Forget About Overpopulation. You May Not Have Enough People.

Colin Sampson

We’re all aware of the threat of overpopulation. For decades, economists and sociologists have warned us of impending overcrowding, food shortages, and competition for scarce resources. And with 7.3 billion people on the planet, it’s natural for CFOs to focus on minimizing risks associated with too many people.

But in 2016, that approach couldn’t be more wrong. Instead of fearing overpopulation, we should worry about having too few people.

In many countries and regions around the world, birth rates have declined precipitously. The number of births per woman has fallen to 1.44 in Germany, 1.40 in Japan, and .81 in Singapore. That’s well short of the birth rate of 2.0 needed to replace the current population as it dies off.

The numbers don’t lie

Immigration is unlikely to prop up declining populations, since birth rates in countries that once produced large numbers of immigrants have also dropped. Since 1960, India’s birth rate has contracted from 6 to 2.5 and Mexico’s plummeted from 7.3 to 2.27.

Although developing countries still have higher birth rates, overall growth is slowing. The International Institute for Applied Systems Analysis predicts that the world’s population is likely to peak at 9.4 billion around 2070 and then decline to 9 billion by the year 2100.

And those are just the raw data. When we look at the likely workforce, the challenges expand. As the population ages, the number of retirees grows and the active workforce shrinks. Thanks to the continuing retirement of large numbers of baby boomers, the annual growth rate of the U.S. labor force between 2010 and 2020 is expected to languish at just 0.7%. In Japan, people 65 and older will make up 40% of the total population by 2060.

Preparing for change

All of these numbers point to a worrisome conclusion: the economic growth of companies, regions, and even countries may be threatened by a potential lack of workers. How should CFOs prepare to address this challenge?

Consider how technology could help you offset a dearth of personnel. It’s possible that robotics, artificial intelligence, automation, sensors, and drones could replace or augment people for simple tasks. The Internet of Things offers many opportunities to support innovation through technology.

Changing demographics may also offer hope. The current refugee crisis in the Middle East has resulted in large numbers of people migrating to Europe. A massive population shift from rural to urban areas in countries such as China is delivering new people into the workforce. Could these workers staff your company? Would they meet your job requirements?

There are no proven strategies yet for handling slowing population growth and a potential shortage of workers. How savvy companies will adjust to this new reality is still a question mark. I only know that CFOs who are aware of the resulting personnel challenges – and any related opportunities – will be best prepared to develop the right strategies and make smart workforce decisions.

To learn more about how finance executives can empower themselves with the right tools and play a vital role in business innovation and value chain, review the finance content hub, which offers additional research and valuable insights.

Colin Sampson

About Colin Sampson

Colin Sampson is the senior vice president and SAP Ambassador for the Asia-Pacific and Japan region, and a former regional CFO for SAP. He is responsible for building long-term relationships with strategic and key customers across the region.