DEMOGRAPHIC TRANSITION, DEMOGRAPHIC BONUS AND AGEING IN MEXICO. Virgilio Partida-Bush, National Council on Population, Mexico

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1 DEMOGRAPHIC TRANSITION, DEMOGRAPHIC BONUS AND AGEING IN MEXICO Virgilio Prtid-Bush, Ntionl Council on Popultion, Mexico Nerly ll countries hve undergone, or re currently undergoing, the demogrphic trnsition. In generl terms, the trnsition is shift from regime chrcterized by high nd uncontrolled levels of mortlity nd fertility to one of low nd controlled levels. This trnsition begn lter but is progressing more rpidly in the developing countries, such s Mexico, thn in the more developed countries. The trnsition leds to chnges in the size nd ge structure of the popultion, nd these give rise to socil nd policy chllenges tht hve yet to be fully resolved. In Mexico, the shrp decline in mortlity due to the expnsion of helth services, the low cost of importing effective drugs nd prontlist policy tht sought to meet the lbour needs of n expnding industril sector nd to populte the ntionl territory, ll fvoured rpid demogrphic growth during the twentieth century. Growth ws especilly rpid between 1954 nd 1974, when the popultion incresed by over 3 per cent per yer. This ws mong the highest rtes of popultion growth in humn history. The country lter dopted new popultion policy tht sought to reduce popultion growth, nd this led to rpid decline in fertility during the lst qurter of the twentieth century. The demogrphic trnsition is expected to be essentilly completed during the next fifty yers, when the ge structure of the popultion will become much older. On the wy towrds tht finl stge, the rpid demogrphic growth of the pst will continue to impct the ge structure, s lrge cohorts born during the periods of pek growth pss through the life cycle. The trnsition will give rise to two chnges s pronounced s they re distinct: first, the popultion of working ge will grow rpidly; lter, the number of older dults will increse rpidly, reching, within hlf century, geing rtios similr to those in the developed countries. Even in 25, there will be trces in the ge structure of the rpid growth tht chrcterized the genertions born during the second hlf of the twentieth century. The impct of tht pst growth will finlly cese erly in the second hlf of the twenty-first century. The consequences of this demogrphic pst re evident tody, but they will become even more pronounced in the coming yers when the geing process intensifies. This pper reviews the demogrphic origin of those two chnges in the ge structure in other words, how pst nd future chnges in fertility, mortlity nd migrtion hve contributed, nd will contribute in the future, to the formtion of the demogrphic bonus nd eventul geing. The pper first considers the phses of demogrphic trnsition nd then goes on to nlyse the contribution of ech of these three demogrphic phenomen to chnges in the number nd ge structure of the Mexicn popultion. A. DEMOGRAPHIC TRANSITION IN MEXICO Mexico s demogrphic trnsition hs followed typicl profile, s cn be seen from figure 1. Following the pre-trnsitionl phse tht lsted until bout 193, the first stge sw rpid decline in mortlity while birth rtes remined firly stedy nd even rose between 1945 nd 196. The second phse begn round 197 when the decline in fertility, which begn during the 196s, becme more rpid. The third stge of the process, when the birth nd mortlity figures converge, will occur during the first hlf of the twenty-first century. 285

2 Rtes (per thousnd) Figure 1. Crude birth nd deth rtes, Mexico, Deth Birth Yer Source: CONAPO (22), bsed on Collver (1965) nd Zvl (1989). The popultion growth rte is estimted to hve incresed from 1.4 per cent in 1921 to 1.7 per cent in 193 nd further to 2.7 per cent in 195 nd 3.5 per cent in As consequence of the decline in fertility, the pce of popultion growth then begn grdully to decrese, to 3.1 per cent in 197, 2.3 per cent in 1985 nd 1.3 per cent in 2 (figure 2). The Mexicn popultion entered the new millennium with rte of growth similr to tht of hundred yers erlier, but with popultion size seven times greter. Figure 2. Totl popultion nd rtes of popultion growth nd nturl increse, Mexico, Nturl increse 4 3 Popultion (millions) Popultion Popultion growth 2 1 Rtes (percentge) Yer Source: CONAPO (22). Chnges in demogrphic vribles A rpid nd sustined decline in mortlity took plce beginning in the 193s, in context of fr-reching economic, politicl nd socil reforms. In 193, life expectncy t birth ws 35.9 yers (34.9 yers for men nd 36.9 for women), wheres, in 2, it ws 74. yers (71.6 yers for men nd 76.5 for women). Progress ws gretest between 1942 nd 196 when there ws n increse of lmost one yer in the verge length of life for ech clendr yer (figure 3). The 286

