The economy of ageing

Have you ever thought who the playmates of your great grandchildren would be? Kids, of course, you’d say with a smirk. Hold your assumptions, it would in all probability be their grandparents. No kidding. There would not be enough kids around by then

Well, it is one sensational way of saying the world is increasingly growing grey, and it won’t be long when one-third of the population would be seniors, another one quarter – adults and mid-age and only one quarter will be children.

The rich world’s population is already ageing fast and the poor world is only a few decades behind. The UN’s latest biennial population forecast shows the median age for all countries is due to rise from 29 now to 38 by 2050. At present just under 11% of the world’s 6.9 billion people are over 60. Taking the UN’s central forecast, by 2050 that share will have risen to 22% of 9 billion, and in the developed countries to 33%. Japan is already there.

A new study by the global real estate services firm Jones Lang LaSalle says that compared to the overall population, which is growing at 1.8% per annum, the population of those who are age 60 and older is growing at 3.8%. Their number — which currently stands at 100 million — is expected to increase to 240 million by the year 2050. Further, with the rate of growth in the senior populations of developing nations projected to be double that of developed nations, India and China are expected to have almost 50% of the world’s 1.3 billion seniors by 2040.

In the beginning of the last century, average life expectancy at birth for the world as a whole was only around 30 years, and in rich countries under 50. The figures now are 67 and 78 respectively, and still rising. Raising age expectancy is not a bad news, nor is it a crisis but it calls for cataclysmic change in the socio-economic system. World will be different from what we are accustomed to so far.

A second, and bigger, cause of the ageing of societies is that people everywhere are having far fewer children, so the younger age groups are much too small to counterbalance the growing number of older people. In the early 1970s women across the world were still, on average, having 4.3 children each. The current global average is 2.6, and in rich countries only 1.6. The UN predicts that by 2050 the global figure will have dropped to just two.

Consequences

Shortage of labour force: As more people retire, and fewer younger ones take their place, the labour force will shrink, so output will drop unless productivity increases. Since the remaining workers will be older, they may actually be less productive.

Financial market: Ageing will affect financial markets severely. Life cycle theory of Franco Modigliani’s and Richard Brumberg say people tend to spend more in their youth and old age and save more in their middle years. In fact, the market will have to win the seniors, not the young or the middle-aged. Things dear to the aged people will make advance; such as health, tourism, pilgrimage and sex industry.

Pension: Dramatic rise in pension and other welfare care will result. Even today, the government of India, for instance, is spending additional `545 crore on pension due to enhanced life of pensioners. Whereas a pensioner died at the average age of 50-55 some 50 years ago, the average life has gone up 65-70 years. In countries where public pensions make up the bulk of retirement income, these will either swallow up a much larger share of the budget or they will have to become a lot less generous, which will meet political resistance (and remember that older people are much more inclined to vote than younger ones).

According to “Selling to Seniors,” a monthly marketing report, people above 50 control 77 per cent of all financial assets in the United States, own almost 50 per cent of all credit cards, and account for more than 50 per cent of discretionary spending power — 2.5 times the average per capita. Poor in data, India does not offer a similar picture, but it’s a safe bet that what the rich countries do today, we follow tomorrow.

Government must change its outlook

The whole public finance and employment policy ought to get overhauled. As of today a sizeable chunk of pensioners spend unproductive life though they are healthy enough to contribute. It’s because of the societal belief and consequent government policy that render the pensioners rudderless. Employment of seniors will have to get priority.

Far from seeing this as a liability, the study promotes the potential that this group holds as a separate segment that marketers and service providers can target.

30 years from now

• Advertisements will eagerly pitch their products to 50 plus because they are going to be the biggest spenders.
• More day-care for seniors. Amusement avenues for seniors will increase. Senior friendship circles and clubs will fill up newspapers and electronic media.
• More health clubs, beauty parlours for 50 plus
• Single parents. Single living to be vogue
• Public transport and public facilities to be senior-friendly.

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Category: Opinion