Of all the forces set to reshape the economy over the coming decades, one stands above all others bar climate change: the ageing of the world population.
Thanks to a combination of improved healthcare, technological advances and safer working conditions, those born today can be expected to live 14 years longer than those who came into the world half a century ago. The phenomenon isn’t confined to advanced economies, either.
It turns out that one of the most remarkable increases in longevity since 1960 has occurred in China, where people now live nearly 33 years longer than they did back then; other major developing nations – Turkey, India and Brazil – are not far behind. If present trends persist, the UN estimates, by 2050 some 22 per cent of humanity – or around 2 billion people – will be over 60 years old.
A longer living population poses several problems for society. Not least rising health care costs. European governments, for example, spend some 70 to 100 per cent more on health for those aged 80-plus than on people in their 60s.
Then there’s the impact from a shrinking labour force. With the working age population – those aged 16 to 64 – expected to begin declining by 2030, economic productivity risks going into a deep freeze, organisations such as the International Monetary Fund say. Yet the world isn’t destined to become a less prosperous place. There are several ways in which it can adapt to avoid that fate. Still, for that to happen, it’s necessary to dispense with pre-conceived notions about old age. Describing rising life expectancy as a ‘demographic timebomb’ or ‘silver tsunami’, for example, certainly doesn’t help. It blinds society to the benefits and business opportunities that come with longevity.
The 'young old'
Nothing makes that point more emphatically than a recent study by the consultant McKinsey. To the delight of many 60-somethings the world over, the report dismisses the idea that those of pensionable age are past their prime, and points to the emergence of a vibrant new demographic – or what could be described as the ‘young old’.
This is the growing cohort of senior citizens that are willing and able to work beyond their 60s and imbued with a remarkable propensity to spend money on goods and services that make daily life easier and more fulfilling.
If governments and companies can find ways to meet the demands of this group, McKinsey says, it could boost global economic output by USD12 trillion, or 8 per cent, by 2040.
That looks a little optimistic. Not least because it necessitates an overhaul in welfare provision and labour laws. Governments are moving slowly on that front. But there are signs that businesses are beginning to change their approach.
In the medical industry, for example, health service providers, pharmaceutical companies and bio-tech firms now look at ageing very differently. Increasingly, they treat it as a medical condition, an illness much like any other whose symptoms can be mitigated. It’s a radical departure from previous thinking and has given rise to a wealth of new drug treatments for age-related problems as well as technology that can detect, monitor and manage illnesses that tend to afflict older people such as diabetes and dementia.
The age-as-a-condition industry could get an additional boost from changes in regulation. Health watchdogs such as the US’s Food and Drug Administration do not currently recognise ageing as a medical condition. But with the World Health Organization having taken the first steps towards classifying ageing as a disease, there is, say researchers at Barclays, the growing possibility that medical companies will have greater scope to develop therapies that specifically target ageing and age-related illnesses.
In his book Juvenescence, the billionaire investor Jim Mellon explains that technologies such as animal to human transplants, whole tissue regeneration and artificial intelligence will develop to a point where they can extend average lifespans in the developed world by 40 per cent.
I, Robot
The robotics and automation industries have also become key pillars of the silver economy. An ageing society boosts the robotics market in two ways. To begin with, it creates demand for specialised robots that help people perform tasks they find too physically demanding to do themselves. Robots that assist with, for example, household chores and medical care, have been popular in Japan for years but are now finding favour in other rich countries too.
A second reason an ageing world requires more robots is to plug gaps in the workforce. A fall in the number of people of working age threatens the economy’s capacity for growth. Robotics and automation can mitigate those effects, by providing machines that not only substitute people who have left the workforce but also assist those older workers who do physically demanding work. There is a growing body of evidence showing that robots are more prevalent in countries where the population is ageing and population growth is falling.
Smart homes
Real estate is another industry that’s adapting fast to changing demographics. Reconfiguring existing dwellings to meet the needs of older residents is increasingly popular in the developed world and large emerging economies such as China.
At the same time, specialised housing for the elderly, equipped with tech that makes daily life easier for the over 65s, is becoming a bigger feature of towns and cities, particularly in European cities. According to the consultancy P&S Intelligence, the market for smart home healthcare is poised for explosive growth worldwide in the next decade, from USD9 billion to USD100 billion by the end of the decade.
“Elderly people are demanding an array of smart technologies that can help them live independently and with dignity in their home,” P&S say in a 2020 report. “Increasing demand for internet of things (IoT)-connected patient monitoring equipment and fall detection and prevention equipment is helping the smart home healthcare market advance around the world.” So, as the world adapts to changing demographics, its economy will be transformed. The reset will be painful for some industries but its something that neither governments nor businesses can afford to ignore.
