Population ageing and urbanization

  • In 2008, for the first time in history, the majority of the world’s population lived in cities, and three out of every five people will live in an urban area by 2030.
  • At the same time as cities around the world are growing, the residents are getting older. One million people worldwide turn 60 every month. Putting it another way, two people celebrate their 60th birthday every second.
  • On the current trajectory, the proportion of the global population aged 60+ will double from 11 per cent today to 22 per cent in 2050, most of them will live cities in developing countries.

The above statements sum up succinctly the two significant trends – population ageing and urbanization – facing our world in the 21st century.

Number of People over 60+

Aging chart

What is population ageing?

Population ageing is a phenomenon that occurs when the median age of a country rises due to rising life expectancy or a declining birth rate. We are now experiencing population ageing – not only in specific countries but also across the globe caused by rising life expectancy and declining fertility. The scale and speed is unprecedented in the history of mankind.

The Economist magazine published a special report on ageing populations in June 2009, at the height of the global financial crisis. It reports that the International Monetary Fund (IMF) calculated that the costs of the financial crisis would be huge but noted that in the longer term, looking towards 2050, these costs will be dwarfed by age-related spending. The IMF says: “for advanced countries, the fiscal burden of the crisis will be about 10 per cent of the ageing-related costs”.

But population ageing is not limited to advanced economies in the West and Japan, where 20 per cent of the population is already 65+. It is also the phenomenon in the developing economies in Africa, the Middle East and Asia. China is growing old before it becomes rich – it is expected that more than a quarter of its population will be 65+ by 2050. Even India, where two-thirds of the population is under 30, faces the problem of how to take care of its elderly population – now over 100 people and expected to increase three-fold in four decades.

Population ageing will produce profound and unprecedented change in the structure of all societies.

Why is urbanization an issue?

Cities have proved themselves to be the world’s economic dynamos for centuries, attracting skilled workers and productive business and benefiting from economies of scale. And given the current fragile global economy with anemic growth and lack of new jobs, a wave of urbanization propelling growth across emerging economies is a welcome phenomenon. So why is urbanization an issue?

Until 1500, Asia was the center of the world economy, accounting for two-thirds of global GDP. But in the 18th and 19th centuries, urbanization and industrialization vaulted Europe and the US to prominence. We are now observing a decisive shift in the balance back to Asia – at a speed and a scale never before witnessed. For example, China’s economic transformation resulting from urbanization and industrialization is happening at 100 times the scale of the first country in the world to urbanize – the United Kingdom – and at ten times the speed.

We are witnessing the most significant shift in the earth’s economic center of gravity in history.

There are many challenges in such a tectonic shift. Rapidly urbanizing emerging economies and their increasingly wealthy consumers are already driving strong demand for the world’s natural and capital resources. To cater to the needs of residents, cities will have to invest heavily in infrastructure. McKinsey estimates cities will need annual physical capital investment that is more than double today’s US$10 trillion – at US$20 trillion+ by 2050. Urban centers in emerging economies will make the most of this investment. The global investment rate and prices of resources have jumped and could rise further. The impact on the environment will also be substantial.

Is there good news?

There is indeed good news. While posing unprecedented challenge to the world, these trends also offer unparalleled opportunity for human kind to move to the next level of development. This will be the topic of another blog article.

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