Implications of Low Life Expectancy In Developing Countries

Implications of low life expectancy:

(1) Loss of productive workforce. In many parts of African continent, life expectancy continued to decrease. For instance, Botswana people use to live up to 60 years old but now averaging at 40 years of age. South Africa which is relatively the performer among African peers, does not do so well too. Life expectancy has come down from 60 years of age to 45 years. If fundamental problems, e.g. lack of access to healthcare, acute shortage of clean water, AIDS awareness campaign are not properly address, this will stem human crisis capital

It is worth to note, that 40-45 years of age are the time where workers are most productive. Even while the sick workers are still in workforce, their medical condition means more days will be taken off as sick leave which means loss of output. From macroeconomic argument, this shows a fall in the productive capacity of the economy. AS curve shifts left. Firms will not want to hire new workers considering those new one are very young e.g. 15 years old & inexperience. Also they need to consider costs of retraining

(2) Crisis in education sector. This is like a ‘multiplier’ argument. Loss of productive workforce covers every sector including education. Some countries like Zimbabwe have witnessed the collapse in primary & secondary school enrolment rate. With even much lesser teachers in school, the problems are waiting to be worsened. Soon the students to teachers ratio increase, classrooms overcrowded, they may institute law that limits number of students per school etc. As such, illiteracy rate will widespread. These people will not know how to operate machineries, understanding complex instructions, or even perform simple primary arithmetic

(3) Loss of tax revenue. There is already very little incentive for private enterprise to operate in the ‘dying’ Africa both local & international. As such corporation tax will not be much. Now, the picture is worsened with bulk of workforce that is relatively young. Young workforce generally earns lower income than those older workers. Secondly, low life expectancy may tend to reduce the existing base of workforce. These 2 factors contribute to lower income tax

(4) Foreign investors lost interest. Productivity of workforce is one of the major considerations by multinationals when deciding whether to invest in a country or not. Of course there are other factors such as political landscape, potential market, ease of obtaining natural resources etc. Why productivity?

Productive workforce can work better & faster resulting in lowering per unit cost of labour. The primary reason for MNCs mainly from US, UK & Eurozone looking for market outside their country is because they would like to avoid legal compliance which actually increases their LRAC (long run average costs). Also, many developing countries excluding SSA, literacy rate is rising & yet they are willing to work at meager wages

(5) High dependency ratio. As parents die in young age, they will probably leave behind their kin under the care of nearest relatives. This will actually increase the dependency ratio. In short, the ratio of youngs (0-15 years) to the working population will increase. These people may have to face opportunity cost of loss income as lesser time is spent on working & more time in watching the kids. This probably explains best why it is so difficult to break the vicious cycle of poverty

(6) Forced to work at young age. Some whose parents have died & without relatives will be forced to work at young age, when in fact they should spend their time in school. Normally most of them will be absorbed into farming. Wages paid could be far below the market as rich landlords may want to exploit them due to their situation. Sadly, this young generation will also enter into the cycle of poverty

(7) Government spending more on healthcare. For government there is an opportunity cost too. To address the problem of low life expectancy, necessary it means more hospitals must be built, surgery equipments must be upgraded, more doctors & nurses must be trained or brought in from outside etc. The result is not instantaneous & it may take decades. Meantime, as more finances are drained to healthcare sector, other sectors such as education, transportation & communication may be victim of ignorance

(8) Worsening international debt. To fulfill other development projects, the African governments will refer to IMF & World Bank for financial aid. This directly means greater burden of debt which include debt servicing. Major South American economies like Argentina & Mexico had once collapsed due to this. Other than that, they are also subjected to SAP (Structural Adjustment Program) which is ill-suit to local economy. Among measures are like, fiscal austerity, interest rates raised to strengthen currency, privatisation, & deregulation of banking & international trade. Some economists argued that this is the modern way of colonisation by world superpowers