There is an increasing number of people growing older, with more money and better health. The public sector and private industry are facing an unprecedented change that will move billions of euros in the future.
In the coming years, the so-called baby boomers will begin to retire, the generation born in the late 1950s, when the devasting effects of WWII on the economy began to subside. In the developed world, this significant loss of millions from the job market is going to be added to the sharp drop in the birth rate, which no longer guarantees generational replacement in the West and which will mean a decline in the working-age population. The UN estimates that in 2060, 30% of the world’s population will be over 65 years old, compared to 17% 10 years ago.
Perhaps the closest and most vivid example of what awaits us can be found in Japan, a society that has been aging for a long time and is no longer an economic and industrial benchmark as it was at the end of the last century. Companies such as Sony, Casio, Panasonic, Sanyo or Canon, which once gave management lessons to the whole world have now been surpassed by competitors from China, South Korea and the United States. Today, Japan’s economy’s main problem is its declining population, which has meant a decrease in the labor force and less demand for goods and services. This drop in demand has led Japan to years of permanent deflation, economic stagnation, and an increase in public debt to finance the country’s economic activity.
As the aging population continues to grow, the State will have to transfer resources to meet the needs of this older demographic
For example, Japan’s main educational problem now is what to do with excess capacity: between 2002 and 2020 some 9,000 primary schools closed, and that rate has increased to an average of 450 closures per year thereafter. This disappearance of schools influences employment in the field of education and on the development of rural areas, since young families don’t settle down in places without schools. It goes without saying that Japan has long lost its moniker as a global driver of growth.
The West is now entering this uncharted territory, and both the public and private sectors will be considerably affected by the social changes that are inescapably coming.
A burdensome load for the public sector
With the aging of the population, the State will have to transfer resources to meet the needs of this older demographic. Things like pensions, health care and adult dependency will require more money, which is supposed to be funded by what is now a less robust workforce, that can only be compensated for with significant increases in productivity. The world is watching the violent confrontations over pension reform between the French government and a part of French society (Macron wants to limit the increase in spending), and in Spain there’s also been important clashes among economists after Congress approved Minister José Luis Escrivá’s pension reform, precisely because it does not reduce the cost of pensions: “The current reform substitutes the self-sufficiency of the system for its dependence on the State. Instead of assuming the cost of gradually becoming a self-sufficient system (…) they have decided to increase spending and leave the economic cost of it to future generations, whereby there will be less of a budget for other public policies,” Universty of Valencia professors Enrique Devesa and Rafael Doménech wrote in an article in Expansión.
Resources allocated to education will also have to be restructured. Blanca Thoillez, professor of Theory and History of Education at the Autonomous University of Madrid, wrote a column in ABC on April 13 entitled “A Letter to Education,” in which she warned: “Don’t forget that you have to make a lesson plan that takes into account the impact of the declining birth rate. The question you are faced with is: what are you going to do with those leftover resources? Are you going to invest them in other sectors or are you going to try and keep them in this one? And if you decide to keep them where they are, get thinking about just how you’ll do so.” The number of students in compulsory education in the 27 EU countries has dropped from 79 million in 2000 to 73 million in 2021, according to Eurostat data. In Spain, that figure has barely fallen from 8.37 million in 1990 to 8.24 million in 2021. And that’s thanks to the influx of students brought to the country through immigration, a population which until 2000 barely existed in Spain’s compulsory education system and which in 2021 made up 10.7% of the total, or roughly 900,000 students.
Since these older people will have had fewer children, developing an entire private industry for personal and dependency care will become necessary
The public health care system won’t get off scot-free either. This rise of an aging population will affect it both in its scope –more spending because the population will be older– and in its makeup, because older people are afflicted with diseases that younger people don’t get and, above all, because it’s easier for them to become chronic. Moody’s Analytics estimates that health spending in Spain will grow by 18%, to 95,000 million euros in the next 12 years, and in Italy it will grow by 13%, to 140,000 million euros.
A private sector revolution
This increased spending will go towards certain diseases more than others. Pharmaceutical industries linked to diabetes, for example, will be among those that benefit the most via funds for research, new products, etc., as its prevalence increases with age. Activities related to cardiovascular health will also come out winning, as coronary heart disease and hypertension are known plagues of an aging population, and, of course, neurovegetative diseases, such as Alzheimer’s or Parkinson’s, will also benefit. And ophthalmology, cosmetic surgery and orthopedics will undoubtedly see a growth in demand for services.
Estimates from Spain’s National Institute of Statistics (INE) suggest that the number of Spaniards over the age of 65 will go from 9.4 million in 2020 to 16 million by mid-century and, according to the UN, the global population over 60 is going to double by 2050 and triple by 2100. In addition, since these older people will have had fewer children, developing an entire private industry for personal and dependency care will become necessary, as today many are the responsibility of their younger family counterparts. Experts are already talking about a significant deficit of professionals in dependency care. There’s a growing need for specialized doctors, nurses, geriatricians, physiotherapists, psychologists and social workers who can respond to the issues that accompany living longer. And as time goes by, this need will only intensify. Along with State initiatives, private companies dedicated to this type of care for the elderly are already emerging, companies specialized in telecare, home help, day centers and nursing homes.
There are other key sectors of economy activity that will also be affected. According to Eurostat, in 2017, a third of the 220 million households in the European Union are made up of a single person. In Sweden, for example, 52% of households are already one-person. In Spain, there are 4.7 million citizens who live alone; of them, more than two million are older than 65 years. In 2037, the INE estimates that the number of Spaniards who will live alone will amount to 6.5 million people. This is a huge social change that’s already here and that will also affect the real estate sector. The existing nursing homes won’t be enough and solutions are starting to arise given the growth in the number of elderly people in good health who don’t need specialized assistance with initiatives such as “senior cohousing”: a shared living model in which a group of people live in independent houses or apartments, but share common services such as cleaning, leisure areas, a dining room, and social or athletic activities.
The transformation of the tourism and entertainment industries
In 2011, the European Commission published a report entitled “Europe, number one in the world as a tourist destination. A new political framework for European tourism,” in which it highlighted the role that increased life expectancy would have for the sector. It explained that the elderly now and, in the future, will have money and free time and, therefore, “this group will play a vital role in the tourism sector in the coming decades,” which will require companies and organizations to “adapt to new needs and remain competitive.” New needs like hotel renovations to make them more accessible and added accommodations, as the current “seasonal peak” will disappear given that retirees can travel year-round. And we’ll see a boom in health-related travel too, either for therapeutic reasons –those looking for a milder climate, for example– or merely for leisure, such as thermal tourism.
The growing importance of our aging population is reflected in the entertainment industry too, which is already looking for storylines where plots center on retiring-age characters, who, until just a few years ago, hardly existed in screenplays. Two examples. The film “Let Him Go” (2020) is a deep dive into the Midwest, where the main characters are a couple of grandparents bent on rescuing their five-year-old grandson who, after the death of his father (their son), lives with his stepfather in a tightly managed family under the control of boy’s maternal grandmother. Or the BBC series “Happy Valley” (2014), starring a police officer from a British town near Leeds on the cusp of retirement, who fulfills her professional duty while taking care of her complicated family and her grandson. In both cases, the grandparent-grandchild relationship is key to the plot.
The growing number of older, healthy people, with increasingly more resources is changing many social and economic systems and these changes have only just begun. There are billions of euros at stake in every sector.
Translated from Spanish by Lucia K. Maher