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Demographics

Animation: The Rapidly Aging Western World

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From issues such as declining fertility rates to the ongoing complications resulting from China’s famous “One Child Policy”, there are many demographic challenges that the world must grapple with in the coming years.

However, one problem of particular importance – at least in places like Europe and the Americas – is a rapidly aging population. As the population shifts grayer, potential consequences include higher dependency ratios, rising healthcare costs, and shifting economies and cities.

Europe: A Prime Example

We’ve discussed Germany’s demographic cliff before, but it’s not only Germany that will be impacted by a rapidly aging population.

Europe median age

The above animation from data visualization expert Aron Strandberg shows the median age of European countries between 1960 and 2060.

Starting about a decade from now, you can see that the U.N. projects some European countries to start hitting a median age of 50 or higher. This includes countries like Spain, Italy, Portugal, and Greece, and then later Germany, Poland, Bosnia, and Croatia.

The UK, France, Ireland, Scandinavia, and former Soviet countries will be younger – but only slightly so. Median ages in these places by 2060 will be in the early to mid-forties.

The Americas

Populations in North and South America are also graying fast, though not quite at Europe’s pace.

Here’s a similar map of the Americas that highlights median age between 1960 and 2060, based on U.N. projections.

Americas median age

Chile and Brazil, in particular, are trending older. Meanwhile, Canada is not far behind with an expected median age of 45 in 2060. Interestingly, the United States is anticipated to only hit a median age of 42 by 2060, which is lower than almost all Western countries.

While this makes the U.S. look younger in comparison, the country will still experience the same type of economic burden from an aging population. In fact, it’s expected that the population of Americans older than 65 years will nearly double from 48 million to 88 million over the coming three decades.

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Demographics

An Investing Megatrend: How Demographics and Social Changes are Shaping the Future

As societies evolve, demographics and social change also evolve, reshaping the world and resulting in new investment opportunities.

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Demographic Megatrends preview

For millennia, people have found support and community through defining factors, ranging from age and race to income and education levels.

However, these characteristics are not static—and drastic demographic changes are starting to create powerful ripple effects in the 21st-century economy.

The Impact of Demographics and Social Changes

Today’s infographic from BlackRock delves into the significant impact that demographics and human rights movements have on global markets. Of the five megatrends explored in this series, demographics are predicted to have the farthest-reaching impact.

Megatrends - Demographics and Social Change

What are Demographics?

Demographics are the characteristics of populations that change over time. These include:

  • Age
  • Gender
  • Race
  • Birth and death rates
  • Education levels
  • Income levels
  • Average family size

As a result, major demographic trends offer both unique challenges and opportunities for businesses, societies, and investors.

The Biggest Shifts

What are the biggest shifts in demographics that the world faces today?

1. Aging Population

The global population is aging rapidly─as fertility rates decline worldwide, those in the 65 years and older age bracket are steadily increasing in numbers.

2. Future Workforce

As the population continues to age, fewer people are available to sustain the working population. For the first time in recorded history, the number of people in developed nations between 20 to 64 years old is expected to shrink in 2020.

3. Immigration Increase

Immigration has been steadily increasing since the turn of the 21st century. Primary migration factors range from the serious (political turmoil) to the hopeful (better job offers).

In particular, areas such as Asia and Europe see much higher movement than others, causing a strain on resources in those regions.

4. Consumer Spending

A steadily aging population is slowly shifting the purchasing power to older households. In Japan, for example, half of all current household spending comes from people over 60, compared with 13% of spending from people under 40.

How Does Social Change Play a Part?

Demographics are the characteristics of people that change over time, whereas social change is the evolution of people’s behaviours or cultural norms over time.

Strong social change movements have often been influenced by demographic changes, including:

  • Ending poverty and hunger
  • Expanding healthcare in developing nations
  • Reforming education quality and accessibility
  • Championing gender and racial equality

Examples of major human rights movements include creating stronger environmental policies and securing women’s right to vote.

Opportunities for Investors

These changes pose some exciting opportunities for investors, both now and in the near future.

Healthcare

Global healthcare spending is predicted to grow from US$7.7 trillion in 2017 to over US$10 trillion in 2022. To meet the demands of age-related illnesses, companies will need solutions that offer quality care at much lower costs—for patients and an overburdened healthcare system.

Changing Workforce

With a declining working population, adapting a workforce’s skill set may be the key to keeping economies afloat.

As automation becomes commonplace, workers will need to develop more advanced skills to stay competitive. Newer economies will need to ensure that automation supports a shrinking workforce, without restricting job and wage growth.

