What Does Population Change Mean for Business

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What Does Population Change Mean for Business?

• Research Tuesday Lecture Series
• 10 April 2007
• By Graeme Hugo
• Federation Fellow
• Professor of Geography and Director of the
  National Centre for Social Applications of GIS,
• The University of Adelaide

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Outline of Presentation

• Introduction
• Why Demography is Relevant
• Changing Numbers
• Changing Age Structure
• Changing Households
• Demography and the Workforce
• Generational Differences
• Changing Ethnic Composition
• Changing Places of Living
• The Future
• Conclusion

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Over the next couple of decades nothing will
impact OECD economies more profoundly than
demographic trends and, chief among them,
ageing Jean-Philippe Cotis Chief Economist,
OECD March 2005
4
Demographics is the most powerful and most
under-utilised tool we have to understand the
past and to foretell the future they play a
pivotal role in economic and social life and
explain two thirds of everything Foot, 2000
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Australias population data are among the best in
the world.Quinquennial census provides a
regular snapshot of the population.Perhaps
better seen as a single frame in a moving picture.
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The Treasury has Discovered Population

• Intergenerational Report 2002
• Intergenerational Report II 2007
• Productivity Commission Report on Ageing 2005

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Everyone is interested in population right now
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Demography

• The scientific study of the changing size,
  composition and spatial distribution of the
  population and the processes which shape them.

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Demographic Study

• Analysis of trends
• Identifying causes
• Projecting future populations
• Identifying implications

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Demography and the Future

• Projections Vs Predictions
• Indicates what the population will be like given
  certain assumptions
• A partial window on the future

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Why is this Important for Business?

• Most business involves providing goods or
  services to people
• Hence demand is influenced by
• - number of persons
• - their characteristics
• - their ability to purchase
• Demography does not fully determine demand but it
  does exert a strong influence

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How can Demography Assist Business?

• Marketing and retailing identifying, locating
  and understanding the diverse consumer groups
  that form markets for goods and services
• Human resource planning
• Site selection and evaluation
• Tracking emerging markets

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Demography and Markets

• The population is constantly changing
• The mass market has been replaced by segmented
  markets
• Identifying growth in particular segments of the
  market can give a competitive advantage

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Changing Population Growth Patterns Australia and
South Australia Rate of Population Growth per
Annum, 1947 to 2005Source ABS 1983 and ABS
Australian Demographic Statistics, various issues
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Contemporary Population Growth Rates (PA)
Source ESCAP 2006 Population Reference Bureau
2005 and 2006 ABS 2006
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Projections of the Population of Australia and
South Australia Source ABS Projections 2005 and
Planning SA
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The Population will Continue to Grow But all of
the Growth will be of the Older Population
Australia Change by Age 2004 2010 2020
(Series B)Source Jackson 2004
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Australia Age-Sex Structure of the Population,
June 2006Source ABS Estimated Resident
Population data
Baby Boomers
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Australia Age and Sex Structure of the
Population, 1901-2001 Source Australian
Censuses 1901-2001 and ABS 2000a
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Wittert 2006
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Key Issues of Age

• Different age groups grow at different rates.
• It allows us to anticipate future change in
  particular age groups.
• Age structures vary enormously between areas.
• Useful information for planning.

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South Australia Growth of Age Groups, 1996-2004
Source ABS Estimated Resident Population data
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Future Change in Age Groups Can be
AnticipatedSouth Australia Growth of Age
Groups, 2004-2011 Source ABS 2005 Projections
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United States Expenditure on Selected Items by
AgeSource Merrick and Tordella 19889
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Playford and Victor Harbor Age-Sex Structure of
the Population, 2001Source ABS 2001 Census
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Opportunities

• Baby boomers have the greatest net wealth
• Many are entering the empty nest stage of the
  life cycle
• Little known of what their needs and preferences
  will be

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Average Household Net Worth by Age of the
Household reference Person, 1994-2000,
AustraliaSource Australian Bureau of
Statistics, Newsletters - Age Matters - Issue
Number 1, December 2002
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Units of Consumption are not only
IndividualsSouth Australia Growth of
Population and Households, 1961-2001 Source
ABS 1961-2001 Censuses
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South Australia Changes in Average Household
Size, 1911-2001 Source ABS 1911-2001 Censuses
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South Australia Households(a) by Household
Size, 1961 and 2001Source ABS, various
censuses
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Greater Segmentation of FamiliesAustralia
Families and Households Growth by Type,
1976-2001Source ABS 1989,9 ABS 2001 Census
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Growth in Households, 2001-2026Source ABS
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Growth in Families, 2001-2026Source ABS
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the mass market is dead, so - figuratively
speaking - is any producer of consumer goods or
services who also continues to focus on
efficiency in production and distribution. In a
highly segregated society, the only strategy that
will work is one that concentrates efficiency in
marketing. In other words focus on the customers
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Increasing Segmentation of Markets

• 1950s and 1960s Most households made up of
  families with children. Now they make up 34.1
  percent of households.

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Product design and Marketing must be tailored to
the tastes and buying power of specific often
disparate groups in the consumer population.
Demographic information becomes essential to
identify and locate the increasingly diverse
consumer groups that constitute the modern market
place (Merrick and Tordella 1988, 4)
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Australia Households with Children
PresentSource ABS Censuses

• Year Percent
• 1976 44.1
• 1991 39.6
• 1996 37.0
• 2001 34.1

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Children and Pets in JapanSource Fujiwara 2007
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Changing Demographic Trends and the Implications
for Labour

• Three factors demographics, workplace skill
  demands and the global economy are combining to
  create a jobs revolution. Any one of these
  factors represents a dramatic transition in our
  economy. Combined they create nothing less than
  a revolution.

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An Ageing Workforce

• Greater difficulty in attracting and retaining
  young workers
• Need to retain productive older workers
• Need to engage groups currently not in the
  workforce
• Greater reliance on immigrant workers, temporary
  and permanent
• Greater need for work arrangements that
  facilitate combining work and care
• Reduced availability of care givers at home

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Annual Additions to Workforce(Access Economics)

• Now 170,900 in single year
• 2020-2030 125,000 in entire decade

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South Australia and Australia Older Workforce,
2001
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Age-Sex Structures of Academic Staff and the
Australian Workforce and Academic Staff and
Professionals, 2001 Source ABS 2001 Census
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Increasingly Mobile Workforce

• Increased possibility of working from home (one
  third of Americans work at least one day at home)
• Decoupling of place of work and home place
• Internationalisation of labour markets
• Increasing reliance on immigrant workers,
  permanent and temporary
• Increasing competition for migrant workers
• Multi job careers

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Australia Net Migration of Australia Born
between 1996 and 2001 Censuses
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Work/Life Balance Issues

• Increasing desire for more flexibility in work
• - older workers
• - young families
• Increasing tightness of labour market

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Two basic demographic approaches to understanding
the characteristics of population sub groups

• Cross Sectional
• Cohort/Generational

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• Cohorts groups of people born in the same
  year(s) who pass through time together.

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Illustration of Differences of Approaches

• In Australia at present, 14 percent of children
  live in single parent families but more than a
  third of the current generation of children will
  spend time in one-parent families.

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Generations and Behaviour

• Age/life cycle effects
• Generational effects
• Individual personal variation

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In Australia, three generations have been widely
identified, especially by marketers

• The Baby Boomers 1946-66
• Generation X 1967-81
• Generation Y 1982-2001

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Total Fertility RatesSource ABS 2003
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Differences in Size Between the Generations
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Marketing Stereotype of Baby BoomersSource
Modified from Flynn 2004

• Rebellious in youth, now conservative
• Optimistic, ambitious, loyal
• Saw employment as guaranteed
• Job status important
• Focus on process and outputs in work
• Committed to employer
• Selfish (SKI)

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Qualitative Differences of CohortsOlder Baby
Boomers as they Enter Older Ages

• Different attitudes to working at older ages
• More healthy?
• More living by themselves
• Different housing aspirations
• More ethnically heterogeneous
• Different health problems
• Different living areas
• Fewer children
• Higher education
• More mobile
• Better off economically but more unequal
• Higher expectations

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Key Differences Between Baby Boomers and
Generation XSource ABS 2001 Census
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Generation X StereotypeSource Modified from
Flynn 2004

• Career focus
• Confident and independent
• Seen change in security family, employment
• Focus on money, flexibility and professional
  development
• Desire for independence
• Less family focussed

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Generation Y StereotypeSource Modified from
Flynn 2004

• Raised in multimedia society, fast pace,
  empowerment
• Aware of rights, individualistic
• Workplace expectations flexibility,
  accommodation of individual needs
• Family insecurity
• Results focused want development and challenge

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Generation Y Stereotype (Cont.)Source
Modified from Flynn 2004

• More family oriented?
• Pleasure orientation
• Loyalty to peer group
• Confident and optimistic about quality of life
• Big purchasers
• More positive then Generation X
• High job mobility
• Ask for what they want
• High moral and ethical standards

