week 2 demographic trends · week 2 demographic trends mauro f. guillén. ... europe, us, canada,...

ANALYZING GLOBAL TRENDS for Business and Society

Week 2 Demographic Trends

Mauro F. Guillén

Mini-Lecture 2.1

•  What is demography? – Demography is the study of human populations.

•  Why should we care about demographic trends?

Economic Importance of Demography

•  Production: –  Relative abundance of labor depresses wages: global

redistribution of production. –  Women’s participation in the labor force.

•  Consumption: –  Size of the market. –  Age structure / population ageing: demand for education,

financial services, healthcare, leisure, etc. •  Savings:

–  Age structure of the population. –  Flows of capital from higher to lower-saving countries.

Political Relevance of Demography

•  Allocation of parliamentary seats by district. •  Voting behavior:

–  Life-cycle patterns. –  Cohort effects.

•  International migration: –  Changes in the demographic makeup of a country. –  Immigrant communities tend to be concentrated in a

handful of cities. •  Nationalism:

–  Demography as integral part of nation-building. –  Xenophobic political parties and social movements

(reaction against immigration).

Impact of Demography on the Welfare State

•  In the rich countries (and some emerging economies): –  Lower birth rates. –  Higher life expectancy.

•  Difficult to reallocate resources across: –  Education. –  Healthcare. –  Old-age pensions.

•  Chronic problems with funding “pay-as-you-go” or “defined benefit” welfare programs (as opposed to “defined contribution” programs).

Geopolitical Impact of Demography

•  Population size and global power: – Development stars of the 1960s-80s: South

Korea, Taiwan, Singapore, and Hong Kong. – Development stars of the 1990s & 2000s: China,

India, and Brazil. •  Discussion question: are population size and

density both relevant from a geopolitical point of view?

What is Demography? •  The systematic, often statistical, study of

human populations, especially with reference to size and density, distribution and vital statistics.

•  Small demographic alterations can cause large transformations if trends persist for years.

•  Demographic reversals take years to occur. •  Demographic policies are hard to design,

difficult to implement, and have effects only years into the future.

Mini-Lecture 2.2

•  What’s the projected growth of the world’s population?

•  How do we calculate that?

We need to make assumptions about key magnitudes

•  Total Fertility = Children per woman. The average number of children a hypothetical cohort of women would have at the end of their reproductive period if they were subject during their whole lives to the fertility rates of a given period, and if they were not subject to mortality.

•  Life Expectancy at birth = The average number of years of life expected by a hypothetical cohort of individuals who would be subject during all their lives to the mortality rates of a given period.

Assumptions (by the UN Population Division)

•  Four different assumptions on fertility: – No change. – High. – Medium. We will use this one. – Low.

•  Mortality (or life expectancy): – Only one variant is used in the projections.

Regions by Level of Economic Development •  More developed: Europe, US, Canada,

Australia, New Zealand, Japan. •  Less developed: Africa, Asia (except

Japan), Latin America and the Caribbean, and Oceania (excluding new Zealand).

•  Least developed: 49 countries in Africa (34), Asia (9), Oceania (5), and Latin America (1). – We will exclude the least developed from the

less developed category.

Medium Fertility Projections (children per woman)

Note: A total fertility rate of 2.1 children per woman is generally considered to be necessary for population replacement.

Source: United Nations Population Division, World Population Prospects: The 2012 Revision.

Discussion Question

•  Why do demographers assume that a population needs a fertility rate of approximately 2.1 children per woman in order for inter-generational replacement to take place?

Medium Life Expectancy (in years)


World Population Projections Projections 2011-2100

Source of the data: United Nations Population Division, World Population Prospects: The 2012 Revision.

Mini-Lecture 2.3

•  Regional distribution of the population.

Regions of the World •  Africa. •  Eastern Asia: China, Japan, the two Koreas,

Mongolia. •  Southeastern Asia. •  South-Central Asia: From Iran to

Bangladesh, plus the “Stans.” •  Western Asia: From Turkey to Iraq, plus the

Caucasus and the Arabian peninsula. •  Europe (including the Russian Federation). •  Latin America and the Caribbean.

