Establish link between population and Economic Growth / development

Human resource makes use of other resources to produce goods and services. Neither other resources can become useful on their own nor can they use human resource. Therefore, human resource is the most crucial of all resources. Having said that, its clear that a large population can prove to be an asset as well as a liability for the economy depending upon how efficiently it is used. If due investment is done on Population it may turn into Human Capital otherwise a Liability that is difficult to sustain.

The role of people / population is twofold in economy and its development:

• As providers of factor services;
• As units of consumption.

Human Resources as Factor Services

These further include:

• Minimum Scales of Production: When we provide infrastructure, it has a fixed cost which must be distributed amongst a large population to make it economically viable. An economy like Canada can certainly grow at a higher rate with higher availability of labour. It is for this reason that these countries have lenient immigration rules.
• Demographic Transition and Savings: With the increase in population, the age composition of population also changes. It increases the labour force and decreases the number of dependent members. Therefore, savings also increase.
• Capital Formation in Agriculture: In agriculture, there is family labour that works on farm. With the increase in number of persons in the family, total labour hours will increase. It will increase agriculture human capital stock.
• Labour Force Participation: When there are more dependent members in the family, it motivates more women to work, postponement of retirement age, increasing number of child workers, and longer working hours for men all leading to increased participation of labour force.
• Trade Specialization: A labour abundant country can specialize in labour intensive industries and thereby increase its exports. Therefore, growing labour supply would enable the country to participate more in trade.
• Technological Changes: A higher population will be able to provide more options and it will increase the pace of technological progress.

A larger population can promote economic growth provided below conditions are existing:

• Existence of a variety of unutilized resources;
• Rising mobility of labour;
• Easier division of labour;
• An improvement in technology that facilitates better utilization of human resource.

Human Resources as Units of Consumption

A rising population increases current consumption and reduces the capacity to save and capital formation.

With the rising population, an economy has to import more of machinery, raw materials etc. to support their increasing population. However, in domestic economy, there will be greater demand for food, clothing and other necessities. Hence, such an economy with limited foreign exchange has to choose between imports of capital goods imports and the imports of necessities. Since both seem to be unavoidable, it chooses to bear trade deficit. If economy is not able to absorb its increasing population productively it will lead to unemployment either open or disguised. Unemployment will create its social and economic side effects. With increase in population, social overhead cost keeps increasing.

The above discussion makes it clear that a larger population is a mixed blessing. To some extent, a larger population will stimulate growth process but after a certain level it will start hampering the growth process.