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Demographic trends and how they affect Economic Growth

The Global Monitoring report has always looked at major demographic shifts that have been shaping economic growth and development. For years, shifts in the world's demographics have always been a major aspect of general economic growth. The population problem is not a new one for many people, and definitely not one that can be taken lightly either. We live in a world where human needs are unlimited, while the resources needed to fulfill them are limited. According to different economic theories, including Kantian and Deontology, a human being aims to live a happy life. And this is why people are described as rational decision-makers.

Anything that seems to make an individual happier is chosen over anything that makes them less happy. This is the same issue with economic growth and development. The relationship between households and markets creates a perfect market environment. As such, the population plays a vital role in the general economic development. Global economic growth seems to have slowed significantly over the past few years. And at the same time, reports indicate that the global working-age participated was highest in 2012, which is also declining, perhaps due to the aging populations.

Even though population trends vary among countries and regions, it's always common to find certain factors that create a perfect environment for economic growth, and this is demographics. An increase in the working-age population is quite eminent, as it will affect the global poverty rate significantly. Many countries are affected by conflict and fragility, and they will want to create more jobs as they invest in human capital. Many factors play a role in determining and collecting demographic data, among them age, mortality rate, and birth rate. Investment in human capital is becoming a critical aspect of modern economies as they rush to take advantage of the younger population. Contrastingly, the main engines behind the global economic growth are aging fast, and many places are being faced by population shrinking. Some countries are being faced with a huge population growth crisis that they don't have proper economic growth. The countries are expected to cement economic growth by increasing productivity, mainly because of these demographic trends.

Economic studies have been using demographics are one of the main pillars of growing an economy. Demographics can be defined as simple as the measurement of people using factors like sex, unemployment rate, age, and many other factors. Demographic change is imminent, and it affects the underlying growth rate within an economy. It also extends into influencing structural productivity, living standards, savings rates, consumption, and investment. It can also impact the long-run rate of unemployment and the equilibrium interest rate. Housing market trends and the demand for financial assets are also touched by these changes, which impact the general economies. As if that is not enough, demographic trends in different countries can change the current account rates exchange rates. In order to understand any economy and see its proper growth, demographics a pivotal aspect that cannot be overlooked.

Trends in Demographics

The high mortality rate was a big issue until the 18th century. This is because the rate of mortality was the highest. However, human investment and technological advancement due to increase knowledge has changed everything. There is much advancement in medicine, public health, nutrition, and other areas that have contributed to reducing the mortality rate. But then, as countries develop more, fertility rates seem to decline as well. Life demands have forced many people in developed countries to resort to smaller families. It is easier for them to educate these fewer children, and it's easier to get quality education compared to having a larger family. Also, people live with the main aim of leading a happy life, so they have to decide based on what makes them happier. The rising opportunity cost of having children and shrinking natural resources is one of the main reasons behind lower living standards. As if that is not enough, there has been a large rise in population migration from rural to urban areas, reducing the need for large families to run farms. Changes in social norms linked to the availability of birth control have been on the rise. It was not until the Second World War II that baby boomers began getting their own children, at a time when the birth rate of generally on a downward trend. The USA's modern fertility rate is placed at 1.88 per woman, which is lower than the U.N. recommendation of 2.1 needed to keep a balance in the population. It's amazing how low this rate is compared to the fertility rate in 1900, which was over 3.

Even as these demographic changes come up, the general life expectancy in many developed economies like the USA has significantly increased, even amidst population aging. Today, many people can live up to 80 years, which is 30 years more than life expectancy in 1900. In the middle, it is 38 years old, which is close to ten years older than what was in 1970. A report by the United Nations indicates that the median age will be 42 years by 2050, following this trend. In addition, the number of older individuals above 65 years per 100 of the working-age will be more than twice what it was in the 70s. The continued aging of the population and the relatively stable fertility rates show that the global population will be continuing on a downward trend. The growth is estimated at two percent per year, as was the case between 2010 and 2015. The U.S. population is expected to steadily as international migration has increased over the years. However, it will slow from 0.8% to 0.5% by 2050.

