Episode Summary

In this episode of Signals, Nick Mazing hosts James Pomeroy, Global Economist at HSBC. They delve into the complex world of demographics and its impact on the global economy. James shares his expertise in collating country forecasts and creating a global view, while also touching on his thematic views on the digital economy, urbanization, and demographics.

First, James discusses the basic demographic data types, like Total Fertility Rate (TFR), working age population, and dependency ratios. 

James recently published a report on the potential shock to demographic projections caused by climate change and migration. This report sheds light on the intricate relationship between these global phenomena and their potential to reshape our world.

James then covers the complex dynamics of intra- and inter-country migrations, and the implications for population growth around the world. While demographic and migration projects over decades are very difficult, it is possible that small and currently “cold climate” economies, such as Canada and Scandinavia, experience population growth substantially above current projections, while Africa, currently viewed as the largest source of global population growth, experiences a decline in population over decades-long timeframe.

Finally, we discuss the major social challenges that come along with increased migration, from housing to integration into the workforce.

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💡 Name: James Pomeroy 

💡What they do: Global Economist

💡Company: HSBC

💡Noteworthy: Expert in global economics with a focus on demographics and climate change.

💡 Where to find them: HSBC The Macro Brief podcast: Apple Spotify


Key Insights 

The Role of a Global Economist

James Pomeroy, a Global Economist at HSBC, explains his multifaceted role. His responsibilities include collating individual country forecasts from HSBC’s team of economists around the world to form a coherent global view. Additionally, he develops overarching thematic views on long-term trends driving global economies. These themes span a variety of topics, including the digital economy, urbanization trends, and demographics. Pomeroy emphasizes the importance of considering these themes, particularly demographics, in today’s world.

Climate Change and Migration

Pomeroy discusses his recent report titled “Climate Change and Migration: A Potential Shock to Demographic Projections”. He highlights the significant challenges posed by demographics and explores the less obvious effects of climate change and migration on these trends. He emphasizes the need for proper housing and integration of displaced people into the workforce and society, as climate change is likely to cause greater global migration flows.

The Impact of Climate Change on Migration

Pomeroy brings up the concept of climate refugees and climate migrants – people forced to migrate due to climate change. He explains that over time, climate change is likely to make more economies inhospitable, causing outflows of people. He also notes that certain economies, such as the UK, Australia, and Canada, which have historically taken in a lot of inward migrants, could be significantly affected by these migration flows.


Episode Highlights 

The Role of a Global Economist 

Timestamp: [00:00:00 – 00:02:00]

The episode kicks off with host Nick Mazing introducing James Pomeroy, a Global Economist at HSBC. Pomeroy explains his role, which involves collating individual country forecasts to form a global view and developing thematic views on long-term trends driving global economies. He emphasizes the importance of demographics in today’s world. 

“My job as a global economist at HSBC involves lots of different things. We have a team of economists based all over the world who look after our individual country forecasts […] And my job as a global economist has sort of two hats.”

Demographic Terminology 

Timestamp: [00:03:00 – 00:04:00]

Pomeroy provides a walkthrough of the main terminology in the demographic space, including population size, working age population, dependency ratios, birth rate, death rate, and migration. He explains how these factors drive demographic projections.

“Those demographic projections are driven by three main things. They’re driven by a birth rate […] we also have to think about death rates […] But also we have to think a lot about migration.”

Concept of Climate Refugees and Migrants 

Timestamp: [00:05:00]

The discussion moves to the concept of climate refugees and migrants, people forced to migrate due to climate change. Pomeroy explains the slow burn effect, where climate change over an extended period makes certain areas largely uninhabitable.

“The first is that there’s the slow burn effect here, which is essentially that climate change over the course of an extended period of time makes certain areas, certain regions, certain countries largely uninhabitable.”

Integration of Displaced People 

Timestamp: [00:14:00]

Pomeroy discusses the importance of integrating displaced people into the workforce and society. He emphasizes the need for investment in housing infrastructure, job market integration, and language training.

“It’s going to be very, very important to make sure those people who have been displaced are able to integrate well into the countries they are essentially forced to live in or the parts of the world they’re forced to live in.”


Full Transcript

Nick Mazing: [00:00:00] Hello and welcome. You’re listening to Signals by AlphaSense, and I’m your host, Nick Mazing. Today we welcome back James Pomeroy, Global Economist at HSBC out of the UK Loyal listeners will recall that we did an episode with James back in February where he covered a number of macro themes and one of them was demographics and they were going to take a deeper dive in demographics.
Listeners can access James’s research in AlphaSense, but also James is a frequent guest on HSBC’s Macro Briefs podcast, and we’re going to have the links in the show notes. James, welcome back. And can you tell us a bit more about you and the macro team at HSBC?

James Pomeroy: Fantastic. Well, firstly, thanks very much for having me back. We had an enjoyable discussion last. Time and hopefully this one’s just as fun.   so my job as a global economist at HSBC involves lots of different things. We have a team of economists based all over the world,   who look after our individual country [00:01:00] forecasts.

So they’re real specialists in the region, usually where they’re based or, or in the region where they’re based. Uh, and they provide those forecasts. And my job as a global economist has sort of two hats. One is to take those views, collate them all together into one sort of coherent global view of the world.

The second part of it is to come up with the. Sort of overarching, both global view, but also some of the thematic views,   about the longer term trends driving the global economies. So that can be on a whole load of different topics in terms of a digital economy, in terms of urbanization trends or as we’ll discuss today in terms of demographics, which,   is really at the heart of a lot of that thematic view,   that I think you have to, to be honest, spend much more time thinking about,   in the world today.

Nick Mazing: So speaking of demographics, which is the focus today, you have a very interesting report that came out recently on May 24th. The title is, Climate change and migration, a potential shock to demographic, projections [00:02:00] and demographics is one of the biggest challenges that faces the world today. And you discuss some of the less obvious effects on the trends coming from climate change and migration.

And before we dig into that, can you give us a quick walkthrough of the main terminology in the demographic space, like TFR, total fertility rate and so on.

James Pomeroy: Yeah, of course. So when you think about demographics, there’s loads of different things we need to consider. Firstly, you have population size, but it’s not just the total population we care about. It’s the working age population. It’s the pensioner population, the child population, which is relatively straightforward when think about what they are.

But if you hear someone say the working age population, they typically means 16 to 64 years old or growth rate in that population. So if you’ve got a growing working age population that’s seen as good in terms of having more workers, more taxpayers, more consumers, all of those things, if you have a growing, uh, elderly population, that can become problematic in some ways in terms of additional fiscal expense.

So in terms [00:03:00] of healthcare, in terms of pensions, You also have, essentially, on top of that, you have dependency ratios, which is essentially the, the ratio of one of those to the other.   so the number of workers to the number of pensioners, for example, the number of workers to non-workers, which includes children.

And essentially that’s a measure of how demographics look in terms of your fiscal positions. So you’ve got more workers relative to non-workers and so on. And those demographic projections are driven by three main things. They’re driven by a birth rate. Now, you think about birth rate, you can even define that as a.

Number of births per person in a given year or number of births per thousand people. They’re generally quoted as, or a fertility rate you mentioned in the question, which is essentially a number. That’s the average number of children that a woman would be expected to have during their lifetime in a population at that time.

And that number is in the west now, worryingly low.   but we look at these numbers relative to a replacement rate, which is 2.1. So if the average woman has 2.1 children, [00:04:00] your population stays steady. And then on top of that birth rate, we also have to think about death rates. Of course, that’s a little bit,   less and less exciting to, to think about.

We have to think where they’re going. But also we have to think about a lot about migration, uh, and those migration projections, both in terms of the number of people, but also the age profile of people when they migrate.   and those three things are really the building blocks of those demographic projections in terms of the shape and size of, of populations.

Nick Mazing: And in your report you bring up the concept of climate refugees and climate migrants, and that is people who are forced to migrate due to

James Pomeroy: So there’s many ways can play out, but there’s

Nick Mazing: are some of the ways

James Pomeroy: fundamental how this can happen. The first is which, that there’s the slow burn effect here, which is essentially the climate change over the course of a extended period of time makes certain areas, [00:05:00] certain regions, certain countries largely uninhabitable.

