“Africa’s working-age population is set to increase from about 500 million in 2018 to 1.3 billion in 2050.”
On the cusp of a new decade, we are about to witness a regime shift in world population dynamics that will unfold over the next 30 years.
According to United Nations (UN) projections1, the world population will grow from seven to nearly ten billion by 2050. This is equivalent to an average annual growth rate of 0.8%. However, the UN estimates that population growth will slow progressively over this time period, with birth rates declining and life expectancy rising. An important outlier in population trends is Africa. Although the growth rate is beginning to slow in Africa, the UN estimates that the continent’s population will rise by 2.2% per year on average between 2017 and 2050, resulting in nearly a doubling of its population to over 4 billion by 2100.
With declining birth rates and rising life expectancy, the world population is set to continue to age. By 2050, a quarter of the population in all regions, except Africa, is expected to be over 60. By 2050, the UN projects that 35.1% of China’s population and 34.5% of Europe’s will be 60 years of age or older.
The regime shift in global demographics includes a reversal of the huge labour supply shock of the 1980s and the 2000s brought about by China and Eastern Europe’s accession to the World Trade Organisation.
China’s working-age population grew by 380 million between 1980 and 2015 (when it peaked at 1.01 billion) but is set to fall by 212 million in the next three decades. As the country ages, its dependency ratio rises as in major developed economies.
The slight decline in the working-age population globally means there will be fewer workers supporting a growing number of retirees, leading to further pressure on pension funding and healthcare costs, as well as recurring debates about labour participation and the retirement age. Most importantly for investors, as the supply of labour contracts, wage growth could pick up, pressuring inflation and real interest rates.
In sharp contrast to China, Africa’s working-age population is set to increase from about 500 million in 2018 to 1.3 billion in 2050, potentially helping to alleviate the workforce crunch in other regions. Nevertheless, a stable political environment and proper education are needed if burgeoning workforces in Africa and parts of India are to reach their full potential. Without these elements, and especially political stability, swelling numbers of unemployed youth could lead to very destructive outcomes.
Migration pressure due to poverty, wars and/or political instability in Africa, the Middle East and South America looks set to persist for the foreseeable future. Climate change is another increasingly powerful driver of migration flows, resulting in an estimated 200 million ‘climate migrants’ across the globe by 20502, driven by water scarcity and rising sea levels. Climate change could also accentuate the pressure of African emigration on Europe.
More than half of the world's population now lives in urban areas and the UN projects that this level will reach 68% by 2050, with most of this growth coming from developing countries. The rate of urbanisation in China is among the fastest of any large economy. Economically, cities have always served as engines of growth, and they account for nearly 80% of global GDP today. However, cities, particularly in the developing world, are notoriously polluted, and are responsible for 70% of global greenhouse gases. Securing sustainable solutions and services to support long-term urban development has become a key priority for policymakers in the developed and developing world alike.
In short, how the world manages to deal with these contrasting situations is a major consideration for strategic investors. While population trends point to low growth potential in many countries, the population explosion in Africa will continue to test not only barely functioning countries on that continent, but also western (mostly European) countries that may come under intense pressure from African immigrants. At the same time, although the cost-benefit analysis is tricky, immigration could help alleviate the labour shortages that many countries will increasingly face.
1 UN World Population Prospects, the 2017 Revision:
2 Estimate by the Institute for Environmental and Human Security of the United Nations University, 2015: