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Economic uncertainties, breakthroughs in agricultural and medical sciences,
and government decisions on social insurance programs, healthcare
issues, and immigration policies will all affect global population
growth and migration patterns. As these variables interact, the outcomes
are truly uncertain. Below are three possible scenarios that could play
out between now and 2015
Restless Masses
Under the first scenario, restless masses, the global population surges,
mostly in developing countries. Government promises on improved
social insurance programs fail to fully materialize. Fertility rates climb as
families insure themselves against economic uncertainties by relying on
additional children to bring in extra income and to care for parents and
grandparents in their old age. Millions of young people migrate from
the countryside to the cities in pursuit of a better standard of living. Yet,
in the poorest countries, there are not enough jobs to meet this surging
demand, and urban centers become a breeding ground for widespread
discontent, especially among restless young men. Africa, the Middle
East, and Central Asia occasionally witness localized explosions of social
and political unrest.
In developed countries, pension and healthcare programs are under
serious strain: Older workers exit the workforce en masse as the costs of
social programs skyrocket and retirement funds underperform. Yet, governments
of Western countries decide to implement highly restrictive
immigration policies, as other pressures such as the threat of terrorism
and discontent with job losses to foreign workers in preceding years
linger. As a result, migrants from developing countries who are flocking
to advanced economies for higher wages find the door shut in their faces.
Immigration Queue
Under the second scenario, immigration queue, world population growth
continues along a similar trajectory as today. In advanced economies
such as Italy and Japan, the economic burden of supporting the elderly
falls heavily on an ever-shrinking pool of workers. Those who expected
to retire at 60 or 65 can now expect to work well into their 70s, while
receiving limited pension and healthcare funds. Women may be encouraged
through government-sponsored incentive programs to have more
children to maintain stable population sizes.
In addition, governments of advanced economies may open national
borders to more immigrants to offset their shrinking workforces. The
United States, Canada, and Australia continue to be among the most
popular destinations, since they are countries with a long history of
immigration and offer more accommodating cultures. Immigration programs focus on attracting individuals with important skills and advanced
education, permitting only a small number of immigrants with unique
technical expertise to relocate to advanced economies. Other jobs will be
outsourced to skilled workers abroad.
Corporations in advanced countries engage in a war for global talent
as they fight for the limited pool of high-skilled, high-wage workers.
At the same time, higher wages in advanced economies draw unskilled,
low-wage workers from developing countries. The inflow of immigrants
helps moderate wage pressures at the lower end of the income
scale. Large numbers of poor, young, unskilled populations throughout
Africa, Latin America, and developing Asia seek menial labor in North
America, Europe, Australasia, and Northeast Asia.
Global Talent Flow
In the third scenario, global talent flow, population growth slows globally.
As economic conditions improve and family planning programs become
more widespread, fertility rates decline rapidly in developing countries.
Among the advanced economies and China, dropping fertility rates and
rising life expectancies have swelled the ranks of senior citizens. Some
countries experience declines in their total workforce, which add to the
fiscal burdens associated with supporting their aging societies. As seniors
gain political clout through lobbying groups and pensioners’ parties, most
governments are compelled to expand their already generous medical coverage
for retirees. Pension funds dominate equity markets, and up the
pressure on traded companies to emphasize immediate dividends over
long-term investment, which in turn impedes innovation and growth.
As the ratio of workers to retirees continues to shrink, countries
increasingly utilize previously untapped demographic groups—such as
women and younger people—to enter the workforce. Moreover, to
make up for the labor shortage, industrialized countries have no choice
but to open their doors to substantial levels of immigration from all
regions of the world. Immigration programs expand for all categories of
labor, placing special emphasis on recruiting workers with advanced
degrees and rare skills. With open labor markets, skilled professionals
migrate to major emerging markets such as China, Korea, and Malaysia,
where new metropolitan areas expand to accommodate economic
growth and absorb the new skilled migrants.
At the same time, higher wages in advanced economies draw
unskilled, low-wage workers from developing countries, since industrialized
countries view immigration as a force for moderating wage pressures
at the lower end of the income scale. The billions of dollars of
wages that migrants send back to their families at home provides a crucial
lifeline for developing countries that have not yet found their place
in the global economy.
Another Paradox
Demography is destiny—yet that destiny is still very much a work in
progress. Which scenario will win out? It depends on multiple, intertwining
dynamics, whose timing and likelihood may elude even the most skilled
demographers. Demography reveals yet another paradox in our “world out
of balance”—namely, that the drivers of the global business environment
are not inherently good or bad. It’s all a matter of perspective.
For instance, nobody would dispute that the advances in medical technology
during the last half-century have been a positive development. Yet
the longer lifespans that have resulted from those medical breakthroughs
have yielded a negative impact through the global aging crisis.
Similarly, changing demographic
trends offer unique opportunities to businesses that can anticipate these
developments. For example, lower fertility rates and smaller families
translate into more disposable income for women. While rapid urbanization
will challenge developing countries, sprawling megacities offer
a prepackaged infrastructure for marketing and selling products and
services to those living at the bottom of the income pyramid.
Successful corporations will understand that they operate in a world
shaped by these trends, and that they have a critical stake in the outcomes.
Those that recognize the impact of external trends may be less
vulnerable to strategic surprises. More than that, corporations that
capitalize on the ebb and flow of the demographic tide will find themselves
ahead of the game as they compete for human capital and consumers
worldwide.
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