Demographic and social change by Norbert Winkeljohann

Demographic and social change by Norbert Winkeljohann,
PwC Germany senior partner

Within the next minute the global population will rise by 145. By 2025, we’ll have added another billion people to reach about 8 billion, with the over-65s the fastest-growing group. But there will be sharp regional variations: Africa’s population is projected to double by 2050, while Europe’s is expected to shrink.

While these demographic changes bring risks for businesses that fail to respond adequately, they also bring big opportunities for forward-looking organisations. We’re finding that our clients are targeting two core sources of growth: the consumption power of growing population segments; and the innovative potential of a diverse workforce. For example, Nigeria’s population should exceed America’s by 2045. And with women in the G7 countries already controlling two thirds of the household budget, the wage gap with men narrowing, and an estimated 865 million women set to enter the economic mainstream in the coming decade, women’s purchasing power will continue to rise.

Another opportunity is global mobility. The number of people being assigned by their employers to roles outside their home country has increased by 25% over the past decade – and we project a further 50% rise by 2020. Put simply, people are planning to move, so there’s an opportunity for companies to make their employment offers more attractive.

Across all these opportunities, the common thread is the move to a more diverse world. And there’s growing evidence that workplace diversity is linked to improved performance by businesses and economies. Innovative companies are already tapping into rising workforce diversity – and it’s a resource that’s set to become ever richer.

However, alongside the opportunities, demographic change also brings challenges. The absolute increase in global population is not in itself the biggest demographic challenge facing us all. Instead, it’s the combination of rising life expectancy and – in some parts of the world – declining birth rates, a combination that will drive dependency ratios upwards. In 2050, the average age in Japan is set to be 53, against 21 in Nigeria.

Whichever side of this divide they sit, countries have to respond quickly. Europe, Asia and Latin America will need more women and elderly people in their workforces, together with higher immigration. Africa’s younger population offers a demographic dividend – but only given the right policy responses. And the timeframe is tight. France took a century to double the share of over-60s in its workforce from 7% to 14%. China, India and Brazil face doing it within three decades.

In regions with ageing populations, such as Europe, a further challenge is soaring healthcare costs related to chronic diseases and caring for the elderly. According to the EU, 30% to 40% of healthcare expenses are already being spent on people aged 65 or above. As the share of this group in the overall population continues to rise, the costs of caring for them will also increase – putting social and healthcare systems under intensifying pressure.