Regional Distribution of the Population (%)


Discussion Question

•  What does the demographic rise of Africa mean for global economic and geopolitical dynamics?

Immigrants (% of population)

Mauro F. Guillén. Source of the data: World Development Indicators.

Mini-Lecture 2.4

•  Age structure of the population: Age Pyramids.

United States

Germany

Source: Population Division, United Nations.

Spain

Italy


China

Russia


Brazil

India


Mexico

Indonesia


Discussion Question

•  What are the consequences of population ageing for the stock market?

Ageing and Stock Prices P/E: price/earnings. M/O: age 40–49/age 60–69. Source: Zheng Liu and Mark M. Spiegel, “Boomer Retirement: Headwinds for U.S. Equity Markets?” Federal Reserve Bank of San Francisco. Reprinted with permission from the Federal Reserve Bank of San Francisco. Economic Letter 2011-26, August 22, 2011. The opinions expressed in this article do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco, or of the Board of Governors of the Federal Reserve System. http://www.frbsf.org/economic-research/publications/economic-letter/2011/august/boomer-retirement-us-equity-markets/

Mini-Lecture 2.5

•  Growth of cities.

Urbanization

Source: United Nations Population Division, World Urbanization Prospects: The 2011 Revision.

World’s Largest Cities 1960

Source: United Nations Population Division, World Urbanization Prospects, the 2011 Revision.

Discussion Questions

•  What are the implications of the growth of cities for consumer markets?

•  And for food and water?

Mini-Lecture 2.6

•  Global cities.

Global Cities •  A city whose importance and identity

transcends the country in which it is situated.

•  The place where “the work of globalization gets done” (Saskia Sassen).

•  Crucial dimensions: economy, finance, politics, culture, diversity.

Features of Global Cities

•  Large, influential, prominent. •  Culturally and ethnically diverse. •  Culturally thriving: museums, music,

universities, schools, etc. •  Advanced infrastructure. •  Rich in business services. •  Open, friendly, safe. •  Legally and politically secure.

Drivers of Global Cities

•  Agglomeration economies. •  Growth of specialized service firms. •  Coordination of dispersed activities. •  New communication technologies.

1 Tokyo Japan 1191 2 New York USA 1133 3 Los Angeles USA 639 4 Chicago USA 460 5 Paris France 460 6 London UK 452 7 Osaka/Kobe Japan 341 8 Mexico City Mexico 315 9 Philadelphia USA 312 10 Washington DC USA 299 11 Boston USA 290 12 Dallas/Fort Worth USA 268 13 Buenos Aires Argentina 245 14 Hong Kong China 244 15 San Francisco/Oakland USA 242 16 Atlanta USA 236 17 Houston USA 235 18 Miami USA 231 19 Sao Paulo Brazil 225 20 Seoul South Korea 218 21 Toronto Canada 209 22 Detroit USA 203 23 Madrid Spain 188 24 Seattle USA 186 25 Moscow Russia 181 26 Sydney Australia 172 27 Phoenix USA 156 28 Minneapolis USA 155 29 San Diego USA 153 30 Rio de Janeiro Brazil 141 31 Barcelona Spain 140 32 Shanghai China 139 33 Melbourne Australia 135 34 Istanbul Turkey 133 35 Denver USA 130

Largest City GDPs City/Metro Area US$ bn Tokyo 1520 New York City 1210 Los Angeles 790 Seoul 774 London 731 Paris 669 Osaka/Kobe 654 Chicago 525 Moscow 520 Shanghai 517

Selected Countries US$ bn Australia 1542 Mexico 1177 Turkey 788 Holland 771 Saudi Arabia 711 Switzerland 631 Iran 548 Sweden 523 Norway 500 Poland 490

Sources of data: Brookings Institution; IMF.

Types of Global Cities

•  Truly global hubs: London and New York. •  Regional hubs: Singapore, Panama, Miami,

Dubai. •  Gateways: Hong Kong, Sydney.

Discussion Question

•  Why do cities want to host global sporting events (e.g. Olympics) when the benefits do not always exceed the costs?

