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1 in 5 of world population will be in New Old 55+ generation

Economic growth
By Paul Hodges on 02-Oct-2015

Segments Oct15An amazing development is taking place in the world today.  For the first time in human history, more people are joining the 55+ age group than the 25 – 54 age group:

  • 600m people will be joining the New Old 55+ cohort between now and 2030, taking their numbers to 1.8bn
  • This is twice the number joining the Wealth Creator 25 – 54 cohort, which will total 3.3bn in 2030
  • It means there will have been a 6-fold increase in the New Old cohort versus the 190m in 1950

This has never happened before, for the simple reason that life expectancy has never been as high as it is today.

Someone aged 65 in the developed world has a life expectancy of 20 years today.  Someone in the emerging economies can expect to live another 15 years.  Yet just a century ago, TOTAL life expectancy was just 46 years in the developed world and only 24 years in the emerging economies.

This has critical implications for the global economy, and therefore for companies and investors.  As I noted in the Financial Times last year:

Consumption is 60% of Western GDP. And so a growing army of pensioners creates obvious headwinds for growth. They lack the income to stimulate demand themselves, while the spending power of the younger generation is reduced by the need to help pay for their parents’ pensions.

“It is wishful thinking to imagine that Europe’s demographic deficit, created by 50 years of declining birth rates and rising life expectancy, can now be resolved by negative interest rates or the electronic printing of banknotes.”

We are in a trap of our own making.  Policymakers have been too scared to debate the implications of longer life expectancy with the electorate.  Yet more than 1 in 5 of the world’s population will be in the lower-spending and lower-income New Old 55+ age group within 15 years.  There were only 1 in 10 in the group just 15 years ago, in 2000.

The world’s previous demographic dividend, caused by the arrival of the BabyBoomers in the peak-spending and peak-income Wealth Creator 25-54 age group, is now becoming a demographic deficit.  Yet pension age is still not properly indexed to life expectancy.  Pension age today is lower than when pensions were first introduced a century ago.

We have long passed the point of no return in terms of the impact on demand patterns and economic growth.  If women were suddenly to return to having the same number of babies as in 1950, it would still take 25 years for these babies to grow up and join the wealth creating cohort.   Companies and investors simply must revisit their stratgegies to take account of how these changes will impact them.

The collapse of commodity prices, China’s change of economic direction with its New Normal policies, and the likely arrival of deflation are just the early signs of the generational paradigm shift now underway.

Our new Study, How to survive and prosper in today’s chaotic petrochemical markets: 5 Critical Questions every company and investor needs to answer, is now about to be launched.  It will provide a road-map through today’s challenges, and a clear vision of the new opportunities now emerging for future growth and profit.

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