CHANGING DEMOGRAPHICS MEGATREND
The good news is that we are living longer, healthier lives. Average life expectancy rose by some 30 years over the course of the 20th Century, and continues to increase. According the the United Nations, the number of people over the age of 65 is expected to increase by 188% between 2010 and 2050. Even more dramatically, the number of people living past 85 is expected to grow by 351%, and those reaching 100 is predicted to increase by 1004% over the same period.
Advances in medical technologies, and in particular the spectacular decline in the cost and time required to map the human genome holds the promise of further dramatic increases in life expectancy, and in particular, the prospect of staying healthier and more active in later life.
While longer, healthier lives are an exciting prospect, this megatrend comes with several challenges for businesses.
First, the demographics of your employees are going to change dramatically, as is the employment relationship itself. With the prospect of living into the 90s and 100s for today's younger workers, the traditional life course of being in education until the early 20s, working until the mid 60s and spending the rest of life in retirement is not going to be viable, both from a financial standpoint and from a desirability perspective. People are going to work longer, perhaps switching careers later in life. Promotion ladders are potentially going to become clogged. For those companies facing waves of upcoming retirements, filling those positions is going to be harder, and the employment relationship and expectations on both sides is likely to shift. Who the burden of healthcare falls on is going to become an even more critical challenge. The same is true for retirement preparation, particularly with increasing stresses on government provision of social security. People are moving towards thinking of their careers from a portfolio perspective, resulting in more movement and shorter tenures with organizations, increasing hiring and retention issues. Companies may need to rethink the employment relationship entirely to move towards a more "gig" based employment landscape. In short, the human resource challenges of your organization are going to escalate dramatically.
Second, the demographics of your customers are changing. As the population ages, with proportionally more older people and fewer younger people, demand patterns shift and opportunities arise in new markets. But at the same time, some industries will suffer or need to undergo dramatic shifts to remain relevant.
Third, as people age and move into retirement or semi-retirement they begin to draw down on prior investments. This may result in a large shift in available investment capital, and the stability of the shareholder base for many firms, providing challenges for investment capital.
Fourth, how the government and society as a whole deals with this demographic change is also likely to have major implications for business. Does immigration policy change to allow for easier immigration to balance out the aging population? What happens to the provision of healthcare and retirement? Does the burden shift away from companies, or does it shift ever more to being tied to employment relationships? Tracking the markers of changing public policy and opinion will become ever more important in adjusting to potentially major shifts caused by changing demographics.
In short, there are numerous challenges to businesses, both directly and indirectly flowing from this dramatic, and to a large extent predictable, shift in demographics.
How will changing demographics impact your business?
Visit our Corporate Solutions tab to explore ways to prepare for the impact of changing demographics and other megatrends that will impact your business over the coming years.
United Nations, World Population Prospects: The 2010 Revision. http://esa.un.org/unpd/wpp
University of Oxford Institute of Population Ageing: http://www.ageing.ox.ac.uk
University of Oxford GOTO: http://www.sbs.ox.ac.uk/gotodemographic