Thursday, November 12, 2015

On how the relative youth of India will not ensure future prosperity

When I saw the title of Sandrine Rastello's Bloomberg article "India to Emerge As Winner from Asia’s Shrinking Labor Force", I initially expected some naive demographic boosterism, some argument to the effect that India's young population will ensure it of future economic triumphs. Happily, this article was one where the title does not match the subject.

By 2050, the Asia Pacific region will have nearly 50 percent of the world’s total work force, down from 62 percent today, according to Bloomberg analysis of United Nations data.

The shifting patterns will see India account for 18.8 percent of the global work force compared with 17.8 percent today, toppling China from the top spot. China will account for 13 percent, down from 20.9 percent now.

[. . .]

India's super sized labor force is often referred to as its demographic dividend, a key asset on its way to achieving economic superpower status. But there's a lot of catching up to do: its per person income is just a fifth of China's.

One obvious problem for India will be finding jobs for such a large populace. Employment data in Asia's third-largest economy is sketchy but the little we have suggests the labor market is far from vibrant.

A survey of selected companies including those in the leather, car and transportation sectors show employment growth fell to 64,000 new jobs in the first three months of the year from 117,000 in the previous quarter, and 158,000 before that. Not exactly what you would expect for an economy growing at 7 percent.

India also suffers from a skills shortage. About 5 percent of workers have formal skills training, compared with 96 percent in South Korea. Central bank Governor Raghuram Rajan called India's human capital his main medium-term concern.

This is something I've noted here before: In August 2012 I noted this in relation to the United States that might not capitalize on its demographic advantages over other high-income countries, in passing in a January 2013 comparison of high-fertility France with low-fertility Germany, and in January of this year when I compared China with Southeast Asia. Crude demographics is but a single starting point. They are not at all by themselves able to determine everything about the future. In the case of France and Germany, for instance, despite dire demographics Germany has moved notably ahead of France in the past decade. Why might China, even if it has an aging population, manage the same trick versus at least some of its potential rivals?

No comments: