Wednesday, 19 December 2012

Life Expectancy and Fertility Rates

Was browsing through Google public data looking for GDP figures and came across this.  Its an interactive chart of Fertility Rate and Life Expectancy by country/region.  As most are aware, many of the richer more industrialized countries are facing an aging crisis where their population is rapidly greying and there's not enough youth to sustain them.

There are a lot of factors that play into this and its hard to say what is really a cause, effect, or merely symptoms of the same issue.  Factors such as women being part of the workforce in industrialized countries (less free time to raise families), higher (longer) educational attainment (pursuit of life and career over family), more retirement security (no longer needing to have multiple kids to support yourself at old age), etc., all have been described in multiple surveys and studies.

Nonetheless, its interesting to see a few trends from the data:

  • Up until the late 70s, the curve looks more like a negative exponential chart with Europe being on the high end.
  • After the 70s, the curve becomes much more linear as most regions such as East Asia and Latin America move towards the upper life expectancy enjoyed by the West.  The only exception is Sub-Sahara Africa which failed to catch up with most of the world.
  • Though it is still far below the rest of the world, Africa life expectancy did improved, going from 30-40 yrs to 50-66 yrs today (along with a drop in Fertility from 7 to 5).  A significant improvement.
  • On the other hand, the true natural lifespan potential of human beings is starting to show.  Whereas 1960 maxed out at ~75 yrs, a half century of improvements only bought us another ~5 yrs of additional life span.  Does this mean that humans are maxing out?  Does the future of genomics research give us more potential?  Do we even want that?  Imagine if the US congressmen can stay in power for ~150 yrs...goodbye progress!
  • Overall fertility rates as a whole have dropped about 30-60% for almost all countries over the last 50 yrs.
  • Many many countries and regions (Europe and Asia especially) are now below the magic 2.1 fertility number which is the level needed to maintain a population size.  Japan is at 1.4, Singapore at 1.2, US at 2, and even China is at only 1.6.

What does this mean from an investing standpoint?  Well its well known that a large working age population is highly correlated to economic growth as they join the work force and start businesses and consume goods and services.  It can be argued that the US baby boom had a huge influence on the rise of the US economic engine.  On the other hand, an aging population has the opposite effect where consumption slows, as does growth and productivity.  So a key economic indicator to look at is countries with large populations and high fertility rates about 10-20 yrs ago as those people will be joining the workforce in the near future.

Examples of which countries fit that 10-20 yr trend?  A few that stands out: India, Pakistan, Nigeria, Indonesia, Philippines, Egypt, and Bangladesh.  Indeed, a few of those countries are already standing out as big growth engines today.  China is very interesting in that it fitted those parameters about 30-40 yrs ago which correlates well with China's growth for the last 20 yrs (and potential fade for the next 20 yrs).

The chart below highlights where a few of those countries were for GDP growth in 2009 (incomplete data post 2009).  I couldn't find an easy way to edit the axis so you're stuck with the not as useful log scale unfortunately.  While they were not at the top of the GDP growth scale, they were better others.  Additional GDP data from 2011 onwards confirms growth for many of those countries as well.  Philippines as an example, grew GDP by ~7% in 2012.

So if you want to use this measure as a predictor for potentially hot and growing countries 20 yrs from now?  Looks like Nigeria, Ethiopia, Uganda, Tanzania, and Congo fits that bill...

Now granted, population is only one factor but its interesting food for thought nonetheless.

See data at: Google Public Data

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