Abstract
Alcoa, the Aluminum Company of America, has been in business in its namesake town, Alcoa, TN, since 1913. Today, the mills produce enough aluminum sheets every minute to make 75,000 beverage cans. An article in the Knoxville News Sentinel, by Michael Silence on July 1, 2007, reports that within the next five years, nearly half of the site’s over 1,600 workers will reach retirement age. Nearby, the Tennessee Valley Authority is not in much better shape – about 30% of its workforce will reach retirement age over the next five years.

This aging pattern is much the same for many other heavy industries in the U.S. Aging physical plants and foreign competition forced change on America’s industries in the 1970s and 1980s. From 1979 through 1999 the Alcoa plant did not hire a single new employee. Rather, they brought back already trained workers who had been laid off as plants downsized and modernized. A lack of investment over time in training new workers, combined with the rapid aging of the U.S. population, is now starting to put incredible stress on the labor market.

Alcoa is not unique within Tennessee in facing these problems now. Neither is Tennessee unique within the U.S., nor the U.S. in the developed world. Many localities throughout the world, countless industries, and entire countries are faced with aging labor forces and many, if not most, will find dealing with it incredibly difficult.

Managing aging populations is a pervasive modern problem. In the 18th century in the U.S., only about 2% of the population lived to the age of 65. Today, the life expectancy of the average person born anywhere in the world is over 67 years (78+ in the U.S.). Aging populations pose a variety of problems:

• By 2050 persons over the age of 65 will outnumber persons under the age of 20...

  Social – Today’s older persons are healthier, more active, and better off economically than any generation to come before them. By 2050, persons over the age of 65 will outnumber persons under the age of 20 for the first time in global history. Global cultures will be the cultures of older people and not of younger ones.
• Political – Today’s older persons are more active politically than any generation to come before. In many countries, a high share of younger people will be immigrants who cannot vote, swinging political power to the elderly.
• Economic – Recent estimates suggest that one-third of the value of total U.S. gross domestic product will go to health care by 2050, most of that to older persons. And the same data suggest that the U.S. is in a much better position than most other countries in the developed world.

For marketers of consumer goods, the challenges posed by aging populations are many and varied:

• Many CPG companies still have portfolios of products aligned to large families with children. As this segment of the population slows in growth, will those portfolios be able to meet ambitious corporate growth targets?
• Meeting the unique needs of older persons today and in the near future will require new thinking and product innovation. Research suggests that this new generation of older persons will lead active lives for much longer than earlier generations.
• Today’s post-WWII generations are the first to grow up in full-blown consumer societies. They want and expect the marketplace to meet and exceed their needs and have shown ample willingness to vote with their feet when those needs are not met.
• Marketers will need solid research to understand aging consumers who, compared to earlier generations, are:
  • more educated and more affluent;
  • more politically aware, and more willing and able to stay active;
  • in better health and living longer

The progression to an aging population generally follows this pattern:

• Stage 1 - Advances in the availability of nutrition and medical care, either through new discoveries or the rollout of existing treatments to previously unserved populations, cause the mortality rate to fall. Although most of a population, across all ages, benefits from a drop in mortality, usually it is children who benefit the most. As the mortality rate falls, population growth accelerates and the proportion of children increases.
• Stage 2 - Higher survival rates for children, particularly when coupled with an expanding economy, tend to lead to drops in fertility. Parents can have fewer children and still meet what they see as ideal family sizes, since more of their children will survive. Sustained reductions in fertility slow population growth and eventually reduce the number of births and the proportion of children in the population, beginning the aging process.
• Stage 3 – If the mortality and fertility reductions continue, they reinforce the aging process, leading to further declines in the number of children, and then to declines in the number of young adults, and finally to sharp declines in the number of adults of working age. Increases in longevity accelerate the growth of the proportion of older persons.

The net effect of all this is that the age distribution of a population begins to get older, to skew more and more strongly toward older people. This is the situation of the world today. Not all countries are at the same stage in the process, but all – or nearly all – are on the path to aging.

Stage One Countries
Stage One countries are characterized by very young populations and rapid population growth - the median age throughout Africa today is around 19. Over the next few years, many of these countries will begin to develop a very advantageous population age distribution – many persons in the productive age ranges (i.e., the working years between 18 and 65), with fewer children and few older adults to support. Given the aging populations in much of the more developed world and the depressed economies and uncertain political situations in many African and Middle Eastern countries, we can expect large numbers of young adults to attempt to emigrate.

Fertility rates throughout much of Africa have already begun to come down, from 6.7 children per woman in the early 1970s to a level around 4.7 today. We expect fertility rates to continue to decline over the next several decades. This, combined with increases in life expectancy, which is up to around 53 years today (expected to rise to around 66 years by 2050), puts many African countries at the beginnings of the population aging process.

Particularly in sub-Saharan Africa, the impact of HIV and AIDS will be felt for some time to come. The main impact demographically will be to remove a large share of younger adults from the population, particularly from countries like South Africa. South Africa and others hit hard by the HIV/AIDS pandemic will continue to be younger for much longer than most of the other African countries.

