The New Population Bomb

In the January/February 2010 issue of Foreign Affairs there is an interesting essay by Jack Gladstone entitled "The New Population Bomb: The four megatrends that will change the world".

In his essay, Mr. Gladstone notes the following four major demographic trends that will affect the 21st Century:

1) the decrease in the relative demographic weight of developed countries;
2) the aging and declining workforce in these developed countries;
3) the substantial increase in population in the poorest, youngest and most heavily Muslim countries; and
4) the continued urbanization of the world with the majority of the population living in urban areas.

The decline and aging of the population in developed countries is relatively well documented. I actually wrote about this a few years ago as part of an Executive Brief on Organization & People Performance. This decline in the labour force of developed countries is a major challenge facing policy makers as it will impact the potential economic growth of countries such as Canada. A number of countries will actually see a decline in their respective populations, a decline in the active workforce and a significant increase in their seniors population. The percentage of the global GDP derived from Western countries is already on the decline from 68% in 1950 to 47% in 2003. Projections are for a rapid decline to 30% by 2050. The implication of this trend is that the overwhelming majority of GDP growth will occur outside of Western countries over the next 40 years. This is in line with the significant increase in the middle class in developing countries - they will be the engines of economic growth with their increased demand for goods and services. According to a World Bank report, the middle class will increase by 200% in developing countries between 2005 and 2030 (to 1.2 Billion people).

Western countries are also facing an aging population and a decline in the number of working age citizens. The most extreme example cited in this essay is South Korea that will see its overall population decline by 9% by 2050, its working age population drop by 36% over the same period and the number of citizens 60 years of age and older increase by 150%! This same trend is evident in other developed countries, though the swings are not as extreme. Even China will be feeling the impact of these trends as the average age of its population continues to creep up.

The impact on economic growth will be significant. The Canadian Parliamentary Budget Officer will be releasing a report in the next two weeks that will look at the impact of demographics on economic growth and the labour force over the next 50 - 75 years. That should be an interesting read, especially for Canadian policy makers.

I will tackle the two other megatrends in an upcoming blog post, as this one is long enough!