04 October 2012 17:06 [Source: ICIS news]
By Joe Kamalick
WASHINGTON (ICIS)--Demographics may play an increasingly crucial role in how companies make long-term plans and how governments cope with a coming sea-change in human population growth.
The world is on the verge of stunning adjustment as elderly people become a larger part of the global population, a shift that could have major impact on economies, business, taxation and trade, a leading demographer contends.
Richard Jackson, a senior fellow and programme director at the Center for Strategic and International Studies (CSIS), says that the aging of the world’s population and a decline in the proportion of working people “has profound implications for the economy and the business environment”.
He explained that in most nations of the world, people are living longer because of better health care, nutrition and general conditions, but that the real cause of the increasing proportion of elderly in the population is widespread declines in birth rates that began in the 1960s.
Among most developed nations, birth rates have fallen below the 2.0 or more births per woman necessary to maintain population levels. ?xml:namespace>
Similar declines in birth rates are being seen in developing nations as well, he said.
As a consequence, while the elderly used to make up about 3% or 4% of a nation’s population, that proportion of aging citizens has climbed to 15% in most countries and will be as high as 40% in some nations by 2050, he said.
The falling birth rate also means that many nations will see declines in their overall populations.
Perhaps the worst case will be
An equally catastrophic trend is emerging in
Demographer Kenneth Gronbach says that
As a consequence of the one-child policy, Gronbach says,
“The issue is that it will be the responsibility now of those 30 and under in
“The 30-somethings will have to do the majority of China’s production, consumption and tax paying, and when you have a 75% reduction in the group that is chiefly responsible for those activities, you’ve got a real problem,” he said.
Gronbach said that
“In the next 10 to 15 years, I think
“They will experience a labour shortage that will tighten their production capacity,” Gronbach said.
The consequnces, said
“The elderly need more services, more support, higher cost health care and pension payouts,” among other higher expenses, he said. “By 2040, the cost of caring for the
Those increasing costs will present most governments with a limited choice of options, all of them undesirable.
“Most nations do not have the fiscal flexibility and room to cover those rising costs,” he said.
To meet those higher costs, governments around the world will have to reduce spending in other parts of their national budgets, borrow more money, or raise taxes – all of which produce additional problems respectively in the loss of other government services, increasing national debts and a higher tax burden on the diminishing worker population.
If governments borrow in order to cover the costs of their aging populations, he said, that could lead to greater dependence on foreign capital.
Taking on additional national debt will of course mean higher debt service costs, but
“That sort of borrowing makes the debtor nation more vulnerable to the lender nation in terms of policy,” he said.
As populations age and shrink, he said, productivity also declines. “Productivity usually peaks in midlife, in the 40s and 50s, and then declines,”
So as a given country’s population grows older and its birth rate declines, it will become increasingly less productive and its technical advances will diminish as well.
He noted that for the 200 years since the industrial revolution, businesses have continued to grow by making and selling more goods and services to growing populations, but that paradigm is about to change.
Among other things, the higher proportion of elderly along with declines in some nations’ populations will accelerate the existing shift from manufacturing to services, he said. “Not that the manufacturing industries will shrink, just that the services industries will grow to become a larger part of the overall economy,” he added.
Aging and declining populations will lead to excess capacity in most nations, he said, which in turn could trigger price wars within and among nations and protectionist trade policies.
“Aging societies with contracting domestic markets may generate political pressure to roll back globalisation” by restricting imports to protect weakening domestic producers, he said.
And as populations age, he said, they become increasingly risk averse. That suggests,
He said the growing proportion of elderly and declining worker populations will mean long-term decline of the industrialised nations, except for the
“The negative impact of aging populations will be more profound in
“We are the only rich country with a growing population,” he said.
Brian Beaulieu, executive director at the Institute for Trend Research (ITR), says that aging and shrinking populations constitute a “mega-trend” that companies must confront if they are to survive.“If you live and work in a country whose population is growing, you and your company win,” Beaulieu said recently. “If you’re doing business in a country, such as
Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy
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