In the last newsletter, we wrote about South Korea and why despite this semiconductor boom, it’s a cyclical market to invest in. Demographics is a big part of that answer. A country where half the population is over 44, fertility is at 0.72, and the working-age share is heading from 71% to 54% by 2050 is a market you trade, not buy & forget.
And it’s not just South Korea. Even Japan, Italy, Germany, China, large economies with world-class markets, are quietly running out of people.
Demographics is the slowest-moving force in economics, and probably the least reported & analysed. And for anyone investing with a long time horizon, it’s worth understanding which countries have the population advantage, and which are simply running out of workers.
And so in this newsletter we break down global demographics through charts and what it means for your portfolio.
The Simplest Signal: Median Age
Median age is simply the age that splits a population in half. Half the people are younger, half are older. A country with a median age of 28 is full of workers, taxpayers, and consumers in their prime. A country with a median age of 49 has half its people closer to retirement than to their first job.
China at 39 looks manageable. But China’s one-child policy ran for 35 years, and its fertility rate now sits at 1.0, barely above South Korea’s (more about that below). The demographic cliff is coming, just with a delay. By 2050, China is projected to lose roughly 100 million people, the equivalent of erasing Germany from the map.
India, most of Southeast Asia, and much of Africa sit firmly on the better side of this curve, with young, growing populations still in their peak working years. The charts ahead make this contrast hard to ignore.
Fertility Rate and Dependency Ratio: Two Sides of the Same Problem
Fertility rate is the average number of children a woman is expected to have over her lifetime. A rate of 2.1 is considered as the replacement rate. This means, on average, two children per woman, roughly one to replace each parent so that the total population is maintained.
Low fertility today becomes a high dependency ratio problem later Japan is the live demonstration of that chain. South Korea is about 20 years behind on the same path.
The USA’s fertility rate is 1.6, well below replacement. What keeps its workforce growing is immigration. Without it, the US dependency ratio would be climbing far faster.
Working-Age Share: Who Is Actually Driving Growth
The share of population aged 15 to 64 is a more direct economic measure. It tells you what fraction of a country is in its productive years right now, and how that fraction is changing.
South Korea’s working-age share falls from 71% today to 54% by 2050. That’s roughly 2 million fewer workers every five years, on a base of 52 million people.
India’s working-age share barely moves over the same period. The dividend window is still wide open. Nigeria’s working-age share actually rises through 2050, which is why it’s the one African economy most economists take seriously as a long-run growth candidate.
Population in 2050: who grows, who shrinks
The Demographic Dividend Window
The “demographic dividend” is a specific phase: the period when a country’s working-age share is large, growing, and not yet burdened by a heavy retiree population. It’s the window when economic growth comes almost naturally — more workers, more consumption, more savings, more investment.
Every country gets this window once. The question is whether they use it.
India’s window runs until roughly 2047. That’s 21 years and the trajectory after 2040 starts working against us rather than for us.
India is in a race between its demographic window and its ability to create enough jobs, raise female workforce participation, and build institutions fast enough to absorb 1 billion working-age people productively. That’s the bet every Indian equity investor is making, knowingly or otherwise.
What this could mean for your portfolio
A few thoughts worth keeping in mind:
Japan and Western Europe are not uninvestable, but they are structurally fighting gravity. Japan’s market tripled between 2012 and 2024 on policy reforms but those are cyclical tailwinds. The underlying demographics are a permanent headwind.
China is facing Japan-style demographics but is earlier in the wealth curve, and with fewer policy tools available.
India has the tailwind, and roughly two decades of it remaining. The main question is whether the economy builds fast enough to use it before the window closes around 2047. Every year that passes without enough jobs, enough urbanisation, and higher female workforce participation is a year of demographic dividend that gets wasted.
But if India shows that it can harness this dividend well, then it will be back on top of investors’ radar.
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Till the next time,
Vijay
CEO – InCred Money
P.S. I share my thoughts on Investing and the Economy regularly. You can follow me here.
