startups . 

Record Remittances from Overseas Pakistanis:

Pakistan is already seeing high levels of labor export and  record remittances  of over $30 billion pouring into the country. Saudi Arabia and the United Arab Emirates (UAE) are the top two sources of remittances but the biggest increase (58%) in remittances is seen this year from Pakistanis in the next two sources: the United Kingdom and the United States.

Remittances from the  European Union  (EU) to Pakistan soared 49.7% in FY 21 and 28.3% in FY22, according to the State Bank of Pakistan. With $2.5 billion remittances in the first 9 months (July-March) of the current fiscal year, the EU ($2.5 billion) has now surpassed North America ($2.2 billion) to become the third largest source of inflows to Pakistan after the Middle East and the United Kingdom. Remittances from the US have grown 21%, second fastest after the EU (28.3%) in the first 9 months of the current fiscal year. 

Pakistan ranks 6th among the top worker remittance recipient countries in the world.  India and China rank first and second, followed by Mexico 3rd, the Philippines 4th, Egypt 5th and Pakistan 6th.  

About two million Pakistanis are entering the workforce every year. The share of the working age population in Pakistan is increasing while the birth rate is declining. This phenomenon, known as  demographic dividend , is coinciding with declines in working age populations in developed countries. It is creating an opportunity for over  half a million Pakistani  workers to migrate and work overseas, and send home record remittances. 

(Riaz Haq is a Silicon Valley-based Pakistani-American analyst and writer. He blogs at  www.riazhaq.com )