3 generl fll in mortlity ws so rpid tht the cumultive reduction in the risk of deth between 193 nd 21 mounted to 82 per cent for men nd 86 per cent for women. As in mny other countries, Mexicn mortlity fell slowly during the 196s. The pce of decline picked up lter, but ws not s rpid s in erlier yers. 9 8 Figure 3 Life expectncy t birth by sex, Mexico, Yers Women Men Yer Source: CONAPO (22), bsed on Collver (1965); figures for bsed on gross mortlity rtes estimted by Collver (1965). Among the min determinnts of the shrp decline in mortlity re the expnsion of eduction services nd snittion infrstructure nd the extension of helth services. The ltter hs been significnt fctor ever since the cretion of the Mexicn Socil Security Institute (IMSS) in 1942 nd the conversion of the Deprtment of Helth into the Ministry of Helth in According to recent projections from Mexico s Ntionl Council on Popultion (CONAPO, 22; Prtid 23), life expectncy will increse from 74. yers in 2 (71.6 for men nd 76.5 for women) to 76.6 (74.2 for men nd 79.1 for women) in 21, 79.8 (77.5 for men nd 82.1 for women) in 23 nd to 81.3 yers (79. for men nd 83.6 for women) in 25 (figure 3). Averge life expectncy in Mexico t the end of the projection period will be similr to the recent figure for Jpn, which currently hs the lowest mortlity in the world. The nticipted increses in life expectncy my be conservtive since the projected overll reduction in the risk of deth between 2 nd 25 is 44 per cent, which is much smller thn the 73 per cent reduction observed during The decline in fertility did not begin until the mid-196s. The high nd even rising rtes before then reflected the prontlist policy previling in the country during those yers. Fmilies hd bout six children in the erly twentieth century, reching mximum of 7.2 children t the beginning of the 196s. The grdul spred of the prctice of fmily plnning s prt of new policy tht sought to regulte popultion growth in ccordnce with the greements dopted t the 1974 United Ntions World Popultion Conference in Buchrest contributed to dvncing the fertility trnsition in Mexico (figure IV). The totl fertility rte (TFR) fell to six children per womn in 1975, five in 1979, four in 1985 nd three in 1994, nd hs now reched bout 2.2 children (figure 4). The Mexicn experience, like tht of other countries, demonstrtes tht, once the fertility trnsition begins, the pce of decline ccelertes but, s it progresses, the successive reductions become less yer by yer. 287

4 Figure 4. Totl fertility rte, Mexico, Children per womn Yer Source: CONAPO (22); figures for bsed on estimtes mde by Zvl (1989). Mexico s popultion policy ims t chieving fertility rte equivlent to the replcement rte in 25 ( TFR of 2.1 children per womn). 1 It is estimted tht, in 2, bout 71per cent of women of reproductive ge living with prtner used methods of contrception. In order to rech the replcement rte, it will be necessry to increse contrceptive use to pproximtely 73.5 per cent in 25 with n verge nnul increse of lmost.5 per cent, which is less thn the.7 per cent nnul increse observed during The required increse in the use of contrceptives is fesible, since Mexico hs strong nd comprehensive fmily plnning progrmme tht seeks to minimize the unmet demnd for contrception. The gol is likely to be met since the rte of contrceptive use ws 74.5 per cent in 23, ccording to the Ntionl Reproductive Helth Survey (Secretrí de Slud de México, 24). The uthor s projection of the TFR is shown in figure 4, bsed on the fertility trgets nd the rte of contrceptive use ssumed by the Mexicn Government, nd ssuming tht TFR will rech minimum of 1.85 children per womn nd will remin t tht level from yer 23 onwrds. The ltter ssumption is in line with suggestions t United Ntions group of experts (United Ntions, 22, pp. 18-2). Fertility below the replcement level would result in n eventul reduction of the popultion. The net loss of popultion s result of interntionl migrtion hs been significnt since 196 (figure 3). 3 It is estimted tht territoril mobility principlly, of Mexicns to the United Sttes is currently reducing the popultion of the country by.4 per cent per nnum. Forecsts for the next fifty yers indicte tht the net emigrtion rte might fll from.39 per cent in 2 to.23 per cent in 25. If the fertility, mortlity nd migrtion rtes forecst for 25 were to remin unchnged, the intrinsic growth rte of the stble popultion would eventully be -.78 per cent. B. THE AGE STRUCTURE TRANSITION The vrious phses of demogrphic trnsition hve left their mrk on the ge structure of the Mexicn popultion, s cn be seen from the successive ge pyrmids in figure 5. The combintion of flling mortlity nd high nd rising fertility cused rpid rejuvention between 193 nd 197. The shrp fll in fertility in the following thirty yers produced progressive reduction of the bse of the pyrmid. 288

5 Figure V. Popultion pyrmids, Mexico, Age (yers) Men Women Men Women Age (yers) Men Women Men 8 Women Age (yers) Men Women Popultion (millions) Men Women Popultion (millions) Source: CONAPO (22). 289

6 Demogrphic projections indicte tht this process will intensify in the first five decdes of the present century. The contrction of the bse of the pyrmid will be incresingly evident, not only in reltive terms, but lso in bsolute numbers. On the other hnd, the momentum of the pst rpid growth will be cler first in the working yers (ge 15-59) nd lter in old ge (6 yers nd bove). The working-ge popultion will increse by lmost 27 per cent between 2 nd 215 but by only 3.8 per cent in the following 15 yers, nd it will decrese by 9.5 per cent in the next two decdes. During the sme periods, the number of older dults will continue to rise by 76.3, 83.3 nd 63.2 per cent, respectively. The chnges in ge structure cn be seen more clerly in the time series for the six functionl ge groups shown in figure 6. Pool (24) suggests equting these groups with distinct stges in the life cycle: childhood corresponds to ge group -14 yers; youth to yers; erly middle ge to 3-44 yers; lte middle ge to yers; erly retirement ge to 6-74 yers; nd old ge to 75 yers nd bove. The timeline of the childhood group is similr in pttern to tht of the crude birth rte (figure 1). This is due to the fct tht these genertions re still close to their yer of birth. With the pssge of time, the likelihood of survivl for the most recent cohorts increses s result of the fll in mortlity. However, from 196 onwrds, these cohorts re reduced s result of more intense interntionl migrtion, prticulrly of young people nd dults in erly middle ge. Figure 6. Popultion distribution by functionl ge group, Mexico, Percentge Yer Source: CONAPO (22). Thus, s result of chnges in demogrphic vribles, the expected genertionl prllelism between the six ge groups does not occur strictly with periodicity of 15 yers (the high point of the -14 ge group in does not occur for the ge group in , etc.) either in the precise displcement of profiles (the shpe of the high point of the -14 ge group brodens when the sme genertions re in the nd 3-44-yer ge groups), or in the proportion they represent of the whole s time psses. The pnorm is clerer if we consider the potentil popultion growth implicit in the ge structure or the momentum of the popultion. 4 Pool (24) suggests exmining momentum in 29

