EconomyEditor's PickWired for destruction?

November 17, 2022
FILIPINOS in face masks visit a market in Marikina City. — PHILIPPINE STAR/ WALTER BOLLOZOS

There are some interesting developments in our demographic space in the Philippines.

Way back in 2015, Dr. Dennis S. Mapa in his commissioned study* for the United Nations Population Fund and the National Economic and Development Authority (NEDA) warned that “without government aggressive efforts to reduce the country’s total fertility rate and policies geared towards creating more jobs, the window of opportunity from the demographic transition will close quickly without us even noticing it.”

He was referring to the Philippines’ failed bid to migrate to Phase 1 of the demographic transition in 2000. The goal was to move from a high fertility, high mortality phase to a low fertility, low mortality phase and benefit from the resulting changes in the age structure of the population that could have significant impact on economic growth. This is highly conditional on the support from appropriate public policies on key infrastructure in terms of population management and labor market reforms. Otherwise, the population remains plentiful, workers are not exactly skilled and jobs are not widely available.

Phase 2 is reached when the proportion of working-age population (15-64) is more substantial than the young dependents (0-14) and the elderly (65-older). In 2000, Thailand managed to transition to this stage and maximized its potential for growth. Public spending is challenged by the need to absorb the growing working-age group and if this is overcome, Phase 2 will usher in a good growth momentum. Enhanced education, constant retraining and upskilling, switching to digital solutions should further multiply the total factor productivity.

Phase 3 is where Japan and many advanced economies find themselves in the face of a swelling population of older people. Whereas young emerging countries are hindered by the need to provide for their young population in Phase 1, the challenge to the mature economies is to ensure that their older cohort is well provided for in their retirement years. Pension and health systems need to be strengthened. Economic growth is held back because consumers normally outnumber the productive workers in the population. Increasing productivity is therefore critical.

Mapa cited several previous studies that attempted to quantify additional growth benefits when or if countries succeed in completing the demographic transition. For instance, his 2004 study with now NEDA Secretary Arsi Balisacan estimated that if the Philippines managed to transition from Phase 1 to Phase 2 from 1975 to 2000, we would have made per capita GDP of $1,200 instead of $993. Some 3.6 million Filipinos could have been lifted out of poverty.

What kind of public policies were put in place from 1975 to 2000 that failed to move us from a high fertility, high mortality to low fertility, low mortality economy? We recall the martial law government championing population management through responsible parenthood as well as establishing the then National Manpower and Youth Council (NMYC) — now the Technical Education and Skills Development Authority (TESDA) — to ensure retooling through industry boards and physical branch presence in key regions of the Philippines.

But it was an uphill battle because the economy, while growing, borrowed its way to economic growth and we failed to provide enough jobs to the swelling ranks of the labor force. While labor-intensive industries were supported, there were not enough jobs. Overseas employment became the safety valve. The Overseas Employment Development Board and the Bureau of Employment Services were established and consolidated into what became the Philippine Overseas Employment Administration, and today the Department of Migrant Workers. What was purposed to be a stop-gap measure became a permanent fixture in the labor policy of the Philippine government, then until now.

Fertility rates remained elevated partly because of some institutional objections to artificial methods of contraception, other than the natural method for spacing children. Health and economics yielded to faith-based arguments.

But our high birth rates did not prevent us from achieving 21 years of uninterrupted, positive growth of the Philippine economy from 1999 all the way to 2019, just before the pandemic of 2020. What made a lot of difference here was the long string of policy and structural reforms that liberalized the economy. New industries and business process outsourcing added more push. Given the persistently high fertility rate from 1993 to 2017, ranging from 4.8 children per woman in 1993 to 2.9 children per woman in 2017, this growth resiliency could have hardly come from demographic transition.

We can therefore argue that had we succeeded to shift, the economy could have expanded all the more, more job opportunities could have been made available to the labor force, poverty could have been more decisively reduced — provided appropriate public policy had been put in place.

Which brings us to the recent report of Dr. Mapa himself, now the national statistician and civil registrar general, showing that the total fertility rate of the Philippines declined from 2.7 children per woman in 2017 to only 1.9 children per woman in 2022. This reflects the preliminary results of the 2022 National Demographic and Health Survey (NDHS).

To appreciate this drop to less than two children per woman, we should look at the fertility rates of the top 10 countries with high fertility based on the World Bank’s 2019 data, which ranged from a low of 5.1 (Burkina Faso) to a high of 6.8 (Niger). In contrast, those with the lowest fertility rates ranged from a low of 0.9 (South Korea) to a high of 1.3 (seven countries tied at this score). This listing establishes both the link between economic growth and lower fertility rates and the impact of good public policy.

In this data set, the Philippines was listed at 74th highest out of 189 countries with a fertility rate of 2.6, not far from the NDHS survey of 2017, two years earlier than the World Bank’s, showing 2.9. Indonesia was listed at 86th with a fertility rate of 2.3; Vietnam and Malaysia, 108th and 109th with identical 2; Thailand, 160th with 1.5; and Singapore, 188th with 1.1.

Which brings us finally to the most recent warning from the International Monetary Fund, “Aging is the Real Population Bomb,” written by Harvard’s David E. Bloom and Leo M. Zucker. It’s interesting to see that the world’s fertility rate is 2.3 children per woman while for the high income, it is 1.6; upper-middle income, 1.5; lower-middle income, 2.6; and low income, 4.5. If we aim to be in the upper-middle income countries, the latest fertility rate appears just right, but the bigger question is whether public support to enhance the quality of our workers in terms of better education and constant retraining and upskilling, public health and nutrition, and access to quality jobs could be relied upon.

Bloom and Zucker noted that the world had produced the 8th billion baby on Nov. 15 — actually a Filipino baby girl, Vinice Villorente, born at the Dr. Jose Fabella Memorial Hospital at 1:29 a.m. — while raising the specter not of rapid population growth co-existing with “food shortages, rampant unemployment, depletion of natural resources, and unchecked environmental degradation,” but of population aging. While we are working out to shift to the higher phase of demographic transition by reducing our fertility rate, the two demographic and public health experts correctly observed that indeed the world’s population growth has actually slowed down in recent years. The pandemic’s impact on fertility remains uncertain even as it brought down rates of economic growth and exacerbated poverty and inequality. But one thing is certain: the age structure has changed because global life expectancy has risen sharply, from 34 years in 1913 to 72 years in 2022. Fertility has dropped between 1970 and 2020 and what we are seeing today is precisely a greater proportion of the elderly in the population.

What these transitions are saying to the policymakers is unequivocal. Preparedness is critical because a whole gamut of issues should be resolved with limited resources including health, social, and economic demand in the coming decades. Otherwise, we are looking at a “dwindling workforce straining to support burgeoning numbers of retirees, a concomitant explosion of age-related morbidity and associated healthcare costs, and a declining quality of life among older people for lack of human, financial and institutional resources.”

The Fund article concluded with the need to rewire the global approach to healthy aging. If we don’t heed the call, we might be wired to premature destruction. n

* “Demographic Sweet Spot and Dividend in the Philippines: The Window of Opportunity is Closing Fast,” October 2015

Diwa C. Guinigundo is the former deputy governor for the Monetary and Economics Sector, the Bangko Sentral ng Pilipinas (BSP). He served the BSP for 41 years. In 2001-2003, he was alternate executive director at the International Monetary Fund in Washington, DC. He is the senior pastor of the Fullness of Christ International Ministries in Mandaluyong.

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