The Evelyn Partners Megatrends Podcast: the demographic dividend

In the latest in our megatrends podcast series, we look at demographics. Demographics can have a direct bearing on economic outcomes: more young people working and paying taxes are a boost for economic growth, while an ageing population can stymy productivity. Developed markets have had their demographic dividend with the ‘baby boomers’, but it is now emerging markets that are reaping the benefits of strong demographics. This could create selective investment opportunities in those regions.

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Demographics change the shape of global economies. Countries with ageing populations are likely to become less wealthy over time, while countries with a high working age population may experience faster growth. This creates risk and opportunities for investors as wealth shifts round an economy and economic power moves from country to country.

Today, developed markets are on the back foot, with ageing populations creating higher healthcare costs and reducing the percentage of people working and paying taxes. The demographic dividend created by the baby boomers is now a headwind. In contrast, emerging markets such as India have young, fast-growing populations, which support wealth creation.

Demographics are not deterministic. However, they will influence broad consumption patterns, the outlook for government spending, and provide support for specific sectors. As investors, we need to recognise the opportunities and risks shifting demographics can create.