Benefits •  Short term vs. long term. •  Tangible vs. intangible. •  Direct vs. indirect vs. induced.

–  Investment. –  Jobs. – Tourism. –  Infrastructure for future use. – Tax collection. – Renovation, regeneration, and revitalization. – Reputation.

Other Issues

•  Who pays for the event? •  Is there crowding out? •  Are they transformational? •  Does bidding for the Olympics bring most

of the benefits of actually hosting them?

Which paid off? •  Montreal 1976. •  Moscow 1980. •  Los Angeles 1984. •  Seoul 1988. •  Barcelona 1992. •  Atlanta 1996. •  Sydney 2000. •  Athens 2004. •  Beijing 2008. •  London 2012.

Mini-Lecture 2.7

•  Health status. •  Obesity.

• More obese/overweight than hungry people in the world: – 1 billion vs. 800 million.

Obesity

Country

Hungry

Obese Country

Hungry

Obese Males Females Males Females

Algeria … 6.4 16.2 Belgium … 14.8 10.7 Botswana 25 6.9 17.7 Denmark … 12.0 8.3 Ethiopia 41 0.2 0.0 France … 9.0 7.6 Gambia 19 0.5 3.6 Germany … 22.9 22.1 Kenya 31 0.1 2.2 Greece … 30.3 26.4 Nigeria 6 3.0 8.1 Italy … 14.4 13.7 South Africa … 7.6 36.8 Poland … 12.9 18.0 Uganda 21 0.1 1.9 Russia … 9.6 23.6 Tanzania 34 0.8 3.6 Spain … 17.3 17.3 Argentina … 37.4 37.8 Sweden … 13.3 12.4 Brazil 6 12.4 24.5 Turkey … 10.8 32.5 Canada … 25.5 25.7 UK … 23.7 26.3 Chile … 24.3 39.1 Bangladesh 27 0.2 0.2 Colombia 10 19.6 26.1 Cambodia 22 0.5 0.4 Cuba … 20.1 31.5 China 10 4.1 3.6 Guatemala 21 20.5 36.8 India 21 1.7 2.0 Haiti 57 1.3 21.1 Indonesia 13 0.2 3.9 Mexico … 30.1 41.0 Japan … 2.3 1.1 Peru 15 17.7 37.7 Nepal 16 0.3 0.3 USA … 44.2 48.3 North Korea 33 3.4 12.9 Venezuela 8 29.5 33.0 South Korea … 8.3 14.6 Afghanistan … 0.7 2.1 Lao 23 3.3 12.6 Egypt … 22.0 48.0 Thailand 16 2.6 11.1 Iran … 10.0 29.5 Malaysia … 1.7 11.0 Iraq … 8.3 19.1 Mongolia 26 14.5 36.6 Jordan … 19.6 37.9 Philippines 15 1.1 5.5 Morocco … 3.7 23.1 Singapore … 1.4 2.9 Pakistan 26 1.6 5.0 Vietnam 11 0.0 0.7 Saudi Arabia … 23.0 36.4 Australia … 28.4 29.1 Somalia … 0.6 3.4 Fiji … 10.7 37.1 Sudan 22 1.5 6.5 New Zealand … 28.9 39.9 Syria … 12.4 24.6 Palau … 35.0 59.4 UAE … 24.5 42.0 Tonga … 64.0 78.1 Tunisia … 7.7 32.6 Samoa … 42.2 60.9

Note: All figures in % of the population. Sources: Food and Agriculture Organization, and World Health Organization.

Obese Definition: BMI = [kg / m2] > 30

Discussion Questions

•  Why is obesity on the increase? – Too much cheap (and bad) food. – Changes in lifestyle. – Urbanization.

•  How is it affecting healthcare? – Healthcare spending: diabetes, cardiovascular

diseases, cancer, arthritis, etc.

•  Are other industries affected?

Mini-Lecture 2.8

•  Case study: Demographic Trends and the Clothing Industry.

Clothing Industry

•  1.4 trillion dollars in global annual sales. •  Affected by cross-cutting trends:

– E-tailing. – Urbanization. –  Increasingly demanding young people. – Population ageing. – Obesity.

