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Outsourcing

Demographic bulges will affect the public service’s service delivery capacity

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The average number of children per woman has declined from five to two and a half over the last fifty years. In high-income economies, the average number of children per woman has declined to less than two. Almost all middle-and low-income countries have, or are making the transition, from high to low mortality and fertility rates. According to the Guardian, “A consequence of falling child mortality but continuing high fertility is a “youth bulge” – a high population of young people.” Demographic transitions such as these create a “boom” generation that will work its way through a country’s age structure, affecting the demand for government services from birth through to death; and will push government demand patterns in different directions across the globe.

Challenges with demographic bulges

This transition creates a number of challenges for governments around the world. High-income countries are dealing with the ageing crisis as their “boom” generations transition towards retirement. In high-income countries, an ageing workforce increases the fiscal burden while decreasing the immediate capacity to respond to the general challenges of the ageing population. The combination of these two factors will affect the public services’ capacity for service delivery.

Most countries, however, find themselves dealing with the youth bulge challenge, particularly prevalent in developing countries. Currently, half the world’s population is aged 30 or under. The challenge for middle- and low-income markets may be more extreme than what high-income countries have already experienced:

“When [high-income] markets grew richer, they had the time to adjust because life expectancy only went up in bits … These days, life expectancy in [middle- and low-income markets] goes up by twice the rate every five years.”Jonathan Wheatley, EM Youth Bulge: A Demographic Dividend or Time Bomb? Financial Times, May 2, 2013

The question for the future will be whether the “poor but young” countries will become “rich but old”, or will they become like China and Russia, “poor and ageing”?  

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Figure 7: Median age vs. GDP per capita in G-20 economies – Future growth depends on income levels and age profiles – 2015 projections. (Source: CIFS Analysis, 2014; IMF, 2013; UN Population Prospects, 2012).

The ability of governments to deal with the challenge will be dependent on their:

  • Relative wealth to follow the demographic transitions of their society. For example, Japan has grown rich before it grew old, while China is growing old before it will grow rich.
  • Ability to repurpose and reposition services and infrastructure to meet evolving demands from the population. To give a crude example, can elementary schools be repurposed towards old age homes as demand for elderly care overtakes education in demographic importance?

Read more on the Great Government Transition towards 2020 or Why the next 10 years matter for the public sector.

Do you have recommendations on how the governments can deal with demographic bulge challenges? Share in the comments below!

This blog post is based on the ISS 2020 Vision: Future of Public Sector Outsourcing whitebook.

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