7 terms of the increse in popultion by ge group during period of time, i.e. the growth potentil of ech ge group, or the mount tht ech ge intervl contributes to the overll growth rte. Figure 7 shows the yer-by-yer trend in momentum. In this cse, the profile is similr between the six ge groups, nd one cn even note some wves, lthough they re not s mrked s in other countries (Pool, 24, figure 3). Figure 7. Impct of cohort flows on selected ge groups, Mexico, (Chnge in specific ge group s percentge of totl popultion t the beginning of the yer) Percentge Yer.6.4 Percentge Source: CONAPO (22). Yer The vrious stges of the overll popultion growth rte re most evident in the -14 yer ge group lthough they re lso perceptible in other groups. Thus, for exmple, the fll in the number of births during the six-yer period , during the time of the Mexicn Revolution ( ), is less pprent 15 yers lter ( ) in the ge group, 3 yers lter ( ) in the 3-44 ge group nd lmost disppers ( ) in the group ged 75 nd over, due principlly to the incresing contribution to trends t higher ges of longer survivl resulting from the decline in mortlity. 291

8 The clerest wve is the one tht occurs round 196 which is the result of the policy of promoting nd, lter, discourging lrge fmilies. Once the fll in fertility slows drsticlly beginning in 25 (figure 4), the process of convergence towrds eventul stbility will continue to give rise to wves lthough they will be much smller thn the one tht occurred round 196. The intergenertionl spcing of these wves will be pproximtely 15 yers throughout the present century lthough up to 25 they will be observed only mong the children nd youth (figure 7). Demogrphic bonus On the wy to popultion geing, there is period when the most fvourble demogrphic conditions converge nd my help to trigger Mexico s economic growth potentil if proper nd sensible use is mde of them. The grdul nrrowing of the bse of the ge pyrmid nd the movement of the lrgest genertions (corresponding to the high growth rtes of the pst) first to the economiclly ctive ge groups nd then to the older ge groups, leds to reltionship between the productive nd dependent popultion groups tht is fvourble scenrio for employment, the economy nd investment.. This window of opportunity, lso clled demogrphic bonus or dividend, will briefly remin open in Mexico, for the first nd only time, from 26 to 228. Among the vrious indictors tht enble the timing of this window of opportunity to be identified, the demogrphic dependency rtio is the one tht is generlly used. Although it is crude indictor, the dependency rtio mkes it possible to pinpoint chnges in the ge structure s the demogrphic trnsition dvnces. The dependency rtio is the sum of the number of children nd dolescents (ged -14 yers) nd of older dults (6 yers nd bove), who re regrded s the dependent popultion, divided by the number of people of working ge (15-59 yers), regrded s being the income-erning popultion. Figure 8 shows the development of the dependency rtio. It cn be seen tht, during the twentieth century, the totl dependency rtio ws lmost entirely determined by the youth dependency rtio (children nd dolescents from -14 yers divided by the working-ge popultion), reflecting high demogrphic growth. As result of the rpid decline in the youth dependency rtio due to declining fertility the totl dependency rtio will be ner its minimum for number of yers between 21 nd 22. Lter, the totl dependency rtio will increse rpidly s result of the geing process, reflected in the increse in the old-ge dependency rtio. This pttern cn be clerly recognized in the first hlf of the present century, s shown in figure 8. There is no exct vlue of the dependency rtio tht enbles the timing of the demogrphic bonus to be identified. The period tken here is one when the dependency rtio is below 6 per cent. In the yers of highest demogrphic growth ( ) nd the rejuvention of the ge structure, for every hundred persons of working ge there were s mny or more dditionl consumers in the dependent ges. Three decdes lter (26-228), it is expected tht the proportion will hve fllen to round hlf of the erlier period s mximum. From the perspective of the demogrphic dependency rtio, 1 workers in , in ddition to supporting themselves, were working to support 117 dditionl persons. Between 26 nd 228, they will be doing so for only 6 others, t most. Thus, if the vilble workforce is dequte nd is properly used, over one qurter(1-16/217=.263) of totl consumption in the 196s nd 197s could be trnsferred, in the next 22 yers through domestic svings to spur economic growth nd investment. This is wht is ment by the demogrphic bonus or dividend. 292