Advanced economies are also following the same demographic transition, more than what the U.S. is currently witnessing. The process of population aging is also accelerating with time, as reported by Bloom and Canning (Bloom and Canning 2004).  In Japan, for instance, there has been a constant shrinking trend in the population over a period of the past half a century. It has the highest rate of older to working across the globe, and the medium age is set at 47 years old. Other regions like Europe are also characterized by a low fertility rate, which is below the replacement rate. China's rate of work-age population has gone down over the years since the 80s, partly due to the policy that parents should only have one child. As such, China population is aging rapidly, with the median now at 37 years.

As the population rate decreases in the developed economies, low and middle-income countries are at an earlier phase of this transition. Young and faster-growing population and a rise in labor force rates have been witnessed across the regions. One good example is India, where the median age is at 27 years. According to the U.N. reports, India's population will soon be more than China's, which is currently among the most populated countries. African countries have the highest fertility rates. Many of them are still witnessing a steady growth in their population, mostly because of low-level economic development and an abundance of resources.

Global demographic trends have been shaping the world and will continue doing so for many more years. They are shaping the future of many economies, which is why it's important to study them. Everything that happens in the world population largely affects how the economy is expected to grow. And there are many policies applied in making these changes worth considering in an economy. Every aspect of global development is affected, and hence, there is every need to look at the subject of demographic trends under the problem of population. To understand this, we will be looking at three trends that are most likely to shape the world.

Global migration

As stated above, a lot of the USA population growth is due to international migrations. And the rapid increase in the rate of global migration is generally one of the biggest results of demographic changes. Millions of people are not living where they were born because they found a chance to go and live in another country. Today, the number has risen three times more than what it was in 1960. The migrant population is ranked at number five in the global population. It became a normal thing for people to live far from the countries of birth. It is just as we see with rural to urban migration where people move to cities in search of better opportunities. For instance, in the USA, a large part of the population comprises immigrants, which is why there are so many mixed races here.

The European refugee crisis has received a lot of attention but is not the largest part of the world's migration problem. People relocate for different reasons. Some do so because of violence as they seek shelter in places that seem safer. However, the biggest driver for migration is an opportunity. America, for instance, is seen by many as the land of opportunities, which is why many of them want to go there. Many experts say that migrants are not necessarily fleeing a situation in particular. They can move in search of something better and set their homes in the new land. People shift from low- and mid-income nations to higher-income nations. The rate of migration has been on the high increase over the past few years, although it's not as much as it was several years ago. Thanks to global development goals initiated by global organizations like the U.N., some of the mid-level economies are really stepping up, even as the lower-end nations also grow.

The changing Middle Class

Social class, which mostly leads to social discrimination, has always been one of the issues that fuel economic growth. The middle class is between the lower and high-class societies. On a global scale, a middle class is an economy that is still developing. It was only in the Western world that these classes existed, but now it has shifted to the global arena where more than three billion people are in the mid-class category. Two billion of these are in developing economies like Indonesia, the Philippines, and Thailand. The global middle class is today found mostly in the most dynamic economy globally. This transition is being fueled by better education and technological advancement, which is an important part of the growing society.

A geographical shift follows the changes. Most people in the Middle class have moved to the cities due to higher income in these areas. As such, urbanization has become a major cause of economic growth. A majority of people in developed and developing countries are living in cities more than those in rural areas. This has left fewer people to take care of the farms. Most countries are witnessing a decline in the fertility rate as a result of these changes. Iran is said to have witnessed the sharpest decline. The family continues to be large in Africa, even though more women are entering the workforce, and there is a real middle class.

World faith

Africa is considered to have the highest share of the world population, and it will continue holding this position. Reports from experts indicate that 40 percent of the world population could African by the year 2100. Space has become scarcer across the world as more Africans are leaving their continent in search of better opportunities. And they do this; they will travel with their churches and religious practices, which will affect the whole world by spreading the faith. Countries with large families are more devout to Christianity than those without. It is estimated that Christianity will be a religion of African, carried to the diaspora.


Globalization is a good thing as it brings about diversity. And as the world accepts such changes, the population's problem will remain at the center of economic studies as it influences growth. There is no doubt that the global economy is changingDemographic trends, and it can be seen through the trends in demographics. 

Author: James Hamilton

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