Small City Dreaming: Where to Look for the Demographic Dividend

Much ink has been spilled on forecasting, measuring and realizing the “demographic dividend”—the economic bonus that supposedly awaits emerging economies as the ratio of working-age adults to dependents climbs toward a peak. Lately, policy makers and commentators have questioned whether the “dividend” could turn into a “disaster,” as countries struggle to create enough productive jobs for their ballooning youth populations.

But despite all the hope and anxiety it generates, research has focused less on the geography of the demographic dividend. Where are these young people who seek productive work? Where can their economic potential be fulfilled? Where do youth aspiring for economic mobility move in search of more opportunity?

Based on a multi-year research project by the JustJobs Network and the Centre for Policy Research, we find that the demographic dividend in the Global South’s two largest democracies—India and Indonesia—actually lies in spaces that have been overlooked: a diverse collection of non-metropolitan urban places. Small towns, secondary and tertiary cities, “rurban” settlements, and corridors of urban transformation are on the front lines of the opportunity and challenge presented by the youth bulge.

Why? Consider three different reasons.

First, small cities host a major share of non-farm jobs. About a quarter of Indian youth and almost 40 percent of Indonesian youth employed off the farm are living in non-metropolitan urban areas. Populations in such places are growing fast, too. For example, 85 percent of future urban growth in Indonesia is predicted to occur in urban areas whose 2010 populations were less than 750,000 people.

Second, rural-urban migrants are increasingly choosing small cities. Recent data from 2010-2015 show that young people in Indonesia are more likely to leave than come to the urban core of a metropolitan area, while small cities are swelling with new migrants from rural areas, many moving for education.  In India, twice as many young migrants move to small cities as compared to million-plus cities.

And third, a lot of the youth who could power the demographic dividend live in villages that are gradually becoming urban towns. New small cities are popping up all over the map in both countries, as rural areas witness growing density and non-agricultural activity.

Small cities are places of upward mobility for many youth in India and Indonesia—presenting opportunities to climb the economic ladder and often raising fewer barriers to entry than big cities. But like the broader story of demographic transition, small cities present both opportunity and challenge, the possibility of dividend or disaster. Many young people in places like Kupang, Indonesia and Kishangarh, Rajasthan—two of the cities we investigated—find themselves stuck in precarious, low-wage jobs. They are better off than their parents, but not on their way to the middle class.

Through our research, we sought to understand why young people move to small cities, what kinds of employment they find, and how their experiences depend on things like gender, caste and education. We also wanted to figure out what policies could harness the social and economic potential that lies in urban settings beyond the megacities. This is the first in a series of blogs that report what we found.

We look forward to telling you more about the cities we explored—places that lie at the center of India and Indonesia’s economic development, even as they are relegated to the margins of the policy discourse on jobs, migration and urbanization.

For more on this project visit smallcitydreaming.org