DEMOGRAPHIC VARIABLES AND ITS SIGNIFICANCE FOR BUSINESS

ACTIVITIES

ByProf.Dr.Tadjuddin Noer Effendi MA

Why demographic variables are important to be understood by businessmen

• Almost all private and public sector activity has the ultimate aim of producing or delivering some kind of good or service to people

• A necessary and fundamental preliminary to efficient and

effective production and delivery of goods and services is need supporting a detailed knowledge of the population

Other reasons

• Demographic has potentiality to provide basic data and information to help in strengthening business activities and to magnetize investors.

• A characteristic of population and their change over time able to present general pictures of a potential market.

• Demographic variables such as age structures, education and employment can determine the nature of business activities.

How demographic variables determine business activities?

1. Demographic variables place as an independent variable

Demographic variables Business activities Number of population Population growth and density Population structures (Age, education, employment etc)

Economic and social status

2. Demographic variables place as a dependent variables

Business activities Demographic variables Industries Number of population

Services Population structures Agriculture

FOCUS OF DISCUSSION

• NUMBER OF POPULATION, POPULATION DISTRIBUTION, AND POPULATION DENSITY

• POPULATION GROWTH• POPULATION STRUCTURES AGE EDUCATION EMPLOYMENT• THEIR CHANGES OVER TIME AND IMPLICATIONS ON

BUSINESS ACTIVITIES

NUMBERS OF POPULATION, DISTRIBUTIONS AND POPULATION DENSITY

HOW WE ANALISYS THOSE VARIABLES?

• To analysis those variables For examples, we use Indonesian case and data. We can analysis by islands provinces districts etc.

POPULATION GROWTH

Population growth can be used for basic information in investment planning. It can give us information about existing, and prospect of population in the future.

Factors determine the low of population growth.

1. The decline of fertility rate in few provinces are caused of some factors namely:

• Social change, especially female education has increased and female has initiated to enter the labor market of public sectors in order to get wages. This brings change in social (life) behavior of women, especially towards marriage. They tend to delay marriage since they have to finish education for the sake of their career development in work place. For the married women, planning spacing of pregnancy is becoming a norm and the preference to have children depend on the family economic condition. Two children have already been a norm in young families.

• The awareness in birth control have spread out and have already been accepted in the society

• The first age marriage have increased significantly, especially for young generations followed with young eligible couples

• Small family norm are starting to be accepted and children are seen to be an economic burden (not as fortune any more)

• Service towards the effort to controlling and delaying pregnancy are available and easy to find.

2. The decline of mortality rate is caused from several factors namely:

• Prevention for infection and spread disease has improved significantly. People are already free from the spread diseases.

• Primary health care had developed and spread out so that people have easy access to find the health services.

• Access to service for pregnancy, childbirth, and modern facilities for mother, baby and child are already easy to find.

• Incidence of poverty tended to decline and family health nutrition had been improved and nutrition for child under five years has improved significantly.

• Life expectancy for all age has increased.

Table 3.rtf.Table 4.rtf

POPULATION STRUCTURES

• Age• Education• Employment

Age Population growth both caused by fertility

or in and out /in migration would affect the age of population structures.

Age structures and consumption

The areas where demographic analysis may be most helpful to businessman are:

• It can help in identification the location of potential market.

• it can help in understanding the behavior of the diverse consumer groups that make up markets for goods and services both for existing situation and for the future.

FIGURE 1 Australia.rtf FIGURE 2.rtf Attachment 1.rtf

FIGURE 1 Australia: Average Weekly Household Expenditure on Selected

Items by Age, 1988

• Source: Hugo, Graeme, 1981, p. 8

0

20

40

60

80

100

120

24 andunder

25-34 35-44 45-54 55-64 65+ age

housing food recreation clothing medical care

FIGURE 2 United States: Expenditure on Selected Items by Age, 1988

0

400

800

1200

1600

2000

less than25

25-34 35-44 45-54 55-64 65-74 75+ age

rent food away from home education health care

Source: Hugo, Graeme, 1981, p. 9

Attachment 1 Population Projection by age To do population projection by age we can use formula:

1. Geometric method t Pt = Po ( 1+ R)

Pt =Numbers of population in year t Po =Numbers of population in year 0 R =Population growth t =time reference

2. Exponential method rt Pt = Po e

e = 2.7183 3. Life Tables Model For example see Table below Hypothetic Population Projection for Female by Age 2010

