While business leaders need to be concerned about the growth of the population, more is required in order to focus on the overall gain or loss. The United States overall population growth was very slow last year compared to previous experience. The year ending July 1, 2022, saw the third-lowest increase in 100 years. 2020 and 2021 were the next two years with lower growth. Businesses experience slower growth in potential customers, which is simple to put.
While some companies would be benefited from more babies being born (diaper makers), others would benefit from the long lives of seniors (retirement homeowners). It is important to identify the most relevant demographic segments to understand the business impact of population changes on a company’s bottom line.
Customers are the priority for business minds, but employees are equally important. The United States is currently in a tight labor market. The 2020-2030 decade will see the lowest growth in the working-age population since the Civil War. (Details in the Scariest Chart for Business in the Coming Decade. Based on Census Bureau forecasts, which will prove too optimistic once complete data are available.
Because it happens slowly, demographic change is often overlooked. The slower birth trends should be more often highlighted in newspaper headlines. But demographic forces are strong. The current labor shortage is older than the pandemic. I wrote in December 2019, “The labor market has been tight for several years, and it was only going get worse in 2020.” But the 60-year-old retirement of the baby boomers could have been predicted 60+ years ago. While minor details have changed, like the decline in immigration, the overall picture was clear many years ago.
A simple annual demographic assessment can be used to start a company. What are the key demographics for customers? The buyers might be the customers in consumer sales. In business-to-business sales, however, buyers can be intermediaries between end-users and producers. Walmart’s toy buyer might not be a parent, but his or her financial situation and the number of children they have is what drive the Walmart purchase order.
Regional businesses can access data from the Census Bureau for the state, county, and metropolitan areas. Many states have their agencies that develop estimates and forecasts for the population.
There are at least two benefits to conducting a demographic assessment every year. It forces the company to examine its demographic drivers for profitability. Product and services can change in a year, making customers’ demographics different. Managers often focus on the new, which can be innovative opportunities or emerging threats. The population changes slowly, so the annual assessment is a good way to bring the population forces back into the managers’ minds. Another advantage is possible. Some demographic changes can occur quickly, such as immigration and the effects of an epidemic.
While demographic changes are not often newsworthy, they can be very powerful. Think about how HR policy could have been improved if business leaders realized ten years ago, when the unemployment rate was eight percent, that labor markets would become extremely tight. Companies that prepared for the change in attitude and practice would have outperformed those who were not.
