Thriving amid turbulence: Imagining the cities of the future

Here is an excerpt from an article written by Joe Frem, Vineet Rajadhyaksha, and Jonathan Woetzel for the McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out the wealth of free resources, obtain subscription information, and receive HBR email alerts, please click here.

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Four major forces are shaping cities of the future. How can they thrive in the face of challenges and change?

The world faces unprecedented rates of urban expansion. According to the United Nations, 55 percent of the global population currently lives in cities. By 2050, that number is expected to reach 68 percent, which means an additional 2.5 billion people will reside in urban areas. China’s cities alone will be home to a staggering 900 million people.

Although cities may appear to be in a state of continuous expansion, their population growth has historically occurred in cycles. Innovations have generally addressed the challenges posed by rising populations, only to be replaced by new hurdles. For example, the early 20th century invention of the automobile has addressed some of the difficulties associated with long commutes. However, as cities are increasingly designed to accommodate cars instead of people, sedentary lifestyles have become common and health issues proliferate.

New and complex issues are emerging, and today’s cities are likely on the cusp of the largest global economic transformation to date. As governments steer cities into the future, they would be well advised to consider the following:

  • Talent, technology, climate, and globalization will be key shapers of the city context.
  • Citizen well-being will be the metric of success.
  • Cities and residents must collaborate to shape the initiatives that matter.

This discussion paper explores four major forces shaping today’s cities—from resource stresses to increasing internationalization—and lays out a 14-point vision for thriving cities of the future. The challenges at hand are daunting and complex, and navigating them will be no easy task. We hope this discussion articulates the elements that will define long-term success for city leaders and provides a useful aspiration as they steer their communities into the future.

Four forces shaping cities

The world is undergoing its most dynamic era of change. Four forces are poised to have an outsized impact on the way cities evolve: the competition for talent, an increasingly connected world, the Anthropocene age, and technology’s ever-expanding role.

[Here is the first of the four forces.]

1. The competition for talent

Population changes are, in our view, going to have a dramatic impact on the competition for talent in urban areas.

From 2000 to 2012, rising populations were the key driver of urban growth. Approximately 60 percent of the GDP growth of large cities was rooted in an expanding population, while the remaining 40 percent was due to rising per capita income. Cities are now, however, feeling the effects of a double demographic shift. First, the pace of urban migration is decreasing in many regions. Second, global population growth is declining, due to declining fertility rates and an aging population (Exhibit 1).

Population growth in cities is poised to decline as the transition from rural to urban areas runs its course and populations age.

The impact of these demographic shifts on cities is related to their shift from rural to urban contexts. In Europe and the United States, which experienced the shift in the 18th and 19th centuries, 80 to 85 percent of the population now resides in cities. China’s population, by contrast, is about halfway through the shift, with city dwellers constituting roughly 50 percent of the overall population. In India, which is currently in an even earlier stage of the shift, only about 20 percent of the population lives in cities.

As the transition from rural to urban areas plays out and as populations age, the number of young adults (those between 15 and 29 years of age) will decline. By 2025, more than 60 percent of large cities in developed regions and 47 percent in developing regions will have fewer young adults than they do today. According to our survey of more than 1,500 cities across developed and developing countries, the average age of residents currently ranges from 23 years in Shillong, India, to 48 years in Punta Gorda, Florida.

As the number of young adults declines, the competition for talent will intensify. And, while cities must attract businesses that will expand the number of jobs, they will also need to create vibrant, livable environments that draw high-caliber talent.

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Here is a direct link to the complete article.

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