Age groups No.of Population In 2005

P (x)* Population Projection In 2010**

0 - 4 5 - 9 10 - 14 15 - 19 20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64 65 - 69 70 – 74 75+

20,985 23,223 21,482 18,926 16,128 15,623 13,245 11,184 8,081 7,565 6,687 4,831 4,526 2,749 2,029 1,972

0.98459 0.99427 0.99321 0.99032 0.98787 0.98581 0.98321 0.97945 0.97351 0.96355 0.94812 0.92314 0.88220 0.81710 0.71400 0.58313

20,661 23,090 21,336 18,742 15,932 15,401 13,022 10,954 7,866 7,289 6,340 4,459 3,992 2,246 1,448

*Value of Px available in Life Tables Model **The result of population projection in 2005 is no.of population in 2000 mutiple by Px. Population 0-4 in 2000 become 5-9 in 2005

EDUCATION

• Education is one of the important information for business activity especially for investors. Information on population education structure of a region could give a picture of the skill formation of the labors that are needed to support business activities.

• The region with low population education maybe less attractive for business activities which needs support from skilled labors. For business activities that do not need unskilled labors the low education structure would not be a problem but the level of wage would still be in consideration. Usually educated skill labors require different wages from unskilled labors.

• Business activities that are trying to find low wage levels usually look for regions with low population education structures. Gb 4

Table 7 Education Structures of Popu lation by Province in 1990 and 2005

1990* Education (%)

2005** Education (%)

Province

Primary Secondary Tertiary Primary Secondary Tertiary

Aceh North Sumatra West Sumatra Riau Jamb South Sumatra Engulf Lamping Bangka Belitung Kepulauan Riau DKI Jakarta West Java Central Java Yogyakarta East Java Banten Bali West NusaTenggara East Nusa Tenggara West Kalimantan Central Kalimantan South Kalimantan East Kalimantan North Sulawesi Central Sulawesi South Sulawesi Southeast Sulawesi Gorontalo Maluku Maluku Utara Papua

73.2 69.8 72.1 75.8 78.3 79.1 76.8 81.7

- -

51.9 80.9 83.0 67.7 81.2

-

75.6

84.5 86.2

83.7 76.3 78.2 69.2

71.2 78.0 76.7 77.8

-

74.9 -

79.6

25.4 28.7 26.1 22.8 20.5 19.8 21.5 17.5

- -

42.8 17.8 16.0 29.4 17.6

-

22.4

14.5 12.8

15.3 22.6 20.6 28.5

26.9 20.6 21.5 20.8

-

23.7 -

19,0

1.4 1.5 1.8 1.4 1.2 1.1 1.6 0.8 - -

5.3 1.3 1.0 2.9 1.2 -

2.0

1.0 1.0

1.0 1.1 1.2 2.3

1.9 1.1 1.8 1.4 -

1.4 -

1.4

51.9 55.7 61.8 60.3 63.0 64.2 62.7 68.5 69.7 45.8

39.1 66.6 71.2 52.1 67.3 63.4

60.5

76.8 78.9

69,6 63.2 66.3 53.3

53.0 67.7 66.8 66.1 74.2

59.8 61.9

70.7

45.2 40.8 33.5 36.6 33.3 32.3 33.6 29.2 28.1 48.5

50.8 29.6 25.7 39.2 29.4 33.0

33.2

21.1 18.9

28,1 34.0 29,9 41.4

42.5 28.9 28.8 29.8 23.2

36.5 35.7

26.6

2.9 3.5 4.7 3,1 3.7 3.5 3.7 2.3 2.2 5.7

10.1

3.8 3.1 7.9 3.3 3.6

6.3

2.1 2.2

2.3 2.8 3.8 4.4

4.5 3.4 4.4 4.1 2.6

3.7 2.4

2.7

Source: *BPS, 1992, Population of Indonesia: Result of Census 1990, Seri S2, p.141 **BPS, 2006, Population of Indonesia: Results of the Inter census Population Survey 2005, Serises S1, Jakarta, p. 102

Education continue

• Education in a normal condition could also be used as an indicator for the economic status of a population. Regions with a relatively high population education structure tend to have high incomes. Because of that it could also be used as proxy purchasing power of population.

• The lifestyle of the population is affected by education. Based on those reasons, the need for goods and services for the population with better education is different from uneducated.

Table 7.rtf

Employment

Besides education as discussed in the previous section, labor force and employment data could also be use as an indicator to examine the social and economic transformation process of a region.

Table 8.rtf Table 9.rtf