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What are Demographics?

Robinhood LearnJune 18, 2020
Democratize finance for all. Our writers’ work has appeared in The Wall Street Journal, Forbes, the Chicago Tribune, Quartz, the San Francisco Chronicle, and more.
definition

Demographics are statistical data about a population — such as age, gender, and race — as well as the study of this data.

🤔 Understanding demographics

Knowing how many people live in a certain place or buy a given product can be helpful, but governments and businesses often want to know more. Demographic data provides statistics about the detailed characteristics of a population or group. This can include age, gender, race, marital status, number of children, occupation, annual income, education level, and more. Demographic information offers valuable insights into how populations are organized, their size, and their composition. By using demographic data, a business can determine the size of its potential market and how to segment its target customers. Demographics can play a significant role in the health of an economy. Governments also use demographic data to apportion resources, draw up voting districts, plan policy initiatives, and more.

example

The US Constitution requires the government to conduct a national census regularly, which it has done every 10 years since 1790. These days, the census collects a variety of demographic data from every household, including the gender, age, and race of occupants. According to the 2010 census, the US had a population of 308.7M, of which 72% was white (including Hispanics), 13% was African-American, and 5% was Asian-American. The next census will take place in 2020. Demographic data collected through the census helps determine how federal funding is distributed and the number of congressional seats and Electoral College votes states get.

Takeaway

Demographics are kind of like pizza toppings…

Demographic characteristics are what make people unique, just like toppings make one pie different from another. Collecting demographic data offers a way to segment populations or groups based on a variety of attributes.

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Tell me more...

What are the types of demographic data?
How is demographic information used?
What are examples of demographic trends?
How do demographics affect the economy?
What are company demographics?
What is the demographic dividend?

What are the types of demographic data?

The most common types of demographic data reveal the social and economic characteristics of a population. These can include:

  • Population size
  • Population density
  • Age
  • Gender
  • Ethnicity
  • Education level
  • Marital status
  • Birth rate
  • Mortality rate
  • Income
  • Employment

In the United States, 13 agencies are responsible for gathering demographic data:

  1. Bureau of Economic Analysis (BEA): Key statistics about the economy, such as personal income and gross domestic product (GDP).
  2. Bureau of Justice Statistics (BJS): Information on crime and the criminal justice system.
  3. Bureau of Labor Statistics (BLS): Statistics about the labor market and prices, such as unemployment and inflation.
  4. Bureau of Transportation Statistics (BTS): Transportation data, including safety, performance, and infrastructure.
  5. Census Bureau: General population demographics, such as age, gender, income, poverty level, etc.
  6. Economic Research Service (ERS): Farming, nutrition, safety, and other food-related stats.
  7. Energy Information Administration (EIA): Information on energy consumption and production.
  8. National Agricultural Statistics Service (NASS): Detailed agricultural statistics, such as crop production and prices.
  9. National Center for Education Statistics (NCES): Data about education in the US, including K-12 and colleges and universities
  10. National Center for Health Statistics (NCHS): Stats on health and human services, such as doctor’s visits and vaccinations.
  11. National Center for Science and Engineering Statistics (NCSES): Science and engineering data, including research and development spending.
  12. Office of Research, Evaluation, and Statistics (ORES): Social Security, retirement and disability data.
  13. Statistics of Income (SOI): Income and tax statistics for businesses and individuals.

How is demographic information used?

Anyone can access and use publicly shared demographic data. For instance, academic researchers often use this information for studies on sociology, human behavior, and more. But governments and businesses tend to be the primary users of demographics.

Governments collect data for a variety of reasons, but the main one is to help agencies and lawmakers make better decisions. For instance, the Department of Labor conducts surveys to determine the employment rate, which goes into the agency’s monthly jobs report. This report is an essential indicator of the economy’s well-being, since it provides a snapshot of the labor market. Government agencies use the jobs report to determine what actions to take to stimulate or restrain the economy. For example, the Federal Reserve, the country’s central bank, refers to this data when deciding whether to cut or hike interest rates.

For most businesses, demographic information comes in handy when deciding how best to target a consumer. Let’s say an arcade chain is looking to expand to a new location. Demographics such as age and the number of children would be instrumental in determining the optimal site.