Clothing and Urbanization

•  Functionality. •  Style. •  Speed: “fast fashion.”

Young People •  Young people spend a greater percentage of

income on clothes. •  The Millennials (Y-Generation):

– Confidence. – Tolerance. – Strong sense of community (local vs. global). – Narcissism (though not selfishness). – Hungry for media/technology.

•  Are these stereotypes?

Population Ageing •  60+ people account for an increasing share

of global clothing sales. •  Clothing firms spend 95% of their

advertising targeting the “under-50s.” There are some exceptions: – Chico’s “Live for the present” campaign,

featuring Diane Keaton, 65. – American Apparel’s “Advanced Basics.”

•  In response, most brands have decided to grow in emerging markets with youthful populations.

Online websites are beginning to target the aging population •  Taobao.com, China’s largest online

shopping bazaar, began targeting the over-50 in 2012.

•  By October 2013, more than 1.75 million Chinese seniors had shopped using the website. –  “Clothes account for most of my spending

online,” said Yu Min (a retired worker), explaining that malls and clothing stores are “built for her daughter’s generation.”

•  In 1985 the average U.S. woman was a size 8.

•  In 2013 the average US woman is a size 12-14.

The prevalence of obesity is changing the definition of the average clothing consumer

•  In the US, the market for clothes is worth $300 billion.

•  About 20% is accounted for by obese people.

•  Why? Is it a demand problem or a supply problem?

U.S. Clothing Market

•  Plus-size clothing (14+) accounts for less than 20% of clothing sales.

•  Many companies refuse to stock Plus Sizes or have limited inventory: –  Mike Jeffries, CEO of Abercrombie & Fitch, prevents

his stores from stocking XL or XXL sizes in women’s clothing:

•  “We go after the attractive all-American kid with a great attitude and a lot of friends. A lot of people don’t belong [in our clothes], and they can’t belong.”

–  Lululemon shelves its limited size 12 inventory in the back of the store.

Despite this increasing market segment, Plus Size is still largely a stigma in the fashion industry

Source: Business Insider, May 3, 2013.

Existing international fashion brands have slowly begun to pay attention to the obesity trend

•  In 2010, Forever 21 launched Forever 21+, plus-size fashions ranging from size 12 to 20.

•  H&M+ offers styles up to size 24, but is available for 3% of total designs.

•  Roaman’s. •  Woman Within. •  Juno Active by Junonia. •  Plus Woman. •  Making It Big.

Catering to the Overweight

Made-to-measure business services are increasingly used to attract overweight consumers •  Corneliani, an Italian suit maker, was losing

business in India… –  “The Indian belly—that is the issue, and that’s

why we have started this made-to-measure service,” explains Prem Dewan, the overseer of Corneliani’s Indian retail operations.

•  Since the slowdown in economic growth, more retailers have targeted the plus-size segment, says Abhay Gupta, CEO of New Delhi retail consulting firm Luxury Connect.

Source: Bloomberg.com, June 28, 2013.

Plus Size consumers are demanding bigger and better

•  Blogs, like GabiFresh, represent and attract the Plus-Size community: –  “If you love fashion but you’re sick of being told

to wear A-line skirts, wrap dresses, boot cut jeans, and slimming prints, this is the blog for you.”

•  Plus-size fashion is big business that can no longer be ignored in the fashion industry.

•  Seat design for adults and children.

•  Safety: airbags and seatbelts.

•  Driving assistance.

•  Fuel economy.

Another Example: Automobiles

Week 2 Suggested Reading

•  “The New Demography: Ageing, Migration, and Obesity.” Chapter 4 of Mauro F. Guillén and Emilio Ontiveros, Global Turning Points.

•  ALL READINGS ARE FREE AND AVAILABLE ONLINE.

Week 2 Test

•  I hope you have enjoyed learning about global demographic trends.

•  Now, please take the quiz on Demographic Trends. It only takes a few minutes to complete.

week 2 demographic trends · week 2 demographic trends mauro f. guillén. ... europe, us, canada,...

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