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DEMOGRAPHIC VARIABLES AND ITS

SIGNIFICANCE FOR BUSINESS ACTIVITIES

By
Tadjuddin Noer Effendi

Faculty Economic and Businiss


Gadjah Mada University
Yogyakarta 2015

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
2.29
2.09
2.94
0.58
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

Golonga
n umur

Angkatan Kerja Bekerja di Sektor Pertanian


Menurut
Golongan Umur di Kabupaten/Kota
se-DIY
Kulon
Bantul Gunungkid Sleman
Kota
DIY
Progo
(%)
ul
(%)
Yogyakarta
(%)

15-19

(%)
0,18

0,49

(%)
1,04

0,32

(%)
0.43

0,61

20-24

0,99

3,13

3,92

2,05

2,57

2,88

25-29

2,59

6,67

4,83

4,43

4,98

4,96

30-34

4,75

10,15

6,47

7,30

7,49

7,46

35-39

6,96

10,77

7,55

9,21

9,27

8,74

40-44

9,49

11,70

10,06

10,81

10,71

10,61

45-49

12,05

12,20

10,45

11,25

12,33

11,38

50-54

12,89

11,75

11,23

11,04

13,38

11,63

55-59

11,80

9,77

10,71

10,57

12,90

10,61

60-64

9,55

6,57

9,23

8,17

8,69

8,29

65-69

8,43

4,97

7,38

7,06

4,89

6,72

70-74

8,69

5,03

7,43

7,27

5,09

6,84

>=75

11,63

6,81

9,71

10,52

7,26

9,25

100

100

100

100

100

100

131.918

261.586

318.005

169.127

17.611

898.247

Jumlah
%
N

Sumber : Kemendagri, hasil olahan data SIAK semester II 2013

24,67 %

75,33
%

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

150

119.2

In miliion)

97.1

100

60.7
50

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
2.22.15

2.13

1.98

1.8
persentase (%)

1.49

1.4

1
1930-1961

1.35

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.

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 010 decrase


The cost can be shifted for
saving and investation

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

Countries

Total dependency
Child dependency
ratio
ratio
2000 2025 2050 2000
2025 2050

Old dependency
ratio
2000 2025 2050

Economic support
ratio
2000 2025 2050

Japan
South Korea

0.468
0.393

0.250
0.094

0.637
0.647

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

0.673
0.477

0.838
0.678

0.217
0.299

0.226 0.254
0.252 0.270

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)

0.447 0.583
0.226 0.417

0.582
0.622

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

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

old
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

Source: Hugo, Graeme, 1981, p. 8

Source: Hugo, Graeme, 1981, p. 9

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

Source: Hugo, Graeme, 1981, p. 9

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*

Provinces

Participation by provinces
Open Unemployment
Rate
Labor Force Participation Rate and Labor
OpenForce
Unemployment
1990 and
2010 Labor Force Participation
Rate (%)
(%)
Rate (%)
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

Source : BPS, 2011, Laborer Situation, Agust 2010, Jakarta, p. 25, 26, and 27

Percentage of Population 10 Years and over Worked During The previous Week by Industry and Province in 1990 and 2010
1990 (%)*

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

2010 (%)**

Agriculture

Industry

Services

Agriculture

Industry

Services

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

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

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

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

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