DEMOGRAPHIC VARIABLES AND ITS
SIGNIFICANCE FOR BUSINESS ACTIVITIES
By
Tadjuddin Noer Effendi
Faculty Economic and Businiss
Gadjah Mada University
Yogyakarta 2014
Why demography is need to be understood for
business (peoples) or activities?
• 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 and social situation
Other reasons
• Demographic variables have potentiality to
provide basic data and information to help in
strengthening business activities and prospect of
market for the future.
• Demographic variables such as age structures,
education and employment can determine
nature of business and market situation.
Theoretically the relationship between demography
demography business activities can be analysis from
two perspectives
1. Demography variables place as an independent variable
Demographic variables
Number of population
Population growth and density
Population structures
(Age, education, employment etc)
Business activities
Economic and social condition
2. Demography variables place as a dependent
variables
Business activities
Industries
Services
Agriculture
Demography
Number of population
Population structures
Employment
Unemployment
An example for industry
Batam before as an industry areas its number of population about 60.000
inhabitants. Since its as an industry areas number of population has increase in 1990
approximately 106.667, in 2000 434.299 and in 2010 949.775. Population growth in
period 1990-2000 about 15.6%/year and 2000-2010 7.7%/year.
Contribution of in-migration, particularly working age population, for population
growth is high. As a result, approximately 65% of population are working age
population. This has an implication for business activities for serving the need of
working age population.
An example for service
Yogyakarta as a centre for education and tourism also the age structures tend to
higher proportion in working age population. Business activities are related to serve
student facilities service or to support tourism activities
An example for agriculture
For example the implication of business activities on demography, we see from
comparison between palm oil activities in Sumatera and paddy activities in Java
Palm oil activities in rural Sumatera have an implication on demography, more specifically
on rural-urban migration. In North Sumatera in period 1971-1980 in-migration to urban,
especially to Medan (since industrial development), were relatively higher, population
growth about 8.9%/year. However since the increase of palm oil product (CPO) in
international market lead to increased income of people involved in palm oil activities
have reduced of rural-urban migration incident. Many young generations willing to stay
in rural areas to involve in palm oil activities since it can give more better in cash
income than other activities. Also many young people back in to rural areas (return
migration) since palm oil products (CPO) increase. In period 1999-2000 Medan city
population growth about 0.97 %/year and in period 2000-2010 0.75%/year.
On the other hand, some districts of North Sumatera that hinterland has majority of
population involve in palm oil activities their population growth increase.
Districts
Labuhan Batu
Deli Serdang
Asahan
Population growth (%/year)
1990-2000* 2000-2010**
1.42
2.09
0.58
2.29
2.94
0.85
Source, *BPS, 2000, Penduduk Indonesia: Hasil Sensus Penduduk 2000, Seri RBL1.2, Jakarta, p.172
**BPS, 2010, Penduduk Indonesia: Menurut Propinsi dan Kab/kota sensus penduduk 2010, Jakarta, p. 17-18
Paddy areas of rural Java
Many young generation of paddy areas of rural Java are likely to migrate to other areas
(urban) in order to get better job and income. May be this cause of income generated from
agriculture activities especially paddy tend to uncertainty and low. No doubt young
generation have finished secondary level tend to leave rural areas in looking for job and
better income as their aspiration that may not available in rural areas. This indication can be
seen from population growth data of selected districts of rural Java.
Districts
Purworejo
Kebumen
Wonogiri
Tegal
Pemalang
Magelang
Population growth (%/year)
1990-2000*
2000-2010**
0.04
- 0.25
0.37
- 0.16
0.08
- 0.40
1.11
- 0.30
1.27
- 0.10
0.78
- 0.04
Source, *BPS, 2000, Penduduk Indonesia: Hasil Sensus Penduduk 2000, Seri RBL1.2, Jakarta, p.172
**BPS, 2010, Penduduk Indonesia: Menurut Propinsi dan Kab/kota sensus penduduk 2010, Jakarta, p. 17-18
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
MARKET SITUATION AND BUSINESS ACTIVITIES
NUMBERS OF POPULATION, DISTRIBUTIONS AND POPULATION
DENSITY
HOW WE ANALISYS THOSE VARIABLES?