9 The next two sections discuss how the chnges in ech of the three demogrphic phenomen since 19 hve contributed, nd will contribute, to the demogrphic bonus, subsequent geing nd the growth of the potentil workforce. 12 Figure 8. Dependency rtios, Mexico, Percentge Totl Youth 2 Old-ge Yer Source: CONAPO (22). NOTE: The youth dependency rtio is the rtio between ge groups -14 nd The old-ge dependency rtio is the rtio between ge groups 6+ nd The totl dependency rtio is the sum of youth nd old-ge dependency rtios. C. CONTRIBUTION OF CHANGES IN DEMOGRAPHIC PHENOMENA TO CHANGES IN THE SIZE AND AGE STRUCTURE OF THE POPULATION AND THE SUPPLY OF LABOUR Demogrphic bonus nd popultion geing This section exmines the contributions of fertility, mortlity nd migrtion to chnges in the numbers of persons in the dependent nd working ges during the period of the demogrphic bonus. The nlysis is bsed on the observtion tht the popultion of ge x t prticulr time t is equl to the births tht occurred x yers go (t time t-x) plus the cohort s history of mortlity nd migrtion. Thus, the chnge in the popultion of given ge t two different times is equl to the sum of the differences in the number of persons born into the groups nd the differences in mortlity nd migrtion histories of those two birth cohorts. Those histories cn be further divided into erlier nd more recent periods. The nnex explins the methodology used to derive the results presented below. The contribution of chnges in ech demogrphic fctor to the formtion of the demogrphic bonus nd to the geing process is clerer if we seprte trends in the birth rte, mortlity nd migrtion into three periods pproximtely corresponding to the stges of demogrphic trnsition: (i) the phse of rpid demogrphic growth (up to 1969); (ii) the decline in fertility ( ); nd (iii) the period of convergence between fertility nd mortlity rtes (2-25). In tble 1, the contribution of ech fctor to the formtion of the demogrphic bonus is broken down into the three periods mentioned bove. The demogrphic bonus occurs between 26 nd 228 (figure 9). The working-ge popultion, ges 15-59, is projected to increse by 12.3 million 293

10 persons or 18.2 per cent during this period. Chnges in fertility nd mortlity ech contribute positively to growth in the number ged (with growth in births contributing 6,522,654 persons nd mortlity decline contributing 6,955,228). By contrst, interntionl migrtion is estimted to reduce the working-ge popultion by 1.2 million persons, which mounts 8.6 per cent of nturl increse (tht is, the sum of the contributions of fertility nd mortlity, 13.5 million). TABLE 1. CONTRIBUTION OF CHANGES IN DEMOGRAPHIC PHENOMENA TO THE FORMATION OF THE DEMOGRAPHIC BONUS IN MEXICO, Age Period of chnge Totl nd 6 or over Popultion Absolute chnge b Reltive chnge Totl contribution Totl Nturl increse Totl Fertility Totl Mortlity Totl Interntionl migrtion Totl Source: Estimtes nd projections of the Ntionl Council on Popultion (CONAPO). At strt of yer. b The differences from the totl contributions re due to pproximtions in the clcultion of formul (4) in the methodologicl nnex. 294

11 Figure 9. Popultion pyrmids, Mexico, 26 nd Men Women Age (yers) Popultion (millions) Source: CONAPO (22). However, if we mke distinction by period of occurrence, the picture becomes different. During the yers of rpid mortlity decline nd high nd rising fertility ( ), chnges in these two components of nturl increse contribute positively. While the contribution of mortlity continues to be positive in the following periods, the contribution of fertility turns negtive s consequence of the shrp decline in fertility rtes. Tht decline is sufficiently lrge in the initil decdes of the present century tht it outstrips the positive effect of mortlity nd migrtion in both the working nd the dependent ge groups. In short, most of the growth in the working-ge popultion during the demogrphic bonus period derives from the rpid growth tht took plce before 197, principlly owing to high fertility (9.9 million). However, mortlity decline is significnt positive force in ll three periods, but especilly during the lst 3 yers of the twentieth century declining mortlity during tht period is estimted to dd 4.5 million to the number of persons who will be of working ge during the period From 197 onwrds, the contribution of popultion dynmics hs diminished significntly. The gin originting in is little over one qurter of wht occurred in the previous seven decdes (2.8 compred to 1.1 million). After 2, demogrphic fctors hve tended to reduce rther thn increse the size of the working-ge popultion in This cn be seen more clerly in the contrsting pyrmids in figure 9, which correspond to the beginning nd end of the period in which we hve locted the demogrphic bonus. The increse in the working-ge popultion is concentrted between 29 nd 59 yers of ge, tht is, persons born between 1946 nd In the dependent popultion, the scenrio is even clerer. The reduction in the lst three decdes of the twentieth century is due to interntionl migrtion (-1 million) principlly, of older dults when they were of working ge nd lower fertility (-1.8 million), chnges tht re only prtilly offset by improvements in mortlity (1.2 million) during the sme period. On the 295

