In the year 1500, only approximately 460 million people lived on earth. Over the next 250 years, approximately 350 million people were added as the world’s population grew to just over 800 million. This represents a 1.76x increase in 250 years. The next 250 years (1750 to 2000) saw the world’s population explode to just under eight billion people. That represents an almost 10x increase. Today, the world finds itself on the precipice of yet further demographic shifts that will alter the geopolitical and investment landscape for decades to come.
July 18, 2022
Population Growth In the 20th and 21st Centuries
Between 1950 and 1970, the global population increased from 2.5 billion to 3.7 billion. This significant increase primarily resulted from the post-World War II baby boom. After 1970, global population growth slowed. This decline was not a matter of increasing deaths; rather, it was a result of population aging and decreased fertility rates including from increased contraception.
The United States Population
The United States has seen a dramatic increase in life expectancy and population over the past two centuries. In 1800, the average lifespan in the US was just 38 years. Today, it is almost 79 years. This increase is due to a number of factors, including advances in medicine and public health, improved nutrition and sanitation, and increased safety. The US population has also grown tremendously over time. In 1800, there were just 5 million people living in the country. Today, that number is over 327 million. This growth is due to both natural increases (more births than deaths) and immigration.
The US remains one of the most popular destinations for immigrants from all over the world. These trends have had a profound impact on American society. A longer lifespan means that more people are living into old age, which requires different types of support from government and social services. A larger population also means more demand for housing, food, water, education, and other resources. As our world continues to change, it will be interesting to see how these trends continue to evolve.”
Like the United States, the size of China’s 65+ cohort is increasing. Statista indicates that as of 1960, only 4% of the population was 65 or older. That same year, China’s average life expectancy was almost 44 years. In 2020, China’s average life expectancy was almost 77 years with 12% of its population aged 65+.
China has an important history of population trends, specifically regarding its one-child policy. When its government enacted the policy to decrease population growth, there were drastic economic and societal consequences. An article titled “Without one-child policy, China still might not see baby boom, gender balance”, written by Gretchen Livingston, indicated that as of 2015, there were approximately 116 boys born for every 100 girls born as a result of this policy.
Prior to China’s one-child policy, fertility rates were already declining. Data from the World Bank shows that in the 1960s, the country’s total fertility rate was almost 6 and by 1980 it had fallen to below 3. When the policy took place in 1980, the fertility rate minimally declined. As of 2013, the typical Chinese woman was expected to have 1.6 children in her lifetime (World Bank 2015).
By 2000, Chinese academics voiced concerns regarding the long-term demographic consequences of the policy. Then, in 2013, Beijing announced that couples were allowed to have two children if one parent was an only child. By 2016, the one-child policy was terminated in favor of a two-child policy. By 2020, a three-child policy was enacted. In 2021, China’s birth rates fell to the lowest level in its history since the famine-induced years in the late 1950s.
Today, life expectancy is almost 77 years old. This growth is due to a variety of factors, including a decrease in infant mortality rates and an increase in the number of women of childbearing age.
In a world of declining population growth, Africa is the stark exception. Africa has the youngest average population on earth. In 2020, only 5.6% of Africa’s population was 60 or older compared to 23.4% in North America and double-digit percentages in every other world region (United States Census 2022). However, this small (5.6%) of Africa’s 60+ population still equates to a larger number of people given the continent’s total population.
Africa’s fertility rate has decreased across the past 40 years. In 1950, Africa’s fertility rate was around 6.5. By 2022, that number decreased to just over four. Though this rate is still the highest among continents, it has decreased approximately 36% since 1950 (Macrotrends 2022).
Africa’s average lifespan is also increasing. In 1950, the average African lifespan was less than 36 years (Macrotrends 2022). By 2022, the average lifespan has jumped to almost 64 years. Increased longevity, coupled with a steadier fertility rate, are driving the continent’s unprecedented population growth.
The average woman in Africa has 5 children over her lifetime, compared to 2 for women in Europe and North America. This is partly due to cultural factors, but also because many African women lack access to contraception and other family planning services. High fertility rates are compounded by Africa’s young age structure; about 60% of Africans are under 25 years old. This “youth bulge” puts pressure on already stretched resources and creates a large pool of potential recruits for armed groups (as we’ve seen in countries like Somalia and Nigeria).
It also means that there will be an ever-increasing number of mouths to feed as the population continues to grow rapidly. Africa’s rapid population growth is not without its challenges then, but it also presents opportunities. A larger workforce can boost economic growth and help reduce poverty levels across the continent. And as more and more Africans gain access to education and health care, they will be better equipped to meet these challenges head on.
What Does The Future Hold? Projected Population Trends
Data indicates that by 2050, the number of people aged 60+ will more than double from its current levels (reaching around 2 billion). In fact, most of the expected growth by 2050 will come from developing countries. Today, the main driver of population growth is not high fertility (as in the past) but, rather, increased longevity.
