Millennial vs. Generation X spending power in South America: Colombia
Our last blog post in our South America series reported on the Millennials and Generation X's contribution of spending power development in Peru. Today, the focus is on Colombia, another upper-middle-income country (as defined by the World Bank) which had an annual average spending power per capita of $8,022 (in 2011 PPP) at the end of 2018. For the following analysis, we used Market Pro which provides insights concerning spending power segments and age cohorts for every country in South America. Millennials refers to the generation born between 1980 and 2000, and the preceding Generation X refers to those born between 1960 and 1980.
The amount of rich people in Colombia with a daily spending power of more than $110 (in 2011 PPP) is going to rise significantly over the next ten years. Today, there are 810,000 people in this income group and it is expected that this number will double to some 1.6 million by 2028. Over the same period, the Colombian middle class ($11-$110 daily spending power) will grow by 27% to around 35.5 million people by 2028 according to World Data Lab’s and Market Pro’s forecasts. While middle class and wealthy segments of Colombia are expected to expand, the share of the poor (less than $5) and the vulnerable ($5-$11 daily spending power) people in the total population will decrease by 22% and 6% respectively over the next ten years.
Millennials are getting richer...
In terms of generations and age groups, the number of Millennials in Colombia’s wealthy segment is expected to increase by 87% over the next ten years while their number will remain stable in the middle class with only a slight increase of 7%. By 2028, the poor and vulnerable segments of Colombia’s Millennials is forecasted to decrease by 26% and 17%, respectively. All in all, Millennials represent a 35% share of Colombia’s middle class in 2018. Given demographic trends, this share will drop to 29% in 2028. Similarly, while Millennials represent 33% of the wealthy segment now, their share will drop to 31% over the same time span.
... but Generation X will be even richer
On the other hand, Colombia’s Generation X will record the relatively highest growth in the rich income group with an increase of 140% between 2018 and 2028. Thus, the share of Generation X in this income segment will rise from 32% to 38%. Age is highly correlated with income due to advanced careers. By 2028, Generation X members will be between 50 and 70 years old – which is why they represent such an extraordinary increase in the rich segment. This projection is correlated by the respective 39% and 31% drops in the number of Generation X members of the poor and vulnerable income groups.
The next 10 years
Colombia’s increase in spending power within the next ten years will be mainly driven by Generation X, which is expected to move heavily into the rich segment with an annual average daily spending power of more than $110. It can also be observed that this will consist of almost all members of Generation X as only a small fraction will move up from the vulnerable to the middle income group (between $11 and $110 per day). The vulnerable and poor segments are expected to witness a further shrinking percentage of Generation X members – which also holds true for Millennials and the Colombian population in general.