Demographic profile of Latin America needs policies for development, indicates panel

Silvia Giorguli: "What happens in Latin American labor markets points to what lies ahead"

Latin American countries are experiencing the so-called demographic dividend, a situation in which the number of individuals under 15 years of age has grown, allowing the expansion of the economically active population, which may result in conditions for greater economic development.

However, "the demographic dividend is not automatic; it depends on labor market conditions, jobs that allow individual and social development, productivity, investment and also macroeconomic conditions," warned sociologist and demographer Silvia Elena Giorguli Saucedo, president of El Colegio de México (COLMEX.)

She stated this during the panel Demographic Dividend in Latin America, held on June 13. The event has also featured presentations by demographer Bernadette Waldvogel, from the State System of Data Analysis Foundation (SEADE,) and economist Otaviano Canuto, a member of the World Bank's Board of Executive Directors, who participated via Skype from his office in Washington.

It has been the second activity of the agreement signed between USP and COLMEX in December 2017, which has the IEA and USP's International Cooperation Office (AUCANI) as protagonists. On the day before, June 12, the Mexican researcher gave the conference Migration and Education. Both events have been supported by the Consulate General of Mexico in São Paulo.

Uncertainties

Giorguli has recalled what happened in Asian countries, "where there has been a good synergy between demographic changes and economic growth," and presented doubts about the Latin American process: "Will the region take advantage of the dividend or not? How to anticipate the financial needs and health care for a larger elderly population?"

According to her, Latin America has already reached its maximum population and the number of young people has also reached its peak, making the perspective of the rate of dependence in the next decade to be the lowest of the region in all its history. "With the end of growth in the number of young people, inequality in access to education is easier to solve. This will also increase the economically active population by 2030/2040."

Creating the synergy between the dividend and economic growth depends on how the population's economic participation will take place, she said. "Mexico is bad in that regard. One of the options is to encourage the insertion of women into the labor market and this has to do with promoting education, good living conditions, family-work relationships, flexible working hours and shared domestic responsibilities." For Giorguli, a "gender dividend" may reflect better conditions for the country than the demographic dividend itself in 2050.

She has explained that Latin America has a very peculiar behavior in relation to the occurrence of the dividend. "Uruguay has made the transition first, Mexico is on average in the region and Guatemala is in last, but in a more intense process than the other two. By 2030, the three countries will have a similar demographic profile." One of the Mexican problems is that part of the dividend goes to the United States. "Now the migration has decreased and we can take advantage of it."

Giorguli has commented that there are other factors that may interfere with the good use of the dividend, such as the universalization and improvement of education, but believes that the most important factor is the profile of the labor market in Latin America, characterized by the high level of informality and turnover in work stations. "What is happening in the labor markets today shows what is ahead."

State of São Paulo

In contrast to Giorguli's presentation on the demographic transition in Latin American countries, especially in Mexico, Waldvogel has presented studies on the perspectives of the demographic dynamics of the state of São Paulo by 2050, produced by the Demographic Group of the SEADE Foundation.

According to her, the foundation has statistical data produced since the end of the 19th century, when the Office of Statistics and State Archives was created. "We have received copies of all the birth and death certificates of São Paulo. From the data that have been available since the 1940s, we have been disaggregating the information that allow us to verify the vegetative balance [births minus deaths] and the migratory balance [immigrants minus emigrants]."

Bernadette Waldvogel: "We are also in demographic dividend; we need to observe what society needs to do to benefit from it"

Waldvogel has said that the highest rates of population growth in São Paulo occurred in the 60s, 70s and 80s, "a period in which immigration had more weight." After the 1980s, the growth rate has dropped, reaching only 12% in the last decade." The current rate is only due to the vegetative balance, which has also been decreasing because of the drop in the number of births and the increase in mortality. "The decrease occurs in all administrative regions of the state."

As for the São Paulo fertility rate, which is now 1.5 per woman (less than the replacement rate), the drop was pronounced since 1970, when it was 4.2, but in a discontinuous way, with periods of small increase. In terms of life expectancy, the increase was also relevant in the state, with a nine-year increase, currently being 73 years for men and 79 years for women, according to the foundation's data.

According to Waldvogel, there was a sharp drop in infant mortality between 1975 and 2016, currently being of 10.7 deaths per thousand live births. Sanitation, and the decrease in parasitic infections and respiratory diseases have contributed to this, she explained. "In the beginning, the decline was mostly pronounced among postnatal cases [after four weeks to one year of age] and then there was an increase among neonates [first four weeks of life]." However, 30% of deaths occur in the first week of life. "Neonatal deaths indicate that health actions need to be taken."