12 other hnd, the expected reduction due to trends in the first thirty yers of the twenty-first century is entirely ttributble to fertility being below the replcement level fter 26. The geing process cn be seen more clerly in terms of the overll chnge in the popultion by sex nd ge, s is shown in the superimposed ge pyrmids in figure 1 tht correspond to the beginning nd end of the projection. The geing of the popultion cn be seen from the fct tht the net loss of 12 million children nd young people under-15 yers old t mid-century is lmost mtched by gin of 12.3 million in the first 1 yers of old ge (6-69 yers). Similrly, the reduction of 6.5 million in the first 18 working yers (ge yers) is offset by n increse of 6.8 million in the following 17 yers (ge yers). Figure 1. Popultion pyrmids, Mexico, 2 nd Men Women Age (yers) Popultion (millions) Source: CONAPO (22). The geing of the Mexicn popultion hs lredy begun nd will ccelerte significntly during the present century. In 2, people ged 6 yers or over were 6.8 per cent of the totl popultion. In 25, they re expected to ccount for 28. per cent (tble 2). According to the 24 revision of the estimtes nd projections of the United Ntions Popultion Division, the proportion of the popultion ged 6 or over in the more developed regions of the world is expected to increse from 11.7 per cent in 195 to 32.4 per cent in 25. Thus, process tht hs tken century in the more developed regions (incresing the proportion by 2.6 percentge points) will tke less thn hlf tht time in Mexico (n increse of 21.1 percentge points). Fertility nd mortlity both mke lrge positive contributions to the expected growth in the number of older people between the strt of 2 nd of 251 (tble 2). The high fertility of the pst contributes over 8 per cent (18.4 million out of 22.7 million) of the totl growth ttributble to demogrphic chnges tht occurred before 197. For the popultion younger thn 6 yers, below-replcement fertility in the next 5 yers (2-25) will reduce the number ged under 6 by 18.4 million, which more thn counterblnces the increse of 15. million during the 8 yers ( ) of high nd rising fertility. 296

13 TABLE 2. CONTRIBUTION OF CHANGES IN DEMOGRAPHIC FACTORS TO POPULATION GROWTH DURING THE AGEING PROCESS IN MEXICO, Period of chnge Totl 6 or over -59 Age Popultion Absolute chnge b Reltive chnge Totl contribution Totl Nturl increse Totl Fertility Totl Mortlity Totl Interntionl migrtion Totl Source: Estimtes nd projections of the Ntionl Council on Popultion (CONAPO). At strt of yer. b The differences from the totl contributions re due to pproximtions in the clcultion of formul (4) in the methodologicl nnex. Although the overll reduction in the risk of deth is the sme (74 per cent) during the two 8- yer periods nd (clcultions not shown), the contribution of improved survivl to the growth in both ge groups is greter in the second period (6.6 million for older dults nd 11. million for persons ged under 6 yers) thn in the first (5.1 nd 2.3 million, respectively). 297

14 The contribution of interntionl migrtion might pper contrdictory. Rther thn positive, its contribution might be expected to be negtive in the future, s it ws in the twentieth century. The positive contribution is due to the fct tht, the current officil projections ssume tht the migrtion rtes to the United Sttes nd bck to Mexico tht previled in will remin unchnged throughout the projection period. As the ltter rte (return migrtion) is higher thn the former, the combined effect is reduction in the net outwrd flow. Net out-migrtion mounts to n estimted loss of 39, in 2, which is projected to be reduced to loss of 33, in 25. In totl, the projected trends in migrtion will dd 886, inhbitnts over the period, compred to the number if the totl net migrtion rte were to remin unchnged. In conclusion, the current geing process is bsed principlly on the fertility decline from the high levels of the pst. However, the reduction in mortlity nd the incidence of migrtion will be the most importnt fctors in the distnt future, prticulrly beyond 25. This cn be seen in figure 11 in which the ge pyrmid on 1 Jnury 251 is contrsted with the ge pyrmid tht would eventully result in stbility, if the demogrphic conditions nticipted for 25 were to remin unchnged. It cn be noted tht the ge structure of the popultion is expected to undergo few chnges fter the middle of the present century. At most, wht stnds out is the elimintion of the lst trce of the rpid growth of the genertions born during the second hlf of the twentieth century the pek between 45 nd 65 yers in 251. Momentum The inerti of the high demogrphic growth observed up to 197 is still present in the ge structure nd will continue to be so for decdes. This is clerly pprent in the contribution of demogrphic vribles to the potentil for growth (momentum) from 2 to 215, s cn be seen in tble 3. The combined effects of the shrp decline in mortlity nd high nd rising fertility during the period will give rise to n increse of 16.2 million, figure tht will be reduced slightly to 15.8 million s result of the popultion dynmics fter 2. The momentum resulting from fertility in the cse of the dult popultion (15.7 million t ges 3 yers or over) is equl to the expected totl growth from 2 to 215 (15.8 million). It cn be seen how the popultion growth rising from the fll in mortlity (8.6 million for ll ges) will serve only to mitigte the loss resulting from the drop in fertility (-7. million in ge group -29 yers) nd from the impct of interntionl migrtion (-1.5 million). In reltive terms, the impulse from genertions born up to 1969 will increse the popultion of Mexico by 16.2 per cent between 2 nd 215, or by n verge of 1.1 per cent per nnum during this period. Hlf of the increse is ttributble to mture dults ged between 45 nd 59 yers, whose number will increse by 8. per cent. At the sme time, the contribution of 8.5 per cent from mortlity will be nullified by the reduction from declining nd below replcement fertility (-7. per cent) nd from the mssive emigrtion of Mexicns to the United Sttes (-1.5 per cent). Thus, the expected growth for the first 15 yers of the twenty-first century in Mexico is lmost exctly equivlent to the contribution of fertility in the first 7 yers of the lst century, s if the remining popultion dynmics of the country hd never occurred. 298