And that can be in terms of the ability to sustain human life or the ability to.   provide certain types of industry. So certain areas may be unusable for farmland or they may be not appropriate to do construction work or whatever it needs to be. May make areas,   slightly less,   attractive places to live, to work and to stay.

And therefore you could get people moving out of those areas. And that doesn’t necessarily need to be across borders, it can just be away from those sorts of areas. A similar area that gets affected by this is, Is from higher sea levels. Essentially over the course of time, as sea levels continue to rise, some coastal areas become uninhabitable.

Uh, and therefore you may see some migration away from those areas too.   so that’s almost like your incident disasters. When you think about some of these things, they’re greater prevalence of natural weather events, which are hugely, hugely damaging. Be it in terms of tsunamis, be it in terms of earthquakes, be it in terms of hurricanes, you name it, all of these things.

  are [00:06:00] happening,   in some cases much more frequently because of climate change. And all of these shifts can basically drive people away from where they’re living,   from those one-off events. If you get greater probability of those events happening,   then that too can lead to huge surges in climate induced migration. So this is where things get quite So if you think about migration historically,   a lot migration place

Nick Mazing: cold weather

James Pomeroy: poorer economies and into higher income economies. That’s traditionally how about migration, but in the course of the coming decades, This is not necessarily a story we’re just thinking about in 2023.

This is a longer term story. What you could well see is people moving from countries which are inhospitable due to climate change, to some that are more hospitable due to [00:07:00] climate change. So your potential winners, I guess, from a population perspective in terms of where will become more appealing for people to live are those countries today that may be seen as being too cold.

  so particularly in extremes of the world. So in the northern and southern hemispheres, there’s certain economies that are ripe,   for people to be wanting to move to much more in the future than they do today. So the obvious example, On a global scale, somewhere like Canada,   where you’ve got a very, very large economy,   large parts of the,   economy today are largely uninhabited.

  and you have a sort of climate that may become more appealing,   more temperate,   as the world,   morphs. The same could be true in parts of Scandinavia, Northern Europe, uh, northern parts of Asia as well, but also in the southern hemisphere.   the same could be true in in some parts,   of the world too.

So those countries will naturally become slightly more attractive places to live ’cause of climate change, lifting their temperatures up to being slightly more hospitable. Then on the other end of the spectr  you [00:08:00] have these economies that are both. Hotter and therefore harder to live in. And the most obvious candidates here are those countries around the equator,   or sub-Saharan Africa as well.

So you could well see,   enormous amounts of climate, uh, refugees essentially from these economies. Who have to then go somewhere else, which is slightly more hospitable. So you could see a huge outflow of people from those economies to other parts of the world. Also, those economies that are much more susceptible to natural disasters.

  so this is generally places in Southeast Asia look a lot more vulnerable countries who are vulnerable to higher sea levels.   island nations is a good example of that as well. And so what you could then see is those economies seeing outflows of people. Now, the obvious sort of caveat to this is when we think about temperature and we think about migration, you can draw a nice sort of roughly neat scatter plot that shows sort of,   migration rates versus   temperatures.

But the countries we don’t have that data for in the sort of a timely basis, are the hottest [00:09:00] economies in the world. So you have places like.   Saudi Arabia or some Middle Eastern states like,   the United Arab Emirates or Qatar, we have very, very high migration levels, net inward migration, despite these being some of the hottest economies in the world.

So just because economies are warm, temperature wise, doesn’t mean that they won’t see inward migration. But what we’re saying in the report is that over the course of time, Climate change is likely to make more and more economies inhospitable for one reason or another. And we could see outflows of people relative,   to those people looking more towards those countries today.

  that well will become more hospitable in the future. Yeah, there’s a lot

Nick Mazing: So bringing all of this together, uh, how do you see the [00:10:00] projections from UN at current level actually being affected by the 

James Pomeroy: into account things that go into those projections.

So you have. Sort of the, the beginning, you have a birth rate assumption, you have a death rate assumption, you have a migration assumption. And,   we, we’ve spoken a lot in recent years about why we have a lot of skepticism about the birth rate assumptions. We think birth rates will be much, much lower and that affects your global population in particular affects some country populations.