In Wolfgang Fengler’s article titled “Are Africa’s children our last hope to save us from demographic decline”, we are told that the number of children globally (ages 0-14) is expected to shrink from just below 2 billion (as of June 2022) to about 1.8 billion by 2050. By 2050, Asia’s total number of children is expected to fall by 220 million. The rest of the world will also have 40 million fewer children. The only exception is Africa, which will add about 100 million children to the world population by 2050. If Africa had followed the path of the rest of the world since 2000, there would be around 250 million fewer children in the world by 2050, about a 25% decline compared to 2000.
UN projections indicate that by 2100, close to 40% of all people will be African (up from 17% today). By then, it is estimated that Europe’s share of global population will drop from 10% to below 6% while Asia’s share will plummet from 60% to 43%. The United States, in turn, will drop from 4.25% to 3%. By 2100 over a quarter of the world will be aged 65 or older.
Challenges and Opportunities
With this population shift will come challenges.
- Aging populations will likely lead to declining labor forces, lower fertility, and a higher proportion of senior citizens in a society. Global aging will reshape consumer spending. As populations age, businesses and the media tend to focus on the Millennial Generation (those aged 18-34). Every day, more and more Baby Boomers enter their senior years. They control a significant amount of wealth. Consumer decisions vary with age and in systematic ways. While collective wealth growsfor this age cohort, new spending trends will arise weakening some sectors that have historically been critical to the global economy (e.g., consumer durables, dining out, etc.). It will be critical for investors and upcoming entrepreneurs to keep aging trends in mind as spending behavior evolves.
- Declining labor-force participation implies lower economic growth.
- Aging populations force increased government spending on pension, healthcare, and social benefit programs for the elderly.
- There will also be a reallocation of government spending in favor of programs that support the elderly. This will put budgetary pressure on society as the number of workers declines relative to the number of consumers.
- Many fear that there will be less spending on education and infrastructure in order to finance the elderly.
As retirement approaches, individuals become less willing to tolerate investment risk and may begin selling their higher risk investments. With this come potential long-term headwinds for certain asset classes. Firms may also choose to adjust investments in the domestic economy if productivity levels are lower as a result of a slowdown of output and consumption growth, relative to a declining population and labor force. A smaller working population could support wages and encourage investment in automation and machinery. Increased life expectancy (with fewer children to support) also bodes well for saving rates and greater investment versus spending.
Real estate investing will be significantly impacted by pending demographic trends. As the populations age, two real estate-specific trends are expected to arise: increased urbanization and increased investment in real estate, through investment managers. KKR’s Paula Campbell Roberts believes that “the migration of older populations to the city to meet mobility, access and community needs should persist, particularly as longevity continues to improve.” There will continue to be increased demand for more modern retirement communities and senior co-living options, located in or near major cities. Despite the wealth of the elderly relative to younger populations, that wealth is not equally distributed and there will be opportunities for products that will create more affordable end-of-life experiences in urban areas. The need for affordable senior housing and senior communities will only expand.
Trends are also moving away from the traditional nursing home environment–there is a greater desire to remain independent for as long as possible and nursing homes are incredibly expensive. Multi-generational living (where one or more generations live together on the same property) has gained momentum in the United States. Reasons for this change in housing make-up include higher student loan debt, increasing housing costs, overall debt, etc. This living arrangement has been common for a long time in other cultures, but not so much for the United States. There are many cultural norms across Asia and Africa that expect younger populations to stay with and care for the elderly. This concept is less popular across America, yet it is something this nation may increasingly adopt especially as the 65+ cohort continues to expand.
Africa’s population trends present significant opportunities for the continent. As stated previously, Africa is the only continent that is expected to add children by 2050. By then, Africa will represent approximately 40% of the global population. While other regions contract, Africa is expanding. In Oliver Reynolds’ “For richer, for poorer: The economic impact of population changes”, Mr. Reynolds unpacks the implications and opportunities for Africa. He writes that this “. . . should boost African firms’ competitiveness, encourage inward investment and lead to greater economies of scale”. Additionally, Africa’s growing demographic and economic influence could increase representation in key institutions where it has historically had little authority such as the IMF, World Bank, WTO and UN. This could pave the way for changes in global economic governance that favor the continent, such as corporate tax reform or easing the requirements to complete international business. Underlying such opportunities is the premise that Africa will have jobs for its growing population. Absent jobs, the population could move from fueling economic growth to fueling social upheaval.
There are also significant educational opportunities for Africa. A decreasing fertility rate and an increasing elderly rate may spur greater investment (resources and attention), from parents or grandparents, in each child. Other nations will also deploy greater capital in Africa’s education and resources as they realize the continent’s importance and underlying opportunities in the coming decades.
As it did a few centuries ago, the world again finds itself on the precipice of significant demographic shifts. The United States and China (as well as Europe) will see shrinking population growth while Africa will expand to represent approximately 40% of the world’s population by 2100. These shifts will impact not only geopolitics, consumer spending and investment but how we, and our children, live our lives.
President, CEO and Co-Founder, 1K Africa
Co-Founder & Chairman, FLC Credit Partners & Family Legacy Capital
DISCLAIMER: The opinions and views expressed herein are solely those of the author and do not necessarily represent the view(s) of any affiliated institution or organization including without limitation 1K Africa, Family Legacy Capital Credit Management, LLC, Family Legacy Capital Management, LLC, and any investment fund, entity or vehicle managed by or affiliated or associated with any of them.