• To analysis those variables we need demography data
For examples, we use Indonesian case and data.
We can analysis by
islands
provinces
districts
sub-district
Number of Indonesian Population (million)
1930-2010
250
237.6
205.1
200
179.7
147.5
In miliion)
150
119.2
97.1
100
60.7
50
0
1930
1940
1950
1961
1971
1980
1990
2000
2010
Population numbers by gender, distribution, and density
of main island, Indonesia, 2010
Islands
Sumatera
Java
Male
Female
Total
Distribution
(%)
Density
(person/km2)
25.629.682
(50,6%)
24.984.265
(49.4%)
50. 613.947
(100%)
21,3
105
68.451.461
(50,1%)
68.111.681
(49,9%)
136.563.142
(100%)
57,5
1.055
Nusa Tenggara
6.464.872
(49,5%)
6.602.727
(50,5%)
13.067.599
(100%)
5,5
178
Kalimantan
7.094.742
(51,5%)
6.674.801
(48,5%)
13.772.543
(100%)
5,8
25
Sulawesi
8.670.721
(49,9%)
8.708.677
(50,1%)
17.359.398
(100%)
7,3
92
Maluku and
Papua
3.216.102
(52,0%)
2.963.632
(48,0%)
6.179.734
(100%)
2,6
12
118.048.783
(49,7%)
237.556.363
(100%)
100
124
INDONESIA
119.507.580
(50,3%)
Sumber: BPS, 2010, Penduduk Indonesia menurut kabupaten/kota hasil sensus 2010, Jakarta, hal. 10-11
Source of Indonesian Population Data
o
o
o
o
o
o
Population census (every 10 year ) 1961, 1971, 1980, 1990, 2000, 2010
Laborer Survey (Sakernas) every year since 1976
Inter Census Survey (every 5 year)
National Social-economic survey (Susenas) every year since 1976
Rural Potentiality (Podes)
Special publication (wages, consumption index others)
BPS sometime use similar concept but different definition . We need to
check the definition before we comparing the data.
POPULATION GROWTH
Population growth can be used for basic information in
investment planning. It can give us information about
existing, and prospect of population (potential market) in the
future.
Indonesia Population growth
1930-2010
2.34
2.2
2.15
2.13
persentase (%)
1.98
1.8
1.49
1.4
1.35
1
1930-1961
1961-1971
1971-1980
1980-1990
1990-2000
2000-2010
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.
Selected Welfare Indicators
Indicators
Live expectancy (year)
1996*
2011**
64.4
70.9
Infant mortality (o/oo)
1970***
2010****
104
26.8
% of poor people*****
Urban
2007
2011
Rural
2007
2011
12.5
9.8
20.4
16.6
lSources:
• BPS, Bapenas, UNDP, 2001, Indonesia Human Development Report 2001: Towards A
New Concensus, Jakarta, p.78
** BPS, 2011, Perkembangan Beberapa Indikator Utama Sosial-ekonomi Indonesia, May
2011, Jakarta, p.36
***World Development Report, 1991, Investing in Health, Washington, p.59
**** BPS, 2010, Perkembangan Beberapa Indikator Utama Sosial-ekonomi Indonesia,
August 2010, Jakarta, p.16
***** BPS, 2010, Perkembangan Beberapa Indikator Utama Sosial-ekonomi Indonesia,
May 2011, Jakarta, p.39
Indonesian Population in the future
• Each year population increase 1.49% or
about 4 million. In 2050 number of
population will reach about 350 million
• In Java number of population about 210
million or about 60% of Indonesian
population.
• Population life in urban areas about 60%
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.