Stage Two Countries
Today, Stage Two countries are characterized by slowing population growth and a very advantageous population age distribution with a high share of the population in the prime working years. These countries stand to prosper over the next several decades, with large labor forces ready to be put to work. The modern practices of off-shoring will be a boon to these countries, providing them with jobs without the need to develop a manufacturing infrastructure, further bolstering local economies. In much the same way that many less-developed countries have leaped over the wired stage in telephone service delivery (opting instead for less expensive wireless technologies), some sectors of these countries may be able to step over manufacturing and directly into high-tech/service economies.

Within this group, there are some big differences. China and India dominate this segment, with 36% of the total population of the world today. This share will fall to around 33% by 2050, with much of that decline coming from China. India should continue to grow strongly over the next several decades while its young population is aging and having children. India alone will account for nearly 20% of the world population increase between now and 2050. China will account for only a little over 3%. The U.S. should grow more in absolute numbers over the next 43 years than China despite being less than 25% of its size today. China’s continuing pursuit of slow population growth through legislated family sizes has made for substantial alterations in the demographic structure of the Chinese society.

Assuming local economies and governments can take advantage of their demographic windfalls over the next several decades to drive economic growth, China, India, and other Stage Two countries will provide substantial opportunity for consumer products. At the same time, both of these giant countries will also provide a steady stream of emigrants seeking opportunity in the more developed countries.

Stage Three Countries
Stage Three countries are by and large characterized by low or even negative population growth and rapidly aging populations. Many are entering uncertain economic times, as large proportions of the labor force begin to retire. Stage Three countries will be hard pressed to maintain current standards of living as larger and larger shares of GDP are diverted to the living costs and medical needs of their older citizens. How well these countries do in the mid-term and long-term will depend on how well they are able to attract and integrate immigrants from Stage One and Stage Two countries with labor surpluses.

Beyond Japan, which is off the charts in terms of population aging, many of the oldest and soon to be oldest countries in the world can be found in Eastern and Western Europe (see Table 1). Without substantial shifts in the number of immigrants allowed into these countries (shifts which are both politically and socially difficult), many countries in Europe will actually lose population in absolute numbers over the next several decades.

Japan, which has a population of 127,967,000 today, is expected to lose some 25 million people by 2050. While many of the more developed nations have already begun to
bolster their aging populations by bringing in international immigrants, this continues to be difficult for Japan. By 2050, persons over the age of 80 will outnumber persons under the age of 14 in Japan by a ratio of 1.4 to 1.

The U.S. is by and large the sole exception among the Stage Three more developed countries in that it is growing at a healthy margin. Much of that growth is either from new immigrants entering the country or from the first and second generation children of immigrants who came in during the last 15 years (see CI Issue 2, Population Churn – Part I). The ten largest countries in Western Europe have nearly 360 million people today compared with around 306 million in the U.S. However, by 2050, Western Europe will only add around 5.3 million new people (most of those coming from the U.K.) while the U.S. is projected to increase by nearly 97 million – adding more than 18 times the number of persons as Western Europe.

Population churn and immigration
The number of international immigrants stayed steady or dropped in the world between 1960 and 1980. Those numbers, however, exploded in the 1980s with increased levels of international mobility and with the breakup of the former USSR, Yugoslavia, and Czechoslovakia. Since then, immigration rates have continued to rise, spurred by rapidly growing populations in less and least developed nations and growing labor shortages in the more developed world. These trends have concentrated international immigrants in the developed countries. In 1960, nearly 60% of all international migrants lived in the less-developed nations, but by 2005, less than 40% did.

As fertility rates drop throughout the world – from 4.5 children per woman between 1970 and 1975 to 2.6 today, to expected levels around 2.0 in 2050 – less and less of the population growth within Stage Three countries will be driven by natural increases (the difference between births and deaths) and more and more will be driven by immigrants. Today, the U.S. is the largest recipient of international migrants, counting more than 38 million among its residents in 2005, most from Mexico and other Latin American countries, India, and China. Other countries with large numbers of immigrants include the Russian Federation, Germany, Ukraine, France, and Saudi Arabia.

Many, if not most, international immigrants tend to be younger, and are equally split between males and females. This means that countries with aging native populations and large immigrant populations will see an ever increasing divergence between the ethnic makeup of older, post-child families and younger families with children. Marketing products in the developed world, in the U.S. and beyond, will require much more sensitivity to ethnic differences, including language differences than ever before.

Big eleven countries
There are 11 countries in the world today with more than one million inhabitants (see Table 2). These countries appear on every inhabited continent and across all three stages of population aging. Together, these ‘big eleven’ account for over 60% of the population of the planet, and while they will lose share over the next 50 years, even in 2050 they will still account for over 56% of total world population.

Resources:
Much of the data for this article come from the United Nations Population Center (http://www.un.org/esa/population/unpop.htm). The UNPC produces a series of current population data as well as annually updated projections for countries, regions, levels of development, and the world overall. They track and report detailed information on immigration and do extensive research on the developmental impacts of aging populations.

The U.S. Central Intelligence Agency (https://www.cia.gov/library/) provides a number of different demographic reports and projections, including the annual World Factbook. It also provides summaries of the political situations in various countries.