Investing in the Youth Bulge

• Author: Emmanuel Y. Jimenez and Mamta Murthi
• Position: Sector Director, East Asia and Pacific Human Development, at the World Bank/Lead Economist, Europe and Central Asia, at the World Bank

With the right investments, developing countries can turn their large youth populations into a boon

Rapidly falling fertility rates in most developing countries have led to a "youth bulge"-the largest in history-that will be the next generation of workers, parents, citizens, and leaders. The number of young people aged 12-24 stands at 1.3 billion and is expected to rise to about 1.5 billion in 2035 and decline gradually thereafter (see Chart 1). This trend results from the interplay between declining fertility and what demographers call population momentum-that is, the inertia in population growth from having large child-bearing populations. Currently, the fertility decline is balanced by the still-growing numbers of people of child-bearing age. But over the next two to three decades, as the fertility decline becomes stronger and population momentum slows, the number of young people will peak and begin to drop.

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Of course, there is a huge variation across developing countries. In many middle-income countries and transition economies, the fertility transition is fairly advanced and the number of young people is actually declining (as in China and Thailand). In others, which are not as far along (for example, Brazil and Vietnam), numbers are currently swelling to a peak or a long plateau. In still others, which are even less advanced in this transition (as in India and the Philippines), the peak will be experienced in the next one to two decades. In yet others (as in Niger and Sierra Leone), the numbers are expected to grow continuously into the foreseeable future.

What does the youth bulge imply for growth and poverty reduction? How can countries minimize the risks and seize the opportunities for this cohort? This article highlights some lessons from the World Bank's upcoming World Development Report 2007 (World Bank, 2006) especially relating to investments that facilitate the transition from school to work.

Risks and opportunities

Some see the large numbers as a risk. For low-income countries, the cost of expanding access to post-primary schooling can be prohibitive. Achieving universal primary and secondary education in low-income countries would require an incremental cost of $34-69 billion a year, or about 3 percent of GDP (Cohen and Bloom, 2005). Add to that the cost of addressing HIV/AIDS-a disease to which young people are particularly prone, given youthful sexual experimentation-and noncommunicable diseases, and financing the fiscal burden, difficult at the best of times, can be daunting. In the case of HIV/AIDS, inaction could lead to levels of income by 2050 that are two-thirds 1960 levels in real terms-a "spectacular descent into backwardness," according to one estimate (Bell, Devarajan, and Gerbach, 2006).

Another concern is the risk of unemployment. Young people make up one-fourth of the working-age population but nearly half of the unemployed. Survey data from 60 developing countries show that young people spend nearly a year and a half in joblessness or intermittent work before entering stable employment-costly to individuals in terms of forgone learning. For example, in Guatemala, experience in skilled jobs increases reading comprehension and cognitive skills, which are lost to those unable to get these jobs. Unemployment also risks social unrest, which can hurt a country's climate for investment.

Yet large numbers of young people present countries with an unprecedented opportunity to deepen their human capital. Declining fertility means that countries have a larger proportion of people of working age relative to the proportion of children and elderly people, making...