The Global Baby Bust
ScenarioYour RoleKey PlayersAssignment
Most people think that the world faces an overpopulation problem. But Phillip Longman argues otherwise in his book The Empty Cradle. He warns instead of a global baby bust. World population growth has fallen 40 percent since the late 1960s. The human population is expected to peak at nine billion by 2070, and many countries will see their population shrink long before that. Japan will have 49 retirees per 100 workers as early as 2005.
Falling birthrates mainly account for these declines. Several factors contribute to the falling birthrates. Around the world, more women are entering the workforce, and young people delay raising a family in order to attain the higher levels of education needed to compete in a global marketplace. However, a major reason for falling birthrates is the high cost of raising a middle-class child in an industrialized country---a cost estimated at more than $200,000 (exclusive of college tuition) in the United States.
As developing countries become more industrialized and urban, they too face a high cost of raising children. In Mexico, where fertility rates have declined precipitously, the population is aging five times faster than it is in the United States. By 2050, Algeria could well see its average age increase from 21.7 years to 40 years. One of the greatest declines in population growth is occurring in China, where government policy has long supported one child per family. It predicted that 60 percent of China's population could be over 60 years old by midcentury.
A nation may experience a "demographic dividend" when birthrates first fall. More working-age citizens support fewer children, freeing up money for consumption and investment. Many attribute the recent boom markets in Asia, such as China and South Korea, to this demographic dividend. However, as population growth continues to slow, the nation faces the problem of supporting older populations. For example, by 2040, Germany's public spending on pensions will exceed 15 percent of the GNP, and Italy's working population is expected to plunge to 41 percent by 2050. On a more positive note, a decline in terrorism is associated with an aging populations. Longman points to the fact that Europe's Red Guard, a terrorist organization active in the 1970s, is now defunct.
Is immigration the answer for industrialized countries? To sustain its current ratio of workers to retirees over time, the United States would need to absorb almost 11 million immigrants a year. Such an influx would require building the equivalent of another New York City every ten months. By 2050, 73 percent of the U.S. population would be immigrants or descendants of immigrants who arrived since 1995. However, before this occurs, a potential political backlash against immigrants could materialize. Supply is a problem also.
Puerto Rico---once a major source of immigration to the United States---no longer provides a net flow of immigrants to the United States despite its lower standard of living and free access to the United States. In addition, the United States would have to compete with Europe for immigrants from the developing world. In fact, to sustain its current age structure, even South Korea would have to bring over six million immigrants by 2050.
When I was in college, the world feared overpopulation. What a change in one generation: Now we are going to run out of people! And as we do, populations are aging across the world. This is not just a problem for developed countries. It is a major threat to the future well-being of developing countries as well. What can be done to manage this?
I, too, am concerned about our aging population. Yet, what will be the impact on discretionary income needed to purchase certain consumer products? It looks like nations will need to spend more on supporting their elderly (tax increases?). Older consumers may see their pensions reduced. Younger consumers might need to save more for their own old-age.
C'mon! You are both worrying too much. Nations will use innovation to deal with the population crisis. If the world addresses this problem now, it will be able to begin innovative solutions in order to manage demographical population trends. The key is not to wait until the last minute in order to properly manage this situation.
Prepare a written response to the questions following the You Decide assignment. The length of this case study should be 3 pages, double spaced. Spell-check your work before turning it in and remember to submit your assignment to the Dropbox. The written assignment should address the following.
1. What are the implications of the global baby bust for marketers of consumer goods?
2. What are the implications of the global baby bust for marketers who sell to governments?
3. Why do you think entrepreneurship in a nation declines as its population ages? How could this impact global marketing?
4. How does the global baby bust affect the relative attractiveness of different national markets?