Why Global Demographics Matter
- Demographic changes are having a global impact on economies and societies in the short, medium and long term.
- We consider demographics to be about more than ageing or population size. In our view, it encompasses a whole set of “people characteristics,” within which we focus on those of consumers and workers.
- Consumer and worker behavior affects national income (GDP) at a macro level and corporate profits and individual incomes at a micro level.
- Demographic forces influence the fundamentals of all asset prices, so investors should integrate an understanding of their impact into their decision-making.
Unprecedented demographic changes are under way across the world and their speed and magnitude are greater than ever before. In our view, these changes have not been adequately or appropriately assessed and therefore their impact is frequently underestimated.
Demographics are often thought to refer only to increases in life expectancy and the numbers of young versus old. In fact, demographics pertain to a much broader set of “people characteristics”. These people characteristics affect 7.55 billion people as consumers and 4.80 billion people as workers.1 A person’s age is significant, but not the sole governing characteristic when it comes to his consumption, savings and investment decisions. Education, gender, health and family background are just a few more important characteristics that have a bearing on the behavior of an individual as a consumer or a worker. Scale these up and one can see the aggregated effects on households, companies and government decision-making.
Beyond their economic impact, demographic changes are having a profound effect on the geopolitical landscape of the world, social inequality and governance, as well as the earth’s climate and environmental ecosystems. Because of this and the broad, often lasting, consequences for economies, asset classes and portfolios, we believe that demographic analysis needs to form part of investors’ decision making and that developments in demographics need to be monitored over time.
This, we believe, requires study of
- Data-driven research that demonstrates the present and future impact of demographics
- Implications of demographic trends for policymakers, financial markets and investors
This paper contains elements of both areas and aims to provide a foundation for those wishing to understand the major impacts of demographics on society and the implications for institutions.
Contact SSGA for a full copy of this report.
1UN World Population Prospects 2017 and author’s estimates