Many look at global population growth as a given to greater consumption... and looking at the chart below of total global population set to hit 7.8 billion by 2020, one might be forgiven for this viewpoint. However, the reality, when one looks into the numbers, is that growth in global consumption has ended, as I recently detailed, Investing for the "Long Run"? You May Want to Consider This. This article explains why this population growth will no longer equate to economic or consumptive growth.
0 to 64 year old Global Population
The 0 to 64 year old global population is about 7 billion persons, as of 2018. The chart below shows the distribution and changing size of that population from 1950 through 2050 by high income (black line: $12,000+ income per capita including the US/Canada, most of Europe, Japan, Australia/NZ, etc.), upper middle (yellow line: $12,000 to $4,000 per capita income including China, Russia, Brazil, Turkey, Mexico, Thailand, Columbia, etc.), lower middle (red line: $4,000 to $1,000 per capita income including India, Indonesia, Pakistan, Bangladesh, Ukraine, Philippines, Egypt, etc.), and low income nations (blue line: less than $1,000 in per capita income including most of sub-Saharan Africa, Afghanistan, Haiti, etc.). The simple takeaway should be that the 0 to 64 year old populations among the high and upper middle income countries have ceased growing and will now be shrinking, indefinitely. All 0-64 year old population growth from now forward will be among the lower middle and low income nations of the world. So what?
Income by Age of Head of Household
Why the focus on 0 to 64 year old populations? Average income and expenditures vary greatly by the age of the head of household. As one might expect, income and expenditures start low, rise through peak earnings years (45 to 54 years old), and then recede in later life (earnings more than halved and expenditures roughly halved by the time the head of household is 75 years old). So when I show that all population growth is among the 65+ year old population in the high income nations and will soon be the same among the upper middle income nations... this really matters.
Gross National Income Groupings
But first, putting the four groups' relative income and per capita income in perspective (using World Bank Atlas method, detailed HERE). The chart below shows the gross national income, by the same groupings. The high income nations represent 64% of global income and the upper middle income nations another 27% while the lower middle and low income nations represent less than 9%, combined. Not coincidentally, these breakdowns of global income, per group, line up very closely with the percentage of global energy consumed (and more broadly, global commodity consumption) by each group.
And looking at income per capita of the same groupings in the chart below (again using World Bank Atlas method). Relative to the average per capita income of high income nations, the average income in the upper middle nations is 20% of that in the high income nations, lower middle nations earn just 5% relative to the average high income per capita, and residents of low income nations earn less than 2%. This is to say, to simply maintain current global economic activity, for the decline of every one 0 to 64 year old person in the high income nations, it takes the growth of 20 persons in the lower middle nations or growth of 50 persons in the low income nations!!! But then add in the imminent large scale declines among the upper middle income nations, and the bottom falls out.
Since all the global 0 to 64 year old population growth is among the lower middle and low income nations of the world, a closer look at their situation is merited. In short, it ain't good. After rocketing higher from 2002 until 2014, the situation is really deteriorating as the growth of the high and upper middle breaks down... without the growing wealthier markets to export to or in need of greater capacity in low cost countries, the engine is stalling in the poorer nations of the world.
Total Energy Consumption, by Group
Thanks to the EIA, we can see the total primary energy consumption by each income group (including coal, oil, natural gas, renewables, etc.). The peak and secular decline underway among the high income nations very much mirrors the changing under 65 year old population. Likewise, the upper middle income nations energy consumption has stalled, just as one might expect, based on the like stall in their under 65yr/old population. The secular downturn in energy consumption among the upper middle income nations is imminent. These slowdowns are sending shivers across the lower middle and low income nations of the world, that absent the wealthier nations growth, are likewise stalling.
65-74 year old and 75+ year old Populations
Below, a focus on the population of high income countries that are growing... the 65+ year old segment. By 2035, the 65-74 year old population essentially peaks and begins to decline leaving all population growth solely among the 75+ year olds... the segment with the lowest earnings and spending habits (not to mention taking large withdrawals from unfunded liabilities alongside massively underfunded pensions).
Below, the upper middle income countries, and the 65-74 year old population peaks in 2040, and then all growth is solely among the 75+ year olds.
Gross National Income, Inclusive of Demographic Shift by Head of Household
Putting it all together. The chart below shows global gross national income (using the World Bank Atlas method), with the contribution from each grouping of nations. However, I take the historic and current income per capita of each grouping and multiply by 110% among the 0 to 64 year old population, multiply by 70% among the 65-74 year olds, and by 50% among the 75+ year olds. Historically, the chart matches almost 1:1. However, looking forward, the outcome is that the shrinking numbers of 0 to 64 year olds in the high and upper middle income nations essentially offset the rising numbers in 65+ year olds and broad rising numbers among the lower middle and low income nations. In a world premised on perpetual growth, the best case scenario is essentially a stalemate.
For those curious to see the individual groupings... high income nations below.