The researchers' projections indicate that the state's population is expected to increase to 48 million by 2040, and then begin to decline as the number of deaths will outstrip births, with the population pyramid becoming increasingly narrow. By 2050, the fertility rate will be 1.5, with a life expectancy of 79.1 for men and 84.2 for women. The average age of the adult population will be 44 years.

According to Waldvogel, the number of individuals under the age of 15 has been declining since 2000 and will return to what it was in the 1970s. The population over 65 is expected to outgrow the under-15 in the next decade. The population between 15 and 64 is expected to grow and decline in the 2040s. This will make the 65 plus population reach its plateau before 2100.

She has said that the under-15 dependent population of São Paulo reached its peak in 2015, so "we are in the middle of the demographic dividend. It is time to observe what society needs to do to benefit from it." Having reached the universalization of education, "it is necessary to improve its quality and the moment is important for society to look at it to prepare for the future."

Asked by Giorguli if poor fertility in the state of São Paulo is a problem or an opportunity, Waldvogel replied that "it is positive if it is used to reduce the problems, because it reduces pressures, especially in early childhood education, besides being able to solve problems as even though infant mortality is low, there are still many neonatal deaths."

Waldvogel has asked Giorguli about the fact that the Mexican population still has not reduced population growth and the fertility rate is still not so low. Giorguli has explained that the current fertility rate is 2.2 and that "there are problems that come from the past," with inequalities between rural and urban rates, and between indigenous and non-indigenous, as well as teenage pregnancy, which has increased over the last seven years.

Retirement and health

Based on a study on the demographic dividend in Latin America published by the World Bank two years ago, Canuto has addressed the fiscal implications of demographic changes in the region. The process of rapid aging of the population of Latin American countries exerts two pressures in the fiscal sphere according to him: the growth of the expenses with the health system and the cost of the pensions of the public sector.

He sees the fact that pensions are predefined and social security contributions are below international trends in most countries of the region as distortions. "In terms of retirement age, countries are in line with the international reality, except Brazil." Even countries with predefined contributions, replacement rates are below what would be socially acceptable, putting pressure on the system."

Canuto has said that the Brazilian total pension spending already equals a percentage of the gross domestic product (GDP) similar to or higher than the percentages of the Scandinavian countries or Japan. "We spend the same as those who have, proportionally, twice the population over 65. Our system is very generous with privileged groups who are not old enough to retire. There are accumulations of pensions of various origins, including death, and other benefits."

For him, it is natural for retirement to be lower than the reference income, "because some expenses cease to exist for the retiree, such as transportation and care for dependents." In the average of OECD (Organisation for Economic Co-operation and Development) countries, the ratio of retirement to active salary is 53%, but in Brazil it is 93%, according to the economist.

In the case of the health system, he has said that spending is high compared to that of other emerging countries, but at the same time "pension and health care coverage is still limited, reflecting the low participation of women in labor force and the country's trademark: informality."

"Latin America must promote participation in the labor force, especially of women, and implement policies to reduce informal work."

Countries such as Chile and Mexico, which have predefined contributions and low replacement rates, will need to raise contributions to the social security system, he said. "It is also important to reduce the benefits in countries with very high rates of income, such as Venezuela, Ecuador and Paraguay."

He has pointed out that most Latin American countries would benefit from gradual increases in the retirement age - in parallel with the increase in life expectancy - accompanied by increased contributions, "especially in the acute cases of Nicaragua, Costa Rica, Honduras and Guatemala."

Giorguli has pointed out to Canuto that Latin America is very diversified in terms of social security contributions and access to public services. "Argentina and Uruguay have the most universalized services, while sectors in Brazil, Mexico and other countries have less access."

He has acknowledged that this diversity will require differentiated patterns of reform. "The agenda should focus on the adjustment of pensions and contributions according to the circumstances of each country. The challenge is the universalization of access to public services."

Still on Canuto's presentation, Waldvogel has also emphasized the importance of the formalization of labor market for the maintenance of the social security system, and has raised two impacts of the demographic dividend: lower pressure in children's hospitals and lower pressure on care for the elderly, which "tends to be more time-consuming and more expensive."

For Canuto, the dividend is potentially positive, but if it is not well used it can turn into a demographic liability. "In Brazil, half of the dividend is already behind us and we are not using it in the best way possible. If the quality of education was better, the youngest active population would be having a leap in productivity."

Photos: Leonor Calasans/IEA-USP