15 Figure 11. Popultion pyrmid nd ssocited stble popultion, Mexico, Stble Men Women Age (yers) Popultion (millions) Source: CONAPO (22). Lbour supply Current projections for Mexico indicte tht the economiclly ctive popultion (EAP) will increse from 42.1 million in 2, to 51.1 million in 21 nd to 64. million in 23. It will rech historic mximum of 66.1 million in 242, nd will then fll to 65.2 million in 25. The increse in the lbour supply, however, will not be of the sme mgnitude throughout the time horizon of the projection but is projected to fll more steeply from 21 onwrds. During the first 15 yers of the present century, it will be necessry to crete over 8, jobs per nnum preferbly stble nd well pid while the requirements will fll t n nnul verge of lmost hlf million in the 22s nd become negtive in the 24s. The enormous increse of lmost 22 million in the lbour supply from 2 to 23 in other words, during the period of the demogrphic bonus rises both from the vrious phses of demogrphic trnsition nd from nticipted chnges in levels of prticiption in the workforce (Prtid, 24), s cn be seen in tble 4. One conspicuous fct is tht women, in terms of both demogrphic chnge nd incresed prticiption in economic ctivity, contribute significntly to the increse in the vilble workforce. As regrds men, even though the demogrphic trnsition tends to increse the EAP, the smll chnge in men s lbour force prticiption rtes before the ge of retirement nd the growing tendency to tke retirement will give rise to reduction in the EAP of 574,. 299

16 TABLE 3. CONTRIBUTION OF CHANGES IN DEMOGRAPHIC FACTORS TO POPULATION MOMENTUM IN MEXICO FROM 2 TO 215 Popultion t mid-yer Period of demogrphic chnge Contribution of demogrphic fctors Functionl ge groups Increse Fertility Mortlity Migrtion Momentum effects Totl or more Chnge s percentge of popultion in 2 Totl or more Source: Estimtes nd projections of the Ntionl Council on Popultion (CONAPO). 3

17 TABLE 4. CONTRIBUTION OF THE STAGES OF DEMOGRAPHIC TRANSITION AND OF ANTICIPATED LEVELS OF PARTICIPATION IN THE GROWTH OF THE ECONOMICALLY ACTIVE POPULATION IN MEXICO FROM 26 TO 228, BY SEX Period of chnge Totl Men Women Popultion Absolute chnge b Reltive chnge Totl contribution Totl Demogrphic chnge Joining workforce c Proportionl contribution Totl Demogrphic chnge Joining workforce c Source: Estimtes nd projections of the Ntionl Council on Popultion (CONAPO). At strt of yer. b The differences from the totl contributions re due to pproximtions in the clcultion of formul (6) in the methodologicl nnex. c Only during the period In the coming yers, there will be hevy pressure on the country s lbour mrkets. The rpid popultion growth tht occurred before 197 will led to lrge increse in the EAP between 26 nd 228, nd this expnding workforce will need to be employed productively in order to tke dvntge of the opportunity represented by the demogrphic bonus. For both sexes, the demogrphic incresing rising in period of the pro-ntlist policy mkes the lrgest contribution to the projected growth of the lbour force. However, while the figure for men is round 83.7 per cent, for women, the contribution of demogrphic chnges tking plce before 197 (3.5 million or 46.4 per cent) is similr to the contribution of the growing incorportion of women in economic ctivity (3.4 million or 44.9 per cent), s nticipted for the 23 yers during which the window of opportunity will remin open. According to the Ntionl Employment Survey (Encuest Ncionl de Empleo - ENE), in 2-23, hlf of the lbour force employed in the secondry nd tertiry sectors were in the informl sector of the economy, representing 4 per cent of the totl EAP. The precrious employment conditions chrcteristic of informl employment, nd the low productivity of such work, hinder the growth of GDP nd, ultimtely, slow down job cretion. The poor working environment reduces fmily ernings, leds more household members to enter the lbour force nd 31

18 minimizes ny possibility of svings. A limited svings cpcity not only puts fmily ssets t risk from mjor unforeseen expenses, but lso prevents the ccumultion of resources needed to cope with old ge. Together with the low percentge of workers currently contributing to socil security systems, those who do contribute to pension plns do so for too short time, with the result tht the fund so constituted is indequte for the purchse of n dequte nnuity to ensure dignified old ge. If recent ptterns of contribution were to remin unchnged in the future, those ged 15 yers some of whom contribute, while some do not, nd others hve not yet joined the workforce would spend the mjor prt of their ctive life outside socil security systems. The verge number of yers during which they would py into retirement svings systems bout 12 yers for men nd 8 for women is fr short of the minimum required (24 yers) to enble them to drw the minimum pension gurnteed by the current Mexicn Socil Security Institute (IMSS) lw, which is likely to be extended before long to the other pension schemes in the country. At 25 yers of ge, the sitution is similr, prticulrly for professionl beginning his or her ctive life fter finishing university eduction. Thus, if present contribution conditions remin unchnged, people will be poor not only during their working life but lso in retirement. If the recent chrcteristics of lbour mrkets were to continue until 25, the proportion contributing to socil security systems would begin to diminish in 218, but the number of newly retired people would sor. The number would double between 2 nd 216 nd increse by fctor of 5 by mid-century. According to economic forecsts, constnt rte of growth of GDP of 4.8 per cent from 2 to 23 would be necessry to ensure tht the number of estblished, productive nd well-pid jobs with benefits (including socil security) would include 84 per cent of the EAP in 23 (Hernández Los, 24). If tht scenrio were to occur, the number of people covered would rise rpidly, incresing more thn three-fold in only qurter of century (21-235), but, bove ll, they would represent over 9 per cent of the EAP, implying tht people would contribute to the system for long periods (lmost 3 yers for men nd over 23 yers for women). This highly optimistic scenrio would involve virtuous circle. The lbour force would be highly productive, thereby supporting high economic growth. The high contribution rtes would crete substntil reserves in pension plns, which, in turn, would fvour investment nd would generte further productive employment. At the sme time, the high level of remunertion would encourge dolescents nd young people to remin in the eduction system, with consequentil increse in humn cpitl nd rise in the productivity of lbour. Thus, the optimum utiliztion of the demogrphic bonus is merely mtter of fuelling mechnisms to ensure n nnul 4.8 per cent growth in GDP for three decdes. The demogrphic trnsition in the developing countries, such s Mexico, is occurring much more rpidly thn in more developed regions. In Mexico, the shrp fll in mortlity combined with pro-ntlist policy, which sought to meet the demnd for lbour from n expnding industril sector nd to populte the ntionl territory, fvoured high popultion growth during the twentieth century. 32

