I am a sucker for demographics. They’re basically facts about people, and people are invariably interesting. I especially like to see them (demographics) applied to markets and businesses. For example, what