But that global population story, we think,   will be one of much lower populations globally and by the end of this century. But then within countries, you’re gonna get this impact that comes from migration flows. And if you look in the UN’s assumptions, they basically assume that we’ve had this steady rise in migration for many years,   over the course of the last couple of decades.

That then just drops back to a much, much lower level going forward. Now, this isn’t having a go at the UN at all. They admit in the, uh, in, in the documentation around these forecasts that basically forecasting migration is close to impossible and therefore you have to take these numbers with a, a substantial pinch of salt.

So what we [00:11:00] did during the construction of this report is we put into a model, a very simplistic demographic model, a lot of different migration scenarios, and you start looking at some smaller population economies that historically have taken in quite a lot of inward migrants. So great examples are the UK or Australia,   or somewhere like Canada’s another one of these.

And you say, well, what happens if instead of migration rates coming back down in the course of the next few years or the next few decades, what if they actually accelerated higher? Not just because of climate change and migration, because of this trend that’s been placed today, but what happens if it then got much more stronger because of those climate change shocks?

And suddenly you start thinking, well, actually, what if, you know, what if some of these demographic projections that we all take as granted in terms of shrinking populations in Europe or   populations that are continuing to grow very, very quickly in sub-Saharan Africa. What if the opposite is true? Now what if actually climate change means [00:12:00] that we need to have more people,   globally for the sustainability of mankind living in areas that are more hospitable and Europe becomes much more densely populated.

That is today. And there’s a scenario we put in the report, which isn’t, I don’t think, out of the realms of possibility and your sort of worst case scenario in terms of sort of global climate change shocks where we could have a situation over the next 50 years where Europe’s population grows. Africa’s population shrinks and that’s not a scenario that anyone really spends a lot of time thinking about.

And then you go to some of the country examples and you look at those places that could become much more attractive places to live. I mentioned Canada earlier, you know, it’s plausible that in the course of our lifetime, the Canadian population doubles.   it’s plausible that the population of places like the UK or Australia or Sweden, countries that historically have taken a lot of migration, they see much, much more,   elevated population growth numbers than you would typically expect because the volume of migration coming in, you [00:13:00] just have to remember how many people there are in this world.

How many people live in these countries that are at risk, the greatest risk. From these climate change shocks and you think just a small percentage of those people landing up in some of these smaller population economies can have a dramatic impact on those populations there. Now it’s worth saying that’s just part of the, that’s part of the, the problem, part of the challenge is where people are going to be.

We, it’s very, very hard to model that accurately. What we also need to do though is think seriously about some of the policy challenges this creates, and it’s all fine and well saying, okay, what if Canada’s population was to double? Well, that’s all fine and well, but their policies need to be in place to make the most of that population doubling.

We need to make sure the housing is. Correctly provided we need to make sure that people can be integrated into the workforce, integrated into society. These are going to be big, big existential challenges that governments and policymakers are going to have to tackle, I think in the years to come.

Because even if we don’t go to these extreme scenarios like we’ve just been talking about, it seems quite likely that [00:14:00] climate change is going to be much, much greater flows of migration globally. And when it does, it’s gonna be very, very important to make sure those people have been displaced. Able to integrate well into the countries they are essentially forced to live in or the parts of the world they’re forced to live in.

And that’s gonna require that investment in that housing infrastructure, getting people in the jobs market language training, and all of those things that are so important. And if we can do that, then actually maybe things look slightly more positive than they might initially do on the first look. And we could help to correct some of the demographic imbalances we’ve got, particularly in the developed world. Thanks very much.

Nick Mazing: James, thank you for joining us today. Today we spoke with James Pomeroy, global economist at HS C. We discussed the trends in global demographics and the [00:15:00] factors that influence them, specifically climate change. If you like what James discussed, you can listen to him. The rest of the H S B C research team on the macro brief by HS C Global Research Podcast on Apple, Spotify, or wherever you get podcasts from who have the links in the show notes.

This was another episode of Signals by AlphaSense. My name is Nick Mazing and you can find us on all the major platforms. Thank you for watching or listening.