Averages are dangerous.
Averages hide the range of results. Most of the data in these Newsletters are averages. They can distort our view of the world. Take for example simple measures like life expectancy or life without disability. The UK has a formal index of the deprivation within an area, town or city. It is based on thirty nine different measure. These cover everything from income to the availability of skills training and the living environment. The gap between those people living in the bottom ten percent of areas compared to the top is huge. Male life expectancy in the bottom decile is 74.1 years and in the top 83.5 years. For women the gap is 7.6 years. They live significantly shorter lives. A higher proportion of their lives is with a disability so bad as to interfere with their day to day activities.
The Power of Cities
Within the Newsletters I have tended to focus on countries. Country results are an average across their cities and their rural population. The average can hide a very different story in different cities.
Urbanization is one of the four demographic megatrends according to the United Nations. The others are population growth, population ageing and international migration. Urbanization is an unstoppable force. People all over the world migrate to the cities to improve their economic prospects.
Urbanization and the ageing of the population have gone hand in hand. In the nineteen fifties, most regions had urbanization levels below thirty percent. The exceptions, not unexpectedly, were regions such as North America and Western Europe. Since then, urbanization has accelerated all over the world. Only sub-Saharan Africa and North Eastern Asia now lag.
Cities grow because they accumulate people. They are attracted by the opportunities to improve their income. The also come for the opportunity to spend it. Roughly sixty percent of city growth comes from increased population. The remaining forty percent from increased GDP per head. Retail and service development takes place first in the cities.
The McKinsey Institute argue that cities are the growth engines of the global consumer economy. Consumption is extra-ordinarily concentrated in the major cities. People living in large cities will account for fifty percent of the global population by 2030. They will however generate eighty one percent of global consumption. Ninety seven percent of the world’s population growth from 2015 to 2030 will occur in cities. In the next ten years, the cities will be responsible for a massive ninety one percent of global consumption growth. Just thirty-two cities globally will then generate one quarter of total urban consumption. One hundred cities will account for nearly half of all consumption growth.
The greater metropolitan area of Tokyo is the largest mega-city. In 2020 it had a population of over 37 million people. If Tokyo were a country it would rank in the top fifteen countries in the world on spending power. It would be comparable in size to Spain. It ranks number one in the world and looks to remain so for some time.
Of the thirty-two city growth engines twelve are in China and eleven in the USA. McKinsey estimates London will be the fastest growing city in terms of spending power. They estimate ( pre-COVID) it will grow by three hundred and sixty-seven billion dollars by 2030. That is the equivalent to adding to London a country the size of Egypt.
Cities and the Third Age Market
There are cities in America that are older than Japan. Cities within a country can have different age profiles. They can be at different stages in the development of the Third Age consumer market. The averages hide all this. China may be late in the ageing race, but Fushun has a median age already of forty-five , as old as any city in the world. There are ten years difference in the median age of Naples and Trieste, both within Italy.
Despite the relentlessness of urbanization, some cities already have a declining population. Places such as Seoul, Athens, Detroit, and Havana have a declining birth rate. They also have high levels of migration. Even in China, Fusun and Yichuan are declining in population. The cities are ageing and even declining. The proportion of older Third Agers must be increasing.
The sixty-five and above age group is growing faster than the cities themselves. Punta Gorda in Florida is forecast to soon have fifty seven percent of its population over the age of sixty. Orense in Spain will be at forty seven percent as will Imabari in Japan within ten years. US sunbelt “retirement” cities feature high on the list. They are joined by Gera in Germany, Seogwipo in South Korea, and Trieste in Italy.
Today cities in Europe and Japan have the highest share of the over sixty fives. The North American cities will quickly catch up. By 2030 Tokyo will have thirteen point two million Third Age consumers (over 60). New York by then will rank third in the world after Tokyo and Osaka for Third Age residents . Number four in the rankings will be the Rhine-Ruhr region of Germany. London remains a young city with only 3.8m over 65. These are mega-markets. They rank ahead of many countries in number of older people and their spending power. These are where the power of the Third Age consumers will be felt.
This is not just about increasing shares of older people. These, and many other cities, are losing young people. Ninety percent of Chinese cities will have a decline in their fifteen- to twenty-nine-year-olds. Across all Chinese cities the drop will be twenty percent before 2030. These declines are comparable to the numbers seen in Germany today. China as a country may be just starting its tipping point but many of its cities are already there (see Newsletter #011).
The Third Agers in these cities have the spending power. More and more cities around the world will join the list. Shanghai, Beijing, Mumbai, Sao Paulo, Tainji and Chongquing will soon join the top twenty Third Age Markets.