Demographics is the study of how a population based on factors such as age, race, sex, economic status, education, income, and employment affect various outcomes. Demographics are typically used to learn more about a population’s characteristics. Businesses must rely on demographics as a key method for planning.
Labor force
Back in 1960, the American labor force was dominated by 21-45 year old white males. Today, we have a far more diverse labor force when viewed according to age, sex, race, and ethnicity. These changes in the labor force require an entirely different structure of practices, strategies, and culture.
The growth of women in the labor force fueled economic growth throughout the 80’s and 90’s with the female labor force increasing over 50 million workers since 1960 and going from 39% to 47% from 1980 to 2009. In contrast to that growth factor, we now have workers over 45 increasing from 31% to 41% of the population. The makeup of the labor force constantly changes over time and businesses need to stay on top of these trends.
Income
Businesses need to understand and focus on income groups that are most important to their markets. The ever increasing diversity of incomes, has caused dramatic shifts in the wealth of various groups. Specifically, the top 1% of the population accounted for 60% of all such income in 2007. The top 1% of population accounted for only for 50% of income back in 1979. Similarly, of the top 15 U.S. employers in 1990, 60% of the employees were in manufacturing. In contrast, in 2010, 67% of the top 15 employers’ employees were in retail jobs.
Race
This diversity also extends to racial trends. Since 1990, the white population has decreased from 80% to 75% and is expected to continue to decline over the next several years. According to the U.S. Census, by 2043 whites are expected to be a minority of the American population. In 2012 there were more non-white births than white in the U.S. This changing demographic has tremendous significance for employers and companies selling products and for society.
Conclusion
Understanding demographics can provide great opportunities for startup businesses. While we discussed national trends, the issues vary even more significantly in local markets when demographics are taken into account. One needs to constantly evaluate relevant demographics and demographic trends as they relate to one’s business both in the now and in the future. Demographics can be one of the keys to your business’ success or failure.
Bert Shlensky is president of www.startupconnection.net. An integrated approach to starting a business incorporates several aspects of demographics especially in areas that include targeting, forecasting, and marketing.