IMPACT OF DEMOGRAPHIC ON BUSINESS

University Degree Business and Administrative studies

International Business Environment

M Adnan

MBA

University of Sunderland

CHOOSE ONE QUESTION , YOU ARE ASKED TO WRITE AN ESSAY-style answer of about 3000 words on the topic you have chosen, you are expected to develop your own argument for each, based on your own critical reflection, as well as reading and discussion in the workshops.

For each question, the competent answer will be concise, accurate and clearly written in your own words. It’ll put forward your individual analysis of the issues raised, rather than merely offer a descriptive account.

Assess the impact of demographic changes on the business environment

Introduction;

All countries are experience significant demographic changes. In both academic circles and the business it is widely believed that population will have important effects on business environment. This paper reviews the impact of demographic change on the world, countries and developed and developing countries.

Demography

“Demography is the study of populations, their size, composition, spatial distribution, and the interconnected causes and consequences of those changes”1 Population numbers change over time, influenced by levels of births, deaths and migration into or out of the population area. Global population levels, having grown slowly for most of human history, are now rising very fast.2

Global population growth

At present, the world's population is growing fast - though this has not always been the case.

until the 1800s the world's population grew steadily but slowly for thousands of years
in 1820 the world's population reached one billion
150 years later, in the early 1970s, the world's population reached three billion
in 1999, less than 30 years later, the population doubled to six billion
the global rate of population growth is now very fast (rising by about one billion every 15 years)

Graph shows global population growth - very slow from 500 BCE to 1500 CE, and thereafter increasing more and more rapidly. The predicted global population for 2025 is 8525 million. 2

We have entered an epoch of unmatched global demographic changes with increasing economic globalization, countless social changes, scientific and technological achievements. In fact, the unfolding and unstoppable demographic forces that are gaining momentum will be a defining feature of the world economy throughout the 21st century.

This is a preview of the whole essay

It’s become very difficult for Policy-makers to overlook the profound impact of changing demographics on economic, social, and political development. The causes and consequences of demographic transitions must enter into our complex, dynamic public policy matrix. It is well-understood that demographic changes have myriads effects on societal and economic activities and vice-versa.According to Bard, “The accelerating changes include “a shifting of the world’s wealth, an aging of the industrial nations and an emerging middle class in developing nations, all these things will impact the world’s economy and perhaps our live”

Bard referenced an economic convention sponsored by the Federal Reserve Bank of Kansas City which found that “as people in the developed economies get older, they get healthier and live longer. Providing the necessary social programs translate into real costs and a real burden to governments.”

“The demographic changes in the world and their economic impact are the reverse of what economists projected would happen 20 and 30 years ago. “There was a common notion back then that as families got wealthier, they’d be able to afford a bigger house and be able to feed more kids. The family unit would get larger and nations would have a steady stream of working-age people to contribute to the economy. This hasn’t happened. 4

The relationship between population growth and the business has long been the subject of
debate among scholars and policymakers. Thomas Malthus, in his Essay on the Principle of
Population published in 1798, argued that the rate of population growth was held in equilibrium by the pace of economic growth. If population growth was too rapid, wages would be depressed, causing famine or disease to raise mortality, and inducing marriage, and therefore
childbearing, to be postponed. Faster economic expansion and the associated increase in prosperity on the other hand would increase fertility and the population would then quickly rise to its new equilibrium. Today the theories of Malthus appear to be happening in reverse.3

As economic prosperity has risen around the world, fertility rates have fallen (and large gains in life expectancy have been made), resulting in slower population growth and aging. The gains in life expectancy that have been achieved in recent years are clearly very desirable and have improved individual welfare. A key question, however, is how ongoing demographic change will affect economic performance in the years ahead. Some argue that there is little reason to be concerned. Aging in the advanced economies has been under way for a considerable time, and has coincided with a period of strong income gains. Further, older people now lead healthier lives than at any time in the past, which allows them to continue to contribute to society well beyond the official age of retirement. Others see greater risks, including the possibility of slower economic growth, less innovation, financial market instability, and difficulties in funding overly generous public pension systems.

Indeed, such concerns are not new. Over 50 years ago, the Royal Commission on Population in the United Kingdom worried about the consequences of declining fertility and population aging on both the economy and Britain’s influence overseas (United Kingdom, 1949). The
impact of demographic change on has received less attention, but is certainly no less important, particularly given that an increasing share of the world’s population
will reside in these in the future 5

Huge demographic shifts are under way throughout the world, and their economic, political, and social impacts will be enormous. Most of the changes reflect the demographic transition from high-fertility, rural agrarian societies to low-fertility, urban industrialized societies. The more developed countries, including those in Europe and Northern America, have generally completed the transition, while less developed countries are currently in different stages. As a result, demographic changes are projected to unfold differentially across countries, reflecting variations
in the countries’ underlying demographics, particularly the timing and pace of their
fertility declines and longevity gains.

CONCLUDING REMARKS

World population trends include continued growth in the developing countries, despite reductions in fertility rates, and the general aging of the population. The world population will probably double from the present 5.2 billion people to over 10 billion some time in the next century. Paradoxically, nearly all this growth will take place in the countries that can least afford it. The developed countries are now approaching or are already below replacement rate fertility levels. Population in these countries is about 1.2 billion people and is projected to peak at about 1.4 billion in 2030. Resource commodity demands are likely to moderate in the mature markets of the developed countries

Christopher Smallwood wrote in that, "During the next few decades demographic trends will transform the economic importance of different areas of the world. American power will be vastly enhanced at the expense of Europe. In the east, India will overtake China. In our own part of the globe, the economic weight of different European countries will change markedly — with Germany, Italy and Spain shrinking in importance relative to Britain and France."

Smallwood also said that, "The conclusion is that future growth in Europe will indeed be dominated by the downturn in working population and that the picture emerging from the charts of steady decline against America is the best view of the future we have."11

that "Demographic forces are pulling America and Europe apart. If the trend goes on, it will fundamentally alter America's position in the world." "America's fertility rate is rising. Europe's is falling. America's immigration outstrips Europe's and its immigrant population is reproducing faster than native-born Americans. America's population will soon be getting younger. Europe's is ageing. Unless things change substantially, these trends will accelerate over coming decades, driving the two sides of the Atlantic farther apart. By 2040, and possibly earlier, America will overtake Europe in population and will come to look remarkably (and, in many ways, worryingly) different from the Old World." The Economist notes that "With 400m-550m rich consumers, the American market would surely be even more important to foreign companies than it is today."

References and Bibliography

Lessinger, Jack. 1987. The emerging region of opportunity. American Demographics. Vol. 9, No. 6, pp. 33-37, 66-68.

Torrey, Barbara Boyle, Kevin Kinsella, and Cynthia M. Taeuber. 1987. An Aging World. International Population Series P-78, No. 78. U.S. Dept. of Commerce,

Bureau of the Census, U.S. Government Printing Office, Washington, DC. P.85

Demography, Sunderland Notes

www.cudenver.edu/International/CIBER/Documents/Emerging

longevity1.stanford.edu/files/PREAHayutin

www.pwc.com/extweb/pwcpublications.nsf/docid/6BA5A88298D717498525714E00168198/%24File/encart57-1.pdf