Indonesian population by age group
in period1970-2010
60
50
Persentase
40
Age groups
>65
30
25-64
15-24
20
0-14
10
0
1970
1980
1990
2000
2010 Year
Implication the change of age structures
Dependency ratio decrease
Age productive (15 – 60 ) increase
Age non productive (0-14) decline
Old population (>65) increase but still low
This demograhic situation called as DEMOGRAPIC BONUS
or DEMOGRAPHIC DEVIDEN led to decline in dependency
ratio
Demographic bonus can stimulate economic growth
 Social cost for age groups 0-10 decrase
 The cost can be shifted for saving and investation
→ purchasing power increase → middle class
growing → market expansion
Demographic bonus occurred only ones in demographic
history of a nation
Table 3
economic ratios, selected Asian Countries, 2000, 2025 and 2050
Source: Mason, Lee and Russo (quoted in, p.310)
Summary of dependency and economic ratios, selected Asian Countries, 2000, 2025 and 2050
Total dependency
ratio
Child dependency
ratio
Old dependency
ratio
Economic support
ratio
Countries
2000
2025
2050
2000
2025
2050
2000
2025
2050
2000
2025
Japan
South Korea
0.468
0.393
0.673
0.477
0.838
0.678
0.217
0.299
0.226 0.254
0.252 0.270
0.250
0.094
0.447 0.583
0.226 0.417
0.637
0.647
0.582
0.622
Indonesia
Philippines
Thailand
Bangladesh
India
0.546 0.456 0.573 0.473 0.333 0.313 0.073 0.123 0.260
0.676 0.458 0.521 0.615 0.353 0.305 0.061 0.105 0.216
0.450 0.453 0.660 0.366 0.274 0.278 0.084 0.178 0.382
0.622 0.428 0.523 0.569 0.344 0.309 0.052 0.084 0.213
0.620 0.459 0.531 0.540 0.336 0.300 0.081 0.123 0.232
Source: Mason, Lee and Russo (quoted in Basri, 2012, p.310)
Q
Total dependency ratio (10 -14) + ( 65 over)
-------------------------- x 100
(15 - 64)
Child dependency ratio (0 - 14)
---------- x 100
(15 - 64)
Old dependency ratio 65 and over
------------------ x 100
(15 - 64)
2050
0.545
0.564
0.683 0.695 0.652
0.677 0.672 0.649
0.787 0.728 0.653
0.753 0.761 0.728
0.641 0.638 0.601
Dependency ratio in Japan 1920-1980atio in Japan 1920-1980
Year
Total
Young
old
1920
1925
1930
1935
1940
1950
1955
1960
1965
1970
1975
1980
71.7
71.8
70.5
71.1
68.9
67.8
63.6
56.1
47.5
45.1
47.7
48.2
62.6
63.0
62.3
63.1
61.0
59.5
54.9
47.2
38.2
34.9
36.0
34.9
9.1
8.8
8.2
8.0
7.9
8.3
8.7
9.0
9.2
10.3
11.7
13.3
Source: Okita, Saburo and Kuroda, Toshio, 1981, Japan’ s Three Transitions, Series 1, Tokyo, Nihon University
Population Reseacrh Institute
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: Average Weekly Household Expenditure on Selected
Items by Age, 1988
120
100
80
60
40
20
0
•
Source:
24
and
under
Hugo,
1981, p.
8
25-34 Graeme,
35-44
45-54
housing
food
Source: Hugo, Graeme, 1981, p. 9
55-64
recreation
65+
clothing
age
m edical care
FIGURE 2
United States: Expenditure on Selected Items by Age, 1988
2000
1600
1200
800
400
0
less than
25
rent
25-34
35-44
45-54
food aw ay from hom e
Source: Hugo, Graeme, 1981, p. 9
55-64
65-74
education
75+
age
health care
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
P (x)*
Population
In 2005
Projection
In 2010**
0 - 4
20,985
0.98459
5 - 9
23,223
0.99427
20,661
10 - 14
21,482
0.99321
23,090
15 - 19
18,926
0.99032
21,336
20 - 24
16,128
0.98787
18,742
25 - 29
15,623
0.98581
15,932
30 - 34
13,245
0.98321
15,401
35 - 39
11,184
0.97945
13,022
40 - 44
8,081
0.97351
10,954
45 - 49
7,565
0.96355
7,866
50 - 54
6,687
0.94812
7,289
55 - 59
4,831
0.92314
6,340
60 - 64
4,526
0.88220
4,459
65 - 69
2,749
0.81710
3,992
70 – 74
2,029
0.71400
2,246
75+
1,972
0.58313
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 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.