Education Reform

By 2100, over 50% of the world will be living in either India, China, or Africa.

Global policy leadership and sales of education goods and services will be shaped less by issues and needs in the U.S., and more by the issues and needs of Africa, South Asia, and China.

—Shannon May, CoFounder of Bridge International Academies

In the future, education and training in these growing regions will be based on skills relevant to the modern workforce and shifting global demographics.

Consumer Behaviour

Spending power will continue to migrate to older populations. Global consumer spending from those over 60 years is predicted to nearly double, from US$8 trillion in 2010 to a whopping US$15 trillion in 2020.

Investing Megatrends

Demographics and social changes are the undercurrents of many economic, cultural, and business decisions. They underpin all other megatrends and will significantly influence how the world evolves.

As demographics shift over time, we will see the priorities of economies shift as well─and these changes will continue to offer new opportunities for investors to make an impact for the future of a global society.

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Demographics

Generation Rent: How Millennials are Fueling the Rental Economy

Today’s infographic explores how the millennial generation are fueling the short-term rental industry—is it a passing fad or a shift in buyer behavior?

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It’s long been said that millennials have the power to disrupt and reshape entire industries.

Most recently, this effect has been seen in the retail landscape, where millennial spending habits are setting the tone for the market’s future.

Not only does the millennial generation demand the convenience of making instant purchases—but they can now rent almost anything they want, anytime, and anywhere.

Visualizing the Growth of the Rental Economy

Today’s infographic from Adweek takes a deeper look at the consumer goods rental economy, and the potential long-term impact of this shift in buyer behavior.

Although the current market for rentals is still in its early stages, the sheer momentum that the industry has gained in the last year is enough to threaten even the largest retailers—forcing them to reconsider their own business models.

millennial generation renting

The data for the visualization above comes from market research company Lab 42. In a survey of 500 people, they found that 94% of the U.S. population has participated in the sharing economy in one way or another.

While the sharing economy spotlight typically shines on global behemoths like Airbnb and Uber, the research used to populate this infographic focuses on renting consumer goods for a short period of time, as a sub-segment of the sharing economy.

The Renting Revolution

Offerings within the rental sector have exploded over the last decade, with furniture being the number one category that consumers rent.

According to the infographic, reasons for renting furniture include:

  • Temporary housing: 45%
  • Expensive upfront costs: 43%
  • Testing products before committing: 41%
  • Hosting events at home: 35%
  • Moving into a new home: 29%
  • Redesigning a house: 27%

Other products that consumers rent include gaming systems, clothes, tools, and technology. Female renters are more likely to rent furniture, clothes, and jewelry, while male renters are more likely to rent tools and gaming systems.

Renting goods is predominantly done on an as-needed basis. The Lab 42 report states that for clothing, 77% of respondents indicate that they either rent, or would rent for a formal event.

The End of Ownership?

Despite the common misconception that millennials are driven by emotional needs, the reasons behind why they rent consumer goods are much more pragmatic.

  • Test things before purchasing: 57%
  • Need a temporary solution: 55%
  • Need an item or a service for a short time-frame : 52%
  • Less expensive than buying: 43%
  • More convenient than buying: 42%

Further, only 6% said that they rent because they do not like owning things. This tells us that the rental economy does not indicate the end of ownership, but rather, provides a strategy for consumers to try before they buy.

Attitudes Towards Sustainability

According to the research, very few millennials choose to rent consumer goods because it is better for the environment. However, Nielsen claim that 73% of millennials are willing to pay more money for sustainable offerings—impacting both retail and rental industries.

As evidence of this, Ikea will test a range of subscription-based leasing offers in all 30 of its markets by 2020 in a bid to appeal to environmentally conscious consumers and boost its sustainability credentials. If Ikea’s evolving business model is a success, it could open the floodgates for others to follow suit.

A Promising Market

In the clothing rental space, brands like Rent the Runway pave the way, but there has also been an explosion of startups entering the market in the last year.

One example is the monthly subscription service Nuuly. The company offers consumers access to over 100 third-party brands and vintage items. Consumers can borrow up to six items a month for $88. Similarly, American Eagle’s Style Drop program rents out the latest collections for a flat monthly fee of $49.95.

As more companies incorporate short-term rental services into their offerings, more millennials will shift their behavior from buying to renting—disrupting the traditional retail business model as we know it. With that being said, the impact of millennials having it all, and owning none of it, is yet to be determined.

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