While governments and institutions try to grapple with economic uncertainty and volatility an important factor of relative certainty is often overlooked: demography. One may not know how the markets will behave, but demographic trends can provide instructive and relative certainty for the near term to deal with debt, taxes, unemployment and entitlements, to name a few. Dismissal of major demographic trends, seven of which described below, will in all likelihood result in ill-conceived policies, unsustainable programs and squandered resources.
First, at an estimated 7 billion, the world's population is growing at 1.1 percent annually, or 78 million people, half the peak level of 2.1 percent in the late 1960s. Although the world's demographic growth rate is continuing to slow due to declining birthrates, the 8 billion world population mark will likely be reached by 2025. This growth will increase the world's working age population, 15 to 64 years, by 610 million and those aged 65 years and older by 290 million, increases of 13 and 52 percent, respectively.
Second, nearly all of the world's annual demographic growth - close to 95 percent - is occurring in less developed regions. Top seven contributing nations are India, 22 percent; China, 9 percent; Nigeria, 5 percent; Pakistan, 4 percent; Indonesia, 3 percent; Brazil, 2 percent; and Ethiopia, 2 percent (see Figure 1). Due to its much higher growth, the juggernaut population of India - currently larger than all the developed regions combined - is expected to overtake China in a decade, when the Indian population is projected to reach 1.4 billion. Among more developed regions, the nation contributing most to world population growth is the United States at 3 percent, and the growth of the next six nations, including Spain, Italy, Australia, the United Kingdom, France and Canada, ranges from 0.7 to 0.5 percent.
Though nearly all of the world's demographic growth is occurring in less developed regions, 54 percent of the world's GDP is carried out by the 10 largest national economies of the more developed countries (Figure 1). Collectively, these more developed countries - led by the United States, Japan and Germany - represent 14 percent of world population, expected to decline to 11 percent by midcentury.
Third, in addition to global population growth largely taking place in less developed regions, populations are also becoming more concentrated in urban centers. Until recently, the majority of world population lived in rural areas, 61 percent, for example, in 1980. Today the proportion of people residing in urban centers is 52 percent, a figure expected to reach 60 percent by 2030.
Many of these urban centers are situated close to coastlines. Roughly a quarter billion people worldwide live along coastlines less than 5 meters above sea level. Climate change is making these urban centers more vulnerable to rises in sea-levels and other hazards such as storm surges and flooding. Countries such as Bangladesh, Vietnam and low-lying archipelagos of the Bahamas and Maldives and cities such as New York, New Orleans, Miami, Alexandria, Shanghai, Guangzhou, Kolkata, Mumbai and Osaka-Kobe are among the vulnerable areas.
Fourth, global fertility continues to decline. Today the average number of children per woman globally is 2.5 or about half the level 50 years ago. This downward trend is expected to continue, reaching 2.3 by 2025 and near replacement level of 2.1 children per woman by midcentury.
Behind such averages lie considerable demographic variations across regions. Fertility rates for most developed countries and increasing numbers of developing countries are at or below replacement, which translates into little or even negative rates of population growth. By midcentury, the populations of some three dozen countries, including China, Germany, Italy, Japan, South Korea, Poland and Russian Federation are expected to be smaller than they are today.