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 4
Education Structures of Population by Province in 1990 and 2010
Provinces
Ache
North Sumatra
West Sumatra
Riau
Jambi
South Sumatra
Bengkulu
Lampung
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
West Sulawesi
Gorontalo
Maluku
Maluku Utara
West Papua
Papua
INDONESIA
Primary
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
73.4
Education (%) 1990*
Secondary
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
22.3
Source: *BPS, 1992, Population of Indonesia: Result of Census 1990, Seri S2, p.141
**BPS, 2011, Welfare Statistics 2010, Jakarta, p.89
Tertiary
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
1.6
Primary
47.9
46.5
50.9
50.9
56.6
58.3
53.7
56.7
60.6
39.1
30.8
57.7
61.6
42.6
60.3
51.7
50.9
64.4
68.0
64.4
57.7
58.6
46.4
48.1
57.7
56.2
66.1
63.7
63.1
49.3
54.1
45.1
63.6
55.7
Education (%) 2010**
Secondary
44.2
47.6
42.3
43.5
38.7
36.4
39.8
39.8
34.8
52.9
55.3
37.2
33.5
47.0
34.9
41.6
39.9
30.8
27.4
31.7
36.3
35.7
46.3
45.0
36.3
36.4
29.8
31.7
32.1
43.7
40.2
45.6
31.3
38.3
Tertiary
7.9
5.9
6.8
5.6
5.2
5.3
6.5
4.0
4.6
8.0
13.9
5.8
4.9
10.4
4.8
7.7
9.2
4.4
4.6
3.9
6.0
5.7
7.3
6.9
6.2
7.4
4.1
4.6
4.8
7.0
5.l7
9.3
5.1
6.0
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 5
Labor Force Participation and Open Unemployment Rate by provinces 1990 and 2010
Labor Force Participation Rate and Open Unemployment by provinces 1990 and 2010
1990*
Labor
Force
Participation
Open Unemployment
Labor Force Participation Rate and Open Unemployment by provinces
1990 andRate
2010 Labor Force Participation
Rate (%)
(%)
Rate (%)
Provinces
Aceh
North Sumatra
West Sumatra
Riau
Jambi
South Sumatra
Bengkulu
Lampung
Bangka Belitung
Riau Island
DKI Jakarta
West Java
Central Java
Yogyakarta
East Java
Banten
Bali
West Nusa Tenggara
East Nusa Tenggara
West Kalimantan
Central Kalimantan
South Kalimantan
East Kalimantan
North Sulawesi
Central Sulawesi
South Sulawesi
Southeast Sulawesi
Gorontalo
West Sulawesi
Maluku
North Maluku
West Papua
Papua
53,2
53,9
51,0
53,2
56,6
54,9
59,5
56,8
48,7
49,7
58,6
63,4
57,3
61,7
59,2
63,2
61,2
58,7
57,8
53,6
51,3
54,5
44,1
53,5
49,6
60,9
2,8
3,2
3,0
2,8
1,9
2,9
1,8
1,9
7,1
4,1
2,6
2,5
2,7
2,0
2,2
0,8
1,9
1,8
3,3
4,3
4,3
2,7
4,8
3,3
3,4
3,1
INDONESIA
Source: *BPS, 1992, Populations of Indonesia: Result of Census 1990, Jakarta, Seri S2, p.267
**BPS, 2011, Welfare Indicators 2010, Jakarta, p. 201
2010**
Open
Unemployment Rate (%)
63.2
69.5
66.4
63.7
65.8
70.2
71.9
67.9
66.5
68.8
67.8
62.4
70.6
69.8