Demographic information is handy because it’s relatively easy to collect and represent in visual form. But demographics sometimes lack depth. For instance, consider the case of a television network that states that 80% of its viewers are women. This information doesn’t give us a lot of insight into the types of women who watch the network: Are they young or older? Well-off or low-income? Plus, knowing that statistic doesn’t clarify why more women than men are viewers. However, combining lots of demographic information can give you a more comprehensive picture of the audience.

What are examples of demographic trends?

Demographic trends are changes in a population over time. Most of the time, demographic trends are the result of shifting social, political, and economic contexts.

According to US Census Bureau projections, one important demographic trend is that older people will outnumber children for the first time in history by 2030. That year, one in five U.S. residents will be older than 65. The dependency ratio (ratio of working-age to retirement-age adults) will rise, potentially placing a higher burden on younger generations and hindering economic growth.

Another trend is that households headed by millennials (people between 23 and 38 years old) earn more than older Americans did at their age. Despite this, millennials have less wealth than baby boomers (people 55 to 73 years old) did when they were young, which has been attributed to today’s higher levels of student debt.

Another interesting demographic trend is that, although average household income in the US is at its highest level in 50 years, the share of Americans in the middle-class has fallen over that time. The percentage of Americans considered to be middle-class dropped from 61% in 1971 to 52% in 2016.

How do demographics affect the economy?

Demographics play an influential role in the health of the economy.

An easy way of calculating economic growth is by using gross domestic product. GDP measures the total value of goods and services produced in a country over a specific timeframe, usually one year. When you compare year-over-year changes in GDP (adjusted for inflation), you can see if the economy is growing, staying the same or shrinking.

In the last century, demographics in the US have shifted: Families are smaller, while lifespans are longer. As a result, the country’s population is aging. This factor is a primary reason that GDP growth has stagnated in the US over the last few decades.

There are three main reasons why economists believe an aging population is causing GDP growth to slow: 1. There are fewer working-age people to provide labor and create goods and services. 2. Lower population growth can lead to higher taxes –- If the government is to keep the same level of tax revenue from fewer people, then each person has to pay more. Higher taxes means less money left over to purchase goods and services, which means lower demand. 3. Older people are known to save more and borrow less, meaning less money is going toward investment growth.

Other demographic characteristics can also affect the economy. For instance, as a country’s education level increases, it produces more skilled workers, which typically increases productivity and boosts economic growth.

What are company demographics?

Company demographics can describe the characteristics of a firm’s target customers. In the B2B (business-to-business) market, where the target customer is another company, some company demographics are:

  • Ownership: Is the company public or privately held?
  • Location: Where is the business based, and does it have multiple locations?
  • Employees: How many employees does it have?
  • Maturity: How old is the company? What stage is it in (i.e. start-up, growth, decline, etc.)?
  • Financials: What are the company’s annual revenues and profits?
  • Offerings: What products and services does it currently offer?
  • Market: Which industry does it operate within? What is its target market?
  • Culture: What is the company culture like? What are its values?

Company demographics can also be used for B2C (business-to-consumer) companies. These would focus on the demographics of individual purchasers, such as:

  • Basic demographics: Gender, age, race, education level, etc.
  • Financials: Household income, savings, investments
  • Home ownership: Rent vs. own, home value
  • Marital status: Married, divorced, single
  • Children: Number and age of children
  • Employment: Type of employment (part-time, full-time, casual), job level (director, entry-level, etc.,) and employer sector

Demographics can help companies determine where they should focus sales, marketing, and growth efforts. They can help companies predict the future, since there are patterns in the way people move through life stages. For example, young single people tend to move near the city center, while many young families prefer living in the suburbs. Looking at demographic trends can help a company predict future scenarios, such as which suburb will have the highest concentration of school-aged children next year. With this information, a business can decide which products are likely to be a hit in the area and how to structure future marketing campaigns.

What is the demographic dividend?

The demographic dividend refers to the accelerated economic growth that can happen when a population has more people who are working-age than those who are not (children and elderly people). This usually occurs when a country’s fertility rate declines, which can result from improvements in public health, more access to education among women, or other factors.

With more workers and fewer children to support, a country has a window of opportunity to speed up economic growth.

A real-life example of the demographic dividend took place in Ireland. In 1985, the Irish government legalized the sale of non-medical contraceptives to anyone over 18, which caused fertility rates to drop. By the mid-1990s, Ireland was experiencing an economic boom, thanks in part to this change –- Fewer dependent children meant more women were able to work.

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