In the face of radical global demographic shifts.
A Coming Tsunami Of Demographic Change
Often overlooked in media coverage of climate change, terrorism and refugees, we are now facing a global demographic revolution that is both sweeping and unprecedented. Moreover, it is inevitable, save for the possibility of some kind of worldwide catastrophe.
Think back to 34 years ago–to 1982. Were you on the planet yet? There’s a better than 50% chance that were, given current estimates of the U.S. median age at 37-38. Now flash forward to 2050, an equal number of years into the future. By then, the planet’s social and marketing demographics will have completely transformed–with a direct impact on the ‘life chances’, i.e., prospects for your individual prosperity and wellbeing.
National Economies And Global Industries Will Rise And Fall
Contrary to Malthus’ famous 19th century projections of a worldwide population explosion, a very different dynamic is emerging–
- Falling fertility rates and an increasingly older workforce are slowing economic growth in Western European and other developed economies. That trend is rapidly expanding to the rest of the globe, with the exception of Africa and some undeveloped Asian countries. Case in point–this year, for the first time, the combined working-age population of the world’s advanced economies will decline.
- According to the U.N., among advanced countries, the working-age population will shrink by 26%. By contrast, it will rise by 23% for middle-income countries, led by India at 33%.
- A shrinking population means lower economic growth as demand for homes and durable consumer goods declines, while tax-based social security and corporate pensions for the elderly increase.
- Demand for medical and social services, on the other hand, will continue to rise.
- Finally, though global population will increase, it is projected to level off by mid-century.
Strategies For Slowing The Declining Workforce
One easy remedy for a shrinking labor force is to encourage workers to continue employment into their late 60s and beyond. In Japan, 22% of workers over 65 are doing so, with the U.S. at 18%, and likely to increase. This makes perfect sense because a typical 65 year old is about as healthy as a person in their late 50s was 40 years ago.
- Richer countries, not necessarily by choice, are experiencing an increase in immigration from low-income economies primarily in Africa and Asia. Clearly, well educated, skilled workers (and many of the Syrian and Iraqi immigrants, e.g., are in that category) help grow otherwise stagnant economies. Unfortunately, political opposition is high and increasing. In addition, immigration would need to rise by 800% from less developed countries to counter the decline in developed world workforce numbers, a political impossibility.
- The governments of China, Germany, Russia, Canada and others are incentivizing fertility rates above the replacement level of 2.1 with cash grants, more generous child support and, in China’s case, disbanding their long-standing one-child policy. Unfortunately, the trend towards depopulation, once established, is very difficult to reverse by such means.
- Finally, automation is a double-edged sword, both increasing workers’ productivity (and, therefore, competitiveness with African/Asian cheap labor) while contributing to a decline in demand jobs.
One positive trend–Among economically developed countries, the U.S. will remain fortunate with a working-age population expected to grow 10% by 2050. Of course, the continued importation of skilled immigrant labor is essential to maintaining that trajectory.
In a future Insights article, I’ll outline winners and losers for industries, professions, and world regions as this demographic revolution gains momentum.