Fiscal Fountain of Youth

Young populations predict strong economic growth. A young population means that most people are of working age as a percentage of total population. The emerging markets and developed markets are on the verge of trading places, as this next chart, from the fund Absolute Return, shows:

This doesn’t mean all emerging markets have young populations. If you look at the so-called dependency ratios by country, you see that Russia and China quickly get old. In fact, their dependency ratios will surpass the UK’s over the next two decades. The really young populations, at least among the big emerging markets, are in India and Brazil.

This chart, again from Absolute Return, shows you how many people are aged 65 or older for every 100 people aged 15-64. So if the ratio is 40, it means that there are 40 people aged 65 or older for every 100 people aged 15-64 (the working-age population).

Low numbers mean lots of working people supporting the elderly. Higher numbers mean there are fewer people working to support the elderly. The theory goes that the younger populations with lower dependency issues will grow faster than those older populations.

So looking at this chart, you can see the clear winners through 2030 in the demographic game – India and Brazil. The US, perhaps surprisingly, doesn’t look so bad. Of course, the ages here are somewhat arbitrary. It seems to me that one way out of the problem is that people simply work longer. Why retire at 65?

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