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Increasing Ethnic Diversity

• Indigenous population currently growing at 3.0
  percent p.a.
• Percent overseas-born (2006) 24.1
• Percent born in NES nations (2006) 14.8
• Percent temporarily present 3.1

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South Australia Birthplace of the Overseas-born
Population, 1947 to 2001Source Australian
Censuses, 1947 to 2001
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South Australia Settler Arrivals by Birthplace
Region, 1994-95 to 2005-06 Source DIMIA,
unpublished data
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South Australia Net Overseas MigrationSource
ABS 2005, 2006
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Australia Settler Arrivals by State According
to Whether They are State Specific and Regional
Migration Scheme Migrants or Other Migrants,
2005-06Source, DIMA unpublished data
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South Australia Settler Arrivals, Top 10
Countries, 2002-03 to 2005-06Source DIMA
unpublished data
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South Australia Long Term Visitor Arrivals,
2005-06Source DIMA unpublished data
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People on the Move Changing Locations

• 17 percent move house each year
• 42 percent move at least once every five years
• Counter balancing flows

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Main Internal Migration Flows

• To Queensland and Western Australia
• Coastal areas
• Regional centres
• Mining/resource areas
• Inner/middle city areas
• Peripheral areas of cities

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Australia Interstate Migration Flows,
1996-2001Source ABS 2001 Census
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Key Drivers of Internal Migration

• Retirement migration
• Empty nest migration
• Gentrification
• Sea/tree change
• Resource boom
• Tourism
• Provincial city growth

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Complex Interrelationships with International
Migration

• Escalator migration
• Loss of international migration
• Sydney losing internal migrants
• High mobility of international migrants
• Increasing significance of international
  migrants, permanent and temporary in regional
  areas

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South Australia Recent Population Change in
Adelaide Statistical Division and
Non-Metropolitan South Australia,
2000-2006Source ABS 2006a, 16 and 2007
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South Australia Percent Change in Population by
SLA, 2004-2005Source ABS, Cat. No.
3218.0.55.001 Regional Population Growth,
Australia - companion data, 2006
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Adelaide Statistical Division Percent Change
in Population by SLA, 2004-2005Source ABS,
Cat. No. 3218.0.55.001 Regional Population
Growth, Australia - companion data, 2006
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Growing Coastal Populations, 2001Source ABS
2001 Census
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Sydney SD Net Internal Migration,
1996-2001Source ABS Census 2001
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South Australia Victor Harbor and Alexandrina
Net Migration, 1996-2001Source ABS Census 2001
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The Mismatch Between Water and Population(Nix
1988, 72)
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Australian Rainfall 2006
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(No Transcript)
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Climate Change and Migration

• Unlikely to create large shifts in population
  distribution
• Will influence where future growth will be
• Some agriculture, especially irrigation
  agriculture will need to move
• Water will be more influential as a location
  factor
• Need for greater water conservation,
  infrastructure investment and reuse

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Population and Policy

• Australias greatest resource is its people.
• Population trends should not be dismissed as some
  background peripheral influence on the economy,
  society and environment.
• Population trends are strongly influenced by
  economic trends but they are also influenced by
  other elements.
• Population is amenable to policy intervention.

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• Population is too important an influence on
  economy, society and environment to not be
  included in government policy.
• Population policy is best developed by
  encouraging a broad based and informed public
  debate about what kind of Australia we want in 10
  years, 20 years, 30 years, 30 years. etc.
• However, the research base to inform that debate
  is weak.

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Pre-Requirements of Population Policy

• Must be preceded by wide public discussion
• Cannot be dominated by interest groups and be
  inclusive of a range of interests and
  disciplinary perspectives.
• Needs to be informed by inter-disciplinary
  research-based evidence.
• Needs to be integrated with other goals, eg
• - Ecological sustainability
• - National interest, security
• - Prosperity
• - social equity
• - Social cohesion
• - Global responsibility

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Population change in Australia should be
compatible with sustainable development

• Meet basic needs of all citizens
• Give all citizens opportunity to develop and
  realise their individual potential
• Should not endanger the natural systems that
  support life on earth

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While a greater evidence base is needed my view
is that South Australia (and Australia) will need
to increase its population over the next couple
of decades to achieve a more sustainable balance
between the working and non working population.
Thereafter, however, we should have a stable
population.
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Conclusion

• Neglect of demography in business
• Demographic change is incremental not sudden
• Greater ability to get timely and relevant
  demographic data
• Enhanced capacity to analyse
• Demographic change is partly predictable but
  projections can facilitate scenario development
• Demography needs to be an element in business
  planning