The Palestinian Central Bureau of Statistics recently published demographic forecasts for the Palestinian population in the territories by 2025, predicting a population of 7.4 million. It is a premise of demographics that, the larger any population group is, the better off it will be. This would bode ill for the Jewish population, since even now the number of Palestinian children in the Territories up to age four exceeds the number of Jewish children in Israel. Considering the economic implications of rapid population growth in all Middle Eastern countries, excepting Israel, however, those countries have abolished birth rate incentives and some, commencing from the sixties, have initiated family planning programs, i.e. birth rate reducing programs.
The Palestinians natural increase rate is one of the highest in the world, and it dictates the structure and composition of the next generation population. Obviously, a high rate of natural increase crates a young population (median age today is 16.4), increasing the number of persons being supported relative to the number of adult workers, and giving rise to a steep gradient between the different age groups. Even according to the main premise underlying the forecasts of the Palestinian Central Bureau of Statistics, whereby the natural increase rate has slightly declined, the Palestinian population will remain young, for the most part, and in 2025 the median age is expected to be only 21.4 years.
The initial economic implication is that the labor force potential, defined by the Palestinian Authority as the total population aged 15 to 65, supports a large number of young persons not earning a livelihood. Today the ratio of potential breadwinners to those economically dependent on them stands at 100:101.3, while in the Gaza Strip, the situation is worse, at 100:114. The number of actual breadwinners is, of course, far smaller, due to unemployment, the small proportion of women taking part in the labor force and schoolchildren and students not realizing their earning potential. The Palestinian Central Bureau of Statistics forecasts that in 2025 the ratio of economic dependants in the Territories to potential breadwinners will decline to 66.5:100. Thereupon, even if the earning potential of Palestinians does not increase and participation in the labour force does not change, per capita product will increase by 55%!.
A further implication of the decline of the natural increase rate is the increase of investment in physical capital and per capita human capital. Clearly, an increase of investment in per capital human capital will boost productivity, while an increase in per capita investment in physical capital will increase total means of production. The latter will raise both total per capita product and wages per worker. High natural increase also creates pressure on natural resources such as water and land. The Palestinians will probably not be over-amply endowed with either one of these resources.
These are just some of the considerations that persuaded Middle Eastern nations to put the brakes on natural increase. All that remains is to wonder when the Palestinian Authority and Israel, the only country in the region that boosts its birthrate by means of allowances, will come to understand the economic implications of a high rate of natural increase, and act accordingly.
Published by Israel's Business Arena November 24, 1999