19 D. FINAL REMARKS The consequences of tht demogrphic pst re pprent tody but will be even more importnt in the next few yers, when the demogrphic bonus will offer the opportunity to promote svings nd investment to cope with rpid popultion geing. A number of public policies hve been implemented in recent yers tht my help in utilizing the demogrphic bonus, even though they were not specificlly designed to ddress the gestructure trnsition. The progrmme known s Oportuniddes (Opportunities) is prt of the struggle to combt extreme poverty. It focuses on the cretion of humn cpitl by mens of food llownces tht re grnted on the condition tht children nd dolescents remin in school. Although the progrmme hs been rted success, only in the first yers of the demogrphic bonus will it be possible to scertin whether the vilble workforce is sufficiently qulified nd whether it cn be fully utilized to generte svings nd investment. Another progrmme tht should hve positive influence on the utlitiztion of the demogrphic bonus is Arrnque Prejo en l Vid (Equl Strt in Life). It ims to offer the sme chnce of helthy survivl to ll newborns nd to reduce mternl mortlity significntly. The nticipted increses in life expectncy nd, hence, the eventul geing of the popultion, lrgely depend on the success of helth progrmmes such s Arrnque Prejo en l Vid. Although progrmmes such s Oportuniddes nd Arrnque Prejo en l Vid re short- nd medium-term in scope nd re useful tools for the utiliztion of the demogrphic bonus, the mjor chllenge is the genertion of sufficiently productive nd well-pid employment to fully utilize growing workforce stemming from the rpid increse in the working-ge popultion. Informl employment currently ccounts for lmost hlf the economiclly ctive popultion. In ddition to this problem, it will be necessry to crete sufficient employment to meet the nnul increse of over 8, new entrnts to the workforce between 2 nd 215 nd n verge of 5, during the period While the window of opportunity remins open (26-228), the EAP will increse by 16.7 million, of which 12.5 million will be due to the incresed numbers in the yer ge group. Mking use of the demogrphic bonus thus rests on the prcticl possibilities of minimizing the informl sector of the economy nd creting productive employment for new job-seekers. Only in this wy cn the country tke dvntge of the sving nd investment opportunities offered by fvourble dependency rtio. Recent economic projections for Mexico indicte tht sustined growth of 4.8 per cent per nnum will be needed to ensure tht, in 23, enough forml jobs will hve been creted to bsorb the vilble workforce. An intermedite scenrio would perhps be more likely, under which the jobs creted would bsorb between 71 nd 76 per cent of the vilble workforce. If the current stgntion of the Mexicn economy continues for 1 or 15 yers, the demogrphic bonus will become demogrphic nightmre. The window of opportunity will close without ever hving been opened nd, worst of ll, Mexico will be doomed to become n old nd poor country. 33

20 ANNEX CALCULATION OF THE CONTRIBUTION OF DEMOGRAPHIC COMPONENTS TO POPULATION CHANGE IN EACH AGE GROUP The method is bsed on n old demogrphic principle: the popultion of ge x t time t is equl to the births tht occurred t t-x plus the cohort s history of mortlity nd migrtion. Thus, the increse in the popultion of given ge t two different times is equl to the sum of the differences of births nd the mortlity nd migrtion histories of the two cohorts. Horiuchi (1988) originlly presented the result nd his formultion is reconstructed here, using some of the results of Horiuchi nd Preston (1988). Let μ(x) be the instntneous mortlity rte (force of mortlity) t ge x. It is well known tht the survivl rte t ge from birth in the cohort of the life tble is given by: l p( ) = = exp μ( x) dx l where l re the survivors t ge from l o births. Similrly, in the bsence of migrtion, for prticulr cohort born t t- the surviving proportion is: s( t, ) = exp μ( xt, + x) dx where μ(x,t) is the instntneous mortlity rte (force of mortlity) t ge x nd time t. The sign in the exponent on the right-hnd side is negtive becuse the rte is positive nd mortlity reduces the size of the cohort. In order to incorporte the effect of interntionl migrtion, we use the net instntneous migrtion rte, which is positive if there is net gin or negtive if there is net loss; thus the rte is dded to the exponent on the right-hnd side: s(, t) = exp μ( x, t + x) dx+ η( x, t + x) dx (1) Now let P(,t) be the nnul density of the popultion ged t time t nd B(t - ) be the nnul density of births t time t-; it is cler tht: Pt (, ) = Bt ( st ) (, ) Like the mortlity rte, the instntneous growth rte is derived from the nturl logrithm of the popultion, nmely, rt (, ) = l npt (, ) t { } 34

