The demographic dividend is the idea that a country will be able to experience a period of rapid growth when its population becomes dominated by a higher share of working age individuals compared to dependents.
This normally occurs after a country transitions from a high fertility and high mortality state to a low fertility and low mortality state.
The Philippines is now in a demographic dividend era with the working age (defined as 15-64) share in the population already exceeding the share of the dependent age (below 15 and above 65), according to a recent report by the International Monetary Fund.
The mechanism through which the demographic dividend is transmitted is straightforward. With fewer children, families and the state will be able to invest more in the human capital (education and health) of children. Children with more human capital can be expected to be more productive workers. More productive and a larger share of workers in the population would result in higher savings for the country, leading to more domestic investments. All of these translate to higher economic output per capita for the country.
The state plays a vital role through policies that promote human capital build up and by investing in education and training and fostering a conducive environment for employment creation.
The past decade or so has, in fact, seen some major state policies targeting human capital build up among the youth. Perhaps the most important of these are the Enhanced Basic Education Act of 2013 (RA 10533) and the Universal Access to Quality Tertiary Education Act of 2017 (RA 10931).
RA 10533 included the adoption of the senior high school (SHS) curriculum, which added two years to secondary education (with the very first Grade 11 students entering in school year 2016-2017). RA 10931 provided free tuition in public universities and colleges, and expanded the number of local universities and colleges.
These policies have had substantial impact on access to education among the youth. Analysis of the Philippine Statistics Authority’s Labor Force Surveys for October 2014 (before the implementation of the SHS curriculum) and October 2024 (most recent micro data available), show that the enrollment rate among the youth most likely to be affected by the policies (16-20 years of age) increased from 55 percent in 2014 to 81 percent in 2024.
In a decade’s time, the share of the youth (defined as 16-20 years old) not enrolled declined from close to half to less than a fifth. While not all the change can be attributed to the policies, there are strong indications that they account for a big share of the achievement.
Both males and females benefitted. Enrollment increased from 51 percent to 77 percent rate for the male youth and from 58 percent to 85 percent for the female youth.
Of course, while access has improved over that period, there is no evidence that the quality of education has also improved during the period. The Philippines was a laggard in both the 2018 and 2022 PISA exams overall, although performance differed significantly by public and private status. The PISA targeted to 15-year-olds, however, and would exclude those impacted by the SHS curriculum.
In terms of employment, the labor force participation of the youth declined, as to be expected because more of them are schooling. The labor force participation declined from 36 percent in 2014 to only 20 percent in 2024. This decline is not a bad thing if the youth are accumulating human capital.
Among the youth who decided to participate in the labor force, the unemployment rate was lower at 11 percent in 2024 compared to 14 percent in 2014. The underemployment rate-the share of the employed who want more hours of work, which is an indication of the quality of jobs they have-was also lower at 11 percent in 2024 compared to 18 percent in 2014.
The declines in unemployment and underemployment occurred for both the male and female youth, with the gains slightly greater for the male youth.
There are thus indications that there is some improved employment creation for the youth who decide to join the labor force.
The demographic dividend window has just opened for the Philippines. The experience of other countries is that this window, if accompanied by a continuous decline in fertility rate and a decline in the population, is soon followed by a challenging period when there could be an actual decline in the working age population, which would put a strain on government tax revenues and the sustainability of government programs and social security system.
This is more reason to take advantage of the window. There is need for greater focus on raising the quality of education not just access and this should be reflected in its budget allocation. This might require some difficult decision involving putting a cap on free tertiary education in order to invest more on raising the quality of educational institutions.
Improved quality of education will create more flexible and adaptable workers, which will allow them to get good quality jobs in an environment where technology, especially artificial intelligence, threaten many of the traditional jobs the youth depend on.