'The change in the global population over the next few years is unprecedented'

Global Population and Environment 101
Global Population and Environment 101

The world's demographics are making an "unprecedented shift," and it's going to have an enormous impact on the world.

That's not a new discovery, but the subject is being explored in detail by HSBC economist James Pomeroy in an immense report sent to clients this week.

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The note explores some of the massive changes coming to the global population over not just the next 50 or 100 years, but the next 10. Unlike many economic forecasts, predictions of what the size of the world's workforce will be like in a decade are pretty predictable, since all the future workers have already been born.

Here's a snippet from the report (emphasis ours):

Demographics have long been a key determinant of potential growth rates, but the change in the global population over the next few years is unprecedented. Japan's population started to shrink in the mid-1990s and Germany's started shrinking around the year 2000, but the world's most populous country, China, is now seeing its working-age population shrink for the first time.

Here's the map, showing a sea of red and pink across the advanced world — that means contraction, no growth or slow growth. Only in a belt of the developing world (in Africa particularly) is there any substantial expansion coming by 2020:

global population
global population

Though the overall global population will continue to grow for some time yet, the growth of the working-age population is slowing down pretty much everywhere.

That's relevant for a bundle of reasons — for starters, it means that around the world there'll be fewer workers to support a growing number of retirees. But it also has some economists expecting significant pressure on wages. If employers have to fight for a group of workers that's growing more slowly, or even declining, they'll need to encourage people to move and their labour will be more valuable.

Here's the chart showing how growth rates will change from 2005-15 to 2015-25, showing barely any advanced economies where the rate of change will improve (Japan's up near the top, but their working population is already in decline. It'll just call less slowly).

global population
global population

The demographic change is a two-sided coin.

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Some countries, like Japan, Russia, and parts of Europe, have already entered the stage that the rest of the world is going into — and they've struggled with it.

In Japan, slowing economic growth has made the county's ever-expanding public debt pile more and more difficult to deal with, and the working-age population has already declined by 11.1% in the last 20 years.

Here's another snippet from the report's author:

Smaller populations mean less demand and less potential output. More retirees relative to the number of working-age people means more fiscal pressure: greater expenditure on healthcare and less tax income. Globally, although working-age populations are still growing, we would expect global potential growth to be 0.6ppt lower per year over the next decade compared with the past decade given these demographic changes. Not great news for heavily indebted economies.

Whatever the effects are, this is one forecast that you can rely on — global demographics are shifting, and there's no way to go back.

RELATED GALLERY: See photos of populations around the globe: