Latest Insight

(February 2019)

Segmenting Countries by Age and Affluence and their long term trend to 2043


Age and Income are a useful top level cut for segmenting countries as well as consumers.

In the case of countries four distinct groups emerge – ‘Older affluent’, ‘Older Middle Class’, ‘Family Lower Middle Class’ and ‘Young Poor’.

The first three of these groups are now in a relatively stable population mode.  Obviously, the ‘Family Lower Middle Class’ segment is still growing but the rate of population growth is slowing and the ability to educate, provide adequate health services and employment for them is improving if not already to a good standard.

The last segment – ‘Young Poor’ – which is almost exclusively in the African Continent has population dynamics which are of serious concern.  These countries have low productivity and poor governance which means they are poorly equipped to provide adequate education and health services for their existing population.  Yet their population will double in the next 25 years.  There is literally a tsunami of poorly educated young people emerging which will not be able to find work and support themselves or their families. This is a serious social issue.

Market segmentation is a well understood marketing tool.  It groups customers according to similarity of life stage, needs and preferences and helps provide a better understanding of how a market may develop and hence brand/product positioning.

As a concept it also works well for countries.  By grouping countries according to their similarity on key dimensions we can gain an understanding of how the different groups may develop and plan business and investment strategy accordingly.

In this month’s demographic insight, we have grouped the 109 countries we cover into four logical segments using just two criteria – median age and GDP per capita.

Median age is used as the age profile of a country is a good indicator of the dominant life stages for a country and hence the pattern of development that will take place in the next 20 years  

GDP is used as it indicates the quality of lifestyle that residents of the country have.  It picks up both personal income as well as the ability of the society to provide relevant infra structure such as education and health care. 

Using these two criteria the 109 countries grouped into four quite distinct segments.

  1. The Older Affluent (median age over 35 and GDP per capita over US$30,000 pa),

  2. The Older Middle Income (median age over 35 years, GDP per capita mainly over US$5,000 pa – there are 3 below that – and below US$30,000),

  3. Family Lower Income (median age between 25 years and 35 years and GDP per capita mainly between US$3,000 and US$15,000) and

  4. The Young Poor (median age below 25 years – lowest is 14 years – and GDP per capita ranging from a low of US$337 pa. up to US$5,000 with one exception above that).  

The two figures below show the geographic location of these four groups.

Figure 1:  Geographical Plot of the Older Affluent (Red) and Older Middle-Income Segments (Dark Blue)

Fig 1.jpg

Figure 2: Geographical Plot of the Family Lower Income (Blue) and Young Poor (green) Segments

Fig 2.jpg

Interestingly the four segments are of relatively similar size in terms of number of countries (but not population) but they have radically different growth prospects as detailed below.

Table 1 below shows the projected share of Population and GDP and relative GDP per capita for the regions.  Do appreciate that there is considerable variance within each segment in terms of Population size (and hence total GDP).


Table 1:  Relative Importance of Segments by Total Population and Total GDP and GDP per capita – 2018 and 2043

Tab 1.jpg

 The Older Affluent.

Countries in this segment have a median age over 35 years (the highest is 47 years) and a GDP per capita in excess of US$35,000.  This segment is projected to show very little population growth over the next 25 years.  In fact all segments under 65 years of age decline marginally (3-5% in total) over that period.  In contrast the 65 plus age group is projected to grow by 45%.  In short total Population growth comes from people living longer rather than births.

Figure 3: Long term Age Profile of the Older Affluent Segment

Fig 3.jpg

Commentators tend to jump to the conclusion that these countries have an impending problem of ‘not enough workers.’ This is wrong.  The dependency rate in these countries does increase but at present it is an (unweighted) average of 1 dependent per worker and by 2043 it is projected to be 1.1 which by global standards is low and is not increasing significantly.  The reason for the slow increase is that in these countries life expectancy is into the 80s and that combined with a historically good education system and increasingly nonphysical work means that a significant proportion (24% of males aged 70 to 74 years in the USA and Japan for example) are still in full time employment.  The rapid growth of the older (65 to 74 age group means the retained labour supply exceeds the decline in new young entrants.  In addition, the aged worker has an established and employable skill set.

Their GDP per capita is projected to grow at 1% per annum which is lower than that of the other segments.  This is a reflection of (a) the higher base of US$ 48,000 and (b) they have less upside in both education and infrastructure support as the level currently available is already high by global standards and these are the two key variables that drive labour force productivity.

The Older Middle-Income Segment

The median age of this segment is over 35 years, and GDP per capita mainly over US$5,000 pa – there are 3 below that – and below US$30,000.  Effectively middle class in global terms.   As shown in Figure 1 (red countries) it includes China (which dominates this segment in population terms) and Russia.  It also has a bias to the Eastern European countries which were formerly communist.  As such they all tend to have quite high (by global standards) education levels and good basic infra structure.  However, their younger population is declining in absolute size as a result of declining birth rates and a reducing number of persons of child bearing age. Emigration is also a factor for some.

Figure 4: Long-term Age Profile of Older Middle-Income Segment

Fig 4.jpg

Like the previous segment, in total population growth is minimal (-0.5% in total over the next 25 years) and the younger segments tend to decline significantly (16% in total) but the over 64-year age group doubles in absolute size.  However, unlike the previous segment life expectancy is not sufficient to allow a significant number of the over 65 population stay in work in spite of good education profile and infra structure per worker  As a result GDP per capita growth is projected to be  2.6% per annum for the next quarter century  (China is in line with the other countries in this segment).

Family Lower Income

The median age of this group of countries is between 25 years and 35 years and GDP per capita mainly between US$3,000 and US$15,000.  This segment is effectively family stage lower middle class.  This means that most of the population in these countries is persons aged 25 to 45 – typically in a relationship, and with children.  They spend, but their discretionary component is low (Children are expensive in societies that value education and health (as the countries in this group largely do). 

It is the segment with the fastest projected growth in affluence – leveraging a forecast rapid improvement in education profile of the labour force as a result of many young people who are better educated than their elders entering the workforce (more, better educated workers means greater productivity per worker and greater total production).  This is assisted further by the projected growth in the absolute size of the labour force with an increasing proportion of the population of these countries being of working age – which in this case is 15 to 64 years as few have a life expectancy or education level to facilitate extended working age. 

The big concern here is whether they can find enough jobs.  While education in these countries is improving it is still at risk from robotization and AI as well as reduced demand from the key consumer segments – specifically the two preceding segments which account for 81% of the total GDP of the 109 countries we cover and an estimated 93% of global GDP.

Figure 5: Long Term Age Profile of Family Lower Income Segment.

Fig 5.jpg

In terms of total Population size there is growth – but it is in the over 25 year age groups.  The youngest (0-14 years) declines marginally and the 15 to 24 is stable.  Overall, the population of this segment of countries is projected to grow by an absolute 21% over the next 25 years – from 2.989 Bn to 3.6 Bn  an additional 634 million persons – an average of 25 million a year.

The Young Poor

Perhaps not the nicest of titles but it describes exactly what is in this segment of countries.  In total population terms these countries collectively are projected to grow from 1.3 bn persons to 2.5 billion in the next 25 years – that is double in size.  Growth is uniform across all age groups as shown in Figure 6:

Figure 6: Long Term Age Profile of the Young Poor Segment.

Fig 6.jpg

They are very young, over half their population is under the age of 25 years and in some cases under 20.  While it represents a growing potential labour force (which some commentators call ‘good demographics’) the unfortunate reality is that these same countries are very unproductive and cannot afford to offer their citizens education and health care.  Poor nutrition impacts physical and mental development and these populations do not have a good food supply.  They are, as shown in figure 2, biased to Africa.

Poor education means birth rates continue to be very high (over 100 per thousand women of child bearing age) and this maintains the steady stream of young people and exacerbates the problem as the number of persons of child bearing age continues to increase – and in many cases more than offsets any decline in the birth rate taking place. For example, in Nigeria (with a current birth rate of 171 per thousand – down from 184 in 2008) – the number of females aged 15 to 49 years increases from 45 million to 87 million in spite of a continued (but small) decline in the birth rate.  

As such their population profile is of serious concern for the world.   It is creating very large numbers of poorly feed, poorly educated young people who probably will not be able find work and support themselves let alone their family.  This is inevitably going to create a social disaster (if it hasn’t already?).  In the short-term food, water and political stability can be alleviated if not fixed, but it takes a generation to cure education and health issues. 

There is no easy solution to this, and poor governance is exacerbating it.  This means that what some people regard as a demographic dividend is in reality going to be a demographic liability (or, dare one say,  – disaster).  Already Nigeria (for example) is unable to find sufficient jobs for its young people entering working age.  The proportion of adults in work has declined in the last 5 years even when global economies have been in growth.  There are simply not enough employment opportunities.

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The data for all countries runs from 2005 to 2043.