21 then: rt (, ) = ln{ Bt ( st ) (, )} (2) t = rb ( t ) μ( x, t + x) dx+ η( x, t + x) dx t t where r(,t) is the rte of popultion growth t ge t time t, r B (t ) is the rte of increse in births t time t: rb () t = l n B() t t { } nd by (1) the derivtive of the nturl logrithm s(,t) with respect to time is: ln ( η( x, t + x) dx t t { s, t) } = μ( x, t + x) dx + t If we multiply both sides of (2) for the popultion t time t, we get the bsolute increse in the popultion t ge : Pt (, ) = Ptrt (, ) (, ) (3) t = P( t,) rb ( t ) Pt (,) μ(, xt + x) dx+ Pt (,) η(, xt + x) dx t t One cn see the contribution of the chnge in the birth rte in the first term on the right-hnd side of the second eqution, the improvement in mortlity between cohorts in the second term nd the effect of net migrtion chnge in the third. The discrete version of eqution (3) is: Δ P () t = P ( t+ 1/2) r ( t ) t B P ( t+ 1/2) Δ M ( t + x) t x x= (4) + P ( t+ 1/2) Δ N ( t + x) t x x= where P (t) is the popultion ged t lst birthdy t time t, M x (t) nd N x (t) re the rtes of mortlity nd net migrtion, respectively, t ge x t lst birthdy in the yer tht begins t t, nd r B (t) is the growth rte of births: 35

22 { } r () t = ln B / B B t t 1 with B t being the number of births during the yer tht begins t t. To nlyse the contribution of chnges in demogrphic vribles nd of the beginning of employment, we consider the definition of the rte of prticiption in working life: where EAP(,t) is the nnul density of the economiclly ctive popultion (EAP) t time t. Thus, EAP(, t) At (, ) = Pt (, ) the chnge in the EAP is: EAPt (, ) = Pt (, ) At (, ) = At (, ) Pt (, ) = Pt (, ) At (, ) (5) t t t t In the first element on the fr right one cn identify the contribution of demogrphic chnge nd in the second term the prt plyed by trnsformtions on incorportion into lbour mrkets. The discrete version of eqution (5) for the yer beginning t t is: [ ] Δ EAP ( t) = A ( t+ 1/2) Δ P ( t) = P ( t+ 1/2) A ( t+ 1) A ( t) (6) t t NOTES 1 The trget ws proposed in 1995 in the context of the Ntionl Popultion Progrmme nd remins in the Ntionl Popultion Progrmme It is estimted tht the TFR fell by pproximtely.47 children between 1995 nd 2, corresponding to n nnul decrese of.9 children. Reching the popultion replcement rte in 25 will entil smller nnul reduction in the TFR from 2 onwrds. 3 The difference between totl growth nd nturl increse is the net migrtion blnce. Since the nturl increse rtes exceed those of totl growth, it follows tht the net migrtion rte is negtive. 4 This concept ws originlly proposed by Keyfitz (1971) nd refers to the number of times by which the present popultion would be multiplied when stbility ws eventully reched if the previling fertility were to fll immeditely to the replcement rte nd the ge schedule of mortlity were to remin t its current level (net reproduction rte equl to 1). The uthor finds tht the closer the current ge structure to the eventul stble ge composition, the lower the fctor by which the present popultion will multiply. Thus, the more distnt the current ge structure from stbility (i.e., the more youthful it is), the greter the ge structure s momentum. 36

23 REFERENCES Collver, Andrew (1965). Birth rtes in Ltin Americ: New estimtes of historicl trends nd fluctutions., Berkeley: University of Cliforni. CONAPO (22). Proyecciones de l poblción de México Mexico: Consejo Ncionl de Poblción. Hernández Los, Enrique (24). Desrrollo demográfico y económico de México ( ). Mexico: Consejo Ncionl de Poblción. Horiuchi, Shiro (1988). Assessing effects of mortlity reduction on popultion ging: An nlysis of the elderly femle popultion in Jpn. Pper presented t Seminr on Mortlity Trnsition in Est Asi nd South Asi, Beijing, 29 August-2 September Horiuchi, Shiro nd Smuel Preston (1988). Age-specific growth rtes: the legcy of pst popultion dynmics. Demogrphy, vol. 25, No. 3, pp Keyfitz, Nthn (1971). On the momentum of popultion growth. Demogrphy, vol. 8, No. 1, pp Prtid, Virgilio (23). Proyecciones de l poblción económicmente ctiv de México y de ls entiddes federtivs, 2-25 (Documento Metodológico). México. Prtid, Virgilio (24). Proyecciones de l poblción de México, de ls entiddes federtivs, de los municipios y locliddes, México. Pool, In (24). Of demogrphic dividends, windows of opportunity nd development: Age-structure, popultion wves nd cohort flows. Document submitted to the Seminr on Age-structurl Trnsitions: Demogrphic Bonus, But Emerging Chllenges for Popultion nd Sustinble Development, CICRED, Pris, Februry 24. Secretrí de Slud de México (24). Encuest Ncionl de Slud Reproductiv ENSAR, 23 (dtbse). United Ntions (22). Completing the fertility trnsition (ESA/P/WP.172). New York. Zvl, Mrí Eugeni (1989). Dos momentos en l trnsición demográfic. Demos, México: