Saint Vincent College of Cabuyao

Mamatid, Cabuyao, Laguna

HAS THE PHILIPPINES UNDERGONE DEMOGRAPHIC TRANSITION? WHY OR

SUBMITTED BY:
CUYSON, RICA MARIE C. (1ST/BSBA)
ESTOLAS, NOLI (1ST/BSBA)
PEDRON, HAJIE (1ST/BSHRM)
Tue-4pm-7pm ROOM 101

THE CONTEMPORARY WORLD

EDWINA OPIÑA
Professor
 INTRODUCTION
In the last 60 years, the age structure of the population has been rapidly

changing in most countries all over the world and this phenomenon, given the right

policies in the labor market, health, governance and economy, has created a rare

window of opportunity for countries to experience rapid economic growth over a

relatively long period. The idea behind this link between population dynamics and

economic development is the demographic transition. The demographic transition is

described as a change from a situation of high fertility and high mortality to one of low

fertility. A country that enters into a demographic transition experiences sizable changes

in the age distribution of the population. The changes in the age structure are

foreseeable consequence of the demographic transition. These changes, coupled with

the right policies, affect economic growth.

Demographic Transition is the transition from high birth and death rates to lower

birth and death rates as a country or region develops from a pre-industrial to

an industrialized economic system. The demographic transition model seeks to explain

the transformation of countries from having high birth and death rates to low birth and

death rates. In developed countries, this transition began in the eighteenth century and

continues today. Less developed countries began the transition later and are still in the

midst of earlier stages of the model.

Demographic transition has three phases, with each phase having a different

impact on the economy. The first phase of the demographic transition is triggered by an

initial decline in infant mortality (death rate) but fertility (birth rate) remains high,

resulting in the swelling of the youth dependency group. This phase creates a challenge
to the economy as scarce resources are channeled to consumption rather than

investment, as demand for basic education, primary health care, and other population-

related services increases, thereby hindering economic growth.

The second phase of the demographic transition is when the proportion of

working-age population (defined as those aged 15 to 64) is larger relative to the young

dependents (0 to 14 years) and the older population (65 years and above). This is the

phase when the number of productive working age population is the highest. The policy

challenge at this stage of the demographic transition is how to absorb the growing

working agegroup, particularly those coming from the aged 15 to 24 group (the first

group to enter the labor market). If employment opportunities expand, the second phase

of the demographic transition will accelerate economic growth. The third and last phase

of the transition is when the older cohort (those aged 65 years and above) swells

relative to the total population. The growing aging population during the third phase of

the demographic transition can create a slowdown in the country’s economic growth as

the number of consumers (the older population) grows faster compared to productive

workers.
 Studies Bloom and Williamson (1997), Bloom and Canning (2001), Bloom, Canning and

Sevilla (2001) and Radelet, Sachs and Lee (1997)] that investigated the impact of the

demographic transition on economic growth have shown that demographic transition accounts

for a sizeable portion (about one-third) of the economic growth experienced by East Asia’s

economic tigers during the period 1965 to 1995. It is sad to note that unlike most of its

Southeast and East Asian neighbors, the Philippines failed to achieve a similar demographic

transition in the past decades. In all of these countries (including the Philippines), the mortality

rates broadly declined at similar pace. However, fertility rates dropped slowly in the Philippines

resulting in relatively high population growth rate for the country, compared to its neighbors in

Asia. Due to this slow reduction in the fertility rate, the country may not able to benefit fully from

the demographic dividend and the demographic window of opportunity is closing fast for the

country.

The effect of the demographic transition on income growth is referred to as the

first demographic dividend. In the course of the demographic transition, countries

experience an increasing share of the working age population relative to the total

population and this creates favorable effect on the per capita income. To measure the

impact of the demographic transition on income growth in the Philippines, Mapa and

Balisacan (2004), using cross-country data from 80 countries over the period 1975 to

2000, showed that differences in the population structure of Thailand (at that time in the

second phase of the demographic transition) and the Philippines (first phase of the

demographic transition) account for about 0.77 percentage point of forgone average

annual growth (missed first dividend) for the Philippines from 1975 to 2000. This forgone

growth accumulates to about 22 percent of the average income per person in the year

2000. This forgone growth is even more impressive when translated into monetary
values. It would have meant that rather than a per capita GDP of US$993 for the year

2000, Filipinos would have gotten US$1,210 instead. Moreover, poverty incidence would

have been reduced by about 3.6 million. Fewer Filipinos would have been counted

among the poor by the year 2000.

In addition to the commonly identified first dividend, Mason (2007) discussed

another form of dividend from the demographic transition and refers to it as the second

demographic dividend. The second demographic dividend is realized from the society’s

response to the prospect of an aging population, an outcome as the nation’s age

structure enters into the third phase of the demographic transition. The challenge faced

by societies (and governments) when there is a substantial percentage of the older

population is how to support their consumption, given a reduction in their income. There

are common approaches to this problem and these include: (a) relying on public (or

familial) transfer systems and (b) increasing saving rates and (c) accumulating greater

physical wealth or capital.

Individuals accumulate savings in their working years and this serves as a buffer

during the retirement years. While accumulation of capital can be used to deal with the

life-cycle deficit in the older ages, this capital also influences economic growth. As

Mason points out, increased saving rate in a society results in more rapid economic

growth, creating the second demographic dividend. Mason estimated that the first and

second demographic dividends account for about one-third of the yearly average per

capita growth rate of Japan from 1950 to 1980.

The demographic transition simply creates a demographic window of opportunity

that should be given the right kind of policy environment to produce a sustained period
of economic growth. The growing number of adults (particularly those aged 15 to 24)

during the second phase of the transition will be productive only when there is flexibility

in the labor market to allow expansion. Government policies play vital role to guarantee

the creation of this demographic dividend.

The study looks at the population structure of the country from 2010 to 2100,

using actual census data from the Philippine Statistics Authority (PSA) and projections

on future population from the United Nations (UN), to estimate the period when the

country will experience the demographic window of opportunity. The study will show that

at current conditions (baseline scenario), there is a high probability that the country will

entirely miss this rare opportunity of additional economic growth, over a long period of

time, due to the demographic dividend. This is primarily due to the challenges related to

the relatively high fertility rates, particularly among the poorest households, and the

relatively high unemployment rate, particularly among the youth population. The study

will then provide counterfactual conditions, from the results of the econometric models,

and simulate alternative scenarios coming from fine-tuning of certain policy handles.

The relationship between rapid population growth (or high fertility level) of a

country on its economic growth and poverty incidence have already been studied,

documented and quantified by a number of researchers all over the world. The

unquestionable results point to the same conclusion: that rapid population growth in

poor and developing countries hinders economic development, pushing the next

generation of citizens into the poverty trap. That is why many countries have responded

to this problem by initiating or expanding voluntary programs to reduce fertility rate

controversial issue to this day.

How do we accelerate the demographic transition that will provide the rare

window of opportunity for the demographic dividend? The necessary condition for a

country to speed up the demographic transition is to lower its fertility rate. Sachs (2008)

pointed out that demographic transitions, where they have occurred, have typically been

accelerated and even triggered, by proactive government policies related to the

voluntary reduction in fertility rates, particularly among poor households.

reduce fertility rate at a manageable level that is conducive to higher economic growth.

Herrin and Costello (1996) identified three possible sources of future population growth

(estimated at an average of 1.90 percent per year during the period 2000 to 2010): (a)

unwanted fertility, (b) wanted fertility and (c) population momentum. The authors’

estimates show that unwanted 13 fertility will contribute about 16 percent to the future

population growth; wanted fertility will add another 19 percent; and population

momentum will contribute the remaining 65 percent While unwanted fertility accounts for

only 16 percent of the future population growth, a government intervention, through

Republic Act No. 10354 entitled, “An Act Providing for a National Policy on Responsible

Parenthood and Reproductive Health” (popularly known as the RH Law of 2012), can

have significant impact in lowering the country’s overall fertility rate, particularly among

the poorest 20 percent of the country’s population, where the TFR number is still high.
The authors’ estimates show that unwanted 13 fertility will contribute about 16 percent

to the future population growth; wanted fertility will add another 19 percent; and

population momentum will contribute the remaining 65 percent While unwanted fertility

accounts for only 16 percent of the future population growth, a government intervention,

through Republic Act No. 10354 entitled, “An Act Providing for a National Policy on

Responsible Parenthood and Reproductive Health” (popularly known as the RH Law of

2012), can have significant impact in lowering the country’s overall fertility rate,

particularly among the poorest 20 percent of the country’s population, where the TFR

number is still high.

While there is a pressing need to identify policies that will reduce or better yet

eliminate unwanted fertility to speed up the demographic transition, it is also important

to identify other policy options that will help lower the fertility rate, targeting the effects of

wanted fertility (e.g., encouraging households to reduce family size) and the population

momentum. It should be noted that wanted fertility and population momentum contribute

an estimated 84% to our future population growth. Efforts to lower fertility through direct

government initiative (e.g. RH Law) can complement the other policy options that will

lower wanted fertility and lessen the impact of population momentum. The challenge is

to identify the drivers of income growth which, in turn, has been shown to be a major

determinant of fertility rate.

The country faces a demographic window of opportunity, a rare opportunity for

the country to benefit from its relatively young population. This demographic window of

opportunity creates the demographic dividend that can further enhance the country’s

economic growth. The country faces two major challenges to the creation of this

demographic window of opportunity, the slow reduction in fertility rate, particularly

among the poorest households, and the high unemployment and underemployment

rates among the young workers, particularly the 20 to 24 years old group. These

challenges create hindrance in exploiting this demographic gift

Important work lies ahead if the country is serious in taking advantage of the

benefits brought about by the changing age structure. Lowering the fertility rate is a

necessary condition to the creation of the demographic window of opportunity.

But while reduction in the country fertility rate is a necessary condition for the

demographic transition, harvesting the demographic dividend will require the correct

government policies, particularly in the labor market. The transition from school to the

labor force has important consequences for the human well-being and economic

growth. As shown by the data, the first to enter the labor market - the young adults -

experience challenges associated with high unemployment and low average income.

The highest demographic dividend can be achieved only when the employment

opportunities for young adults improved from the current situation.

VAdsera, A. (2003). Changing fertility rates in developed countries: The impact of labor
market institutions. Journal of Population Economics, 17, 17-43.
Alonzo, R. P., et al. (2004). Population and poverty: The real score (Discussion Paper
No. 2004-15).

Diliman, Quezon City: University of the Philippines Diliman, School of Economics.

https://www.thoughtco.com/demographic-transition-geography-1434497

https://en.wikipedia.org/wiki/Demographic_transition. 16 Sep 2018

https://www.thoughtco.com › Humanities › Geography › Population

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4116081