CHANGING DEMOGRAPHICS OF GLOBAL ECONOMY

Globalization is defined in the layman terms as the simple integration of the world production and normalization of the consumption across all the markets of the world. Including  developed and developing nations the demographics of the world economy has undergone a rapid change in the past 3 decades, where there are some common themes and trends clearly visible.

Trend 1: Change in population of the world - Some researchers say that despite the predicted increase in the world population from ~7 billion in 2011 to 7.6 billion in 2020 the working age population is expected to decline in many countries. For example China is already facing shortage due to one child policy OR Japan has seen more people exiting the workforce than there are workers/labor prepared to enter in the market over the next decade. European labour market has seen ratio of labor entering the workforce to exiting decline, for the first time in 2010 more people retired or voluntarily exited the workforce due to several reasons. Other emerging economies such as Russia, China and South Korea observe similar trends. But on the flip side there are younger countries such as India, Mexico, Brazil and Indonesia stand to profit from younger labor force. One-third of India's population is now under the age of 15 so over the next 2 decades we can expect 300 million more joining the labor force.

Dividend of this demographic change only pays off if the country is able to provide its youth with adequate resources such as education, occupation, training, opportunities and guidance. Economic opportunities to develop the skill set of the youth is the only tool to help bridge the gap between skills demand and supply.

Manpower, an international employment agency reports that approximately 31% of the employers in the world find it difficult to find the worker with the required skill set, for example shortage of the workers with computer skills in USA forces them to import labor from countries such as China and India. Outsourcing has been one of important issues which USA congress and leadership is dealing with, as per them unemployment can be reduced only by keeping the jobs within the country. At the same time private companies lobby to increase the quote of H1B visas and also to outsource to cheap markets.

Trend 2: Dominance of the large multinational firms on the scene of international business and trade balance. Large corporations of US control the supply of products ranging from financial to hardware, from defense to personal use and from electronics to  mobile technologies. Since these firms can set the market prices for these products they closely control the profits and availability, which in turn give them access to control other economies. How ? Marketing of these produce are done to spur the demand, specially in large consumer markets of China, India and USA itself. Once the demand is high, the supply meets it and results in large trade activities ultimately leading to increasing volume of money flow across borders. Multinational firms such as apple, google, Microsoft, IBM, Toyota, BMW, HP, amazon, caterpillar, etc reaps the benefit of this trend.

Trend 3: Mobile and global talent market - Skilled labour in emerging economies for example information technology professionals from India and China find it increasingly attractive to move overseas and earn higher wages. Economic development, international labour laws, ease of movement and global language platform adds icing on the cake by making it smooth and convenient for labour to move across borders and find attractive employment. In the last decade from 150 million to 250 million labour force has moved across borders with most of them directed towards OECD countries. And on the other hand we have also seen reverse brain drain, where a large chunk of working age population is moving back to their home countries, for example students from China, India and middle east work for few years in USA/Europe/Australia and then find it attractive to move back.

I am not proposing any solution to some of the problems I have mentioned here and I am also not proposing any ideas. I am not saying that globalization is a problem and also not that the this three trends are the only trends, which depicts the demographics. I am just saying that we should start thinking about it and start focusing on the bigger picture, while solving micro economic issues. 

I am just suggesting that this changing trends are great influence on the global economics.

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