69.1
65.3
77.4
66.6
72.8
73.2
69.9
71.3
66.4
63.3
69.2
64.1
71.9
64.4
71.5
66.5
65.1
69.3
80.9
8.3
7.4
6.9
8.7
5.9
6.6
4.6
5.6
4.6
6.9
11.0
10.3
6.2
5.7
4.3
13.7
3.1
5.3
3.3
4.6
4.1
5.2
10.1
9.6
5.2
8.4
4.6
5.2
4.6
10.0
6.0
7.7
3.5
67.7
7.1
Figure 4
Open Unemployment Rate by Age Groups 15-24 and 25-65
in Urban dan Rural, Indonesia, Year 2010
Rural
Age groups
Urban
Total
Age 25-65
Age 15-24
Indonesia
0
5
10
15
Percentage
Source : BPS, 2011, Laborer Situation, Agust 2010, Jakarta, p. 25, 26, and 27
20
25
Percentage of Population 10 Years and over Worked During The previous Week by Industry and Province in 1990 and 2010
Province
Aceh
North Sumatra
West Sumatra
Riau
Jambi
South Sumatra
Bengkulu
Lampung
Bangka Belitung
Riau Island
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
West Sulawesi
Maluku
North Maluku
West Papua
Papua
Indonesia
Agriculture
1990 (%)*
Industry
Services
Agriculture
65.5
60.4
59.8
58.1
69.7
64.5
70.9
70.2
1.1
36.8
47.9
45.5
50.1
44.1
54.3
75.2
72.5
61.9
53.8
43.2
55.7
67.5
57.6
68.0
62.0
71.9
8.9
10.4
9.2
13.1
8.1
10.4
6.4
8.7
28.1
23.2
19.4
19.4
16.4
21.5
16.9
12.2
8.1
15.2
14.6
20.5
13.0
8.8
10.1
7.8
11.4
6.9
25.6
29.2
31.0
28.8
22.2
25.1
22.7
21.1
70.8
40.0
32.7
35.1
33.5
34.4
28.8
12.6
19.4
22.9
31.6
36.3
31.3
23.7
32.3
24.2
31.3
21.2
52.2
46.9
44.9
47.7
57.3
60.4
62.0
61.5
32.7
13.1
1.0
24.7
39.2
33.7
44.7
19.0
31.2
53.0
68.5
62.6
57.2
43.1
29.3
35.2
58.9
51.1
52.1
42.6
63.7
51.6
54.0
47.1
75.2
40.5
2010 (%)**
Industry
9.2
12.2
11.0
11.4
9.0
8.2
6.2
8.6
30.2
38.8
21.6
25.1
22.1
17.4
16.9
30.2
19.4
11.3
8.2
9.4
11.2
15.1
21.0
14.2
7.5
10.2
10.4
11.0
7.9
7.0
8.3
10.5
4.3
17.6
Source: *BPS, 1992, Population of Indonesia: Result of Census 1990, Jakarta, Seri S2, p.312
**BPS, 2011, Ketenagakerjaan Penduduk Indonesia: Hasil Sensus Penduduk 2010, Jakarta, p.48, 49 , 50 and 51
Services
38.6
41.0
44.1
40.9
33.7
31.4
31.8
29.9
37.1
48.1
77.4
50.2
38.9
48.9
38.4
50.8
49.4
35.7
23.3
28.0
31.6
41.8
49.7
50.6
33.6
38.7
37.5
46.4
28.4
41.4
37.7
42.4
20.5
41.9
Conclusion
Demography variables need to be
consider in analysis of potential, in
expansion of market and in developing
bussiness activities
Writing individual paper
Topic : Relationship between business activities and demographic
variables as a dependence or an independence
Length : Maximum 5 pages (not including cover, references and
attachments
Writing in font type new time roman ,font 12, and spacing 1.5
In analyzing only looking at OT (opportunity and threat)
Time: regular 2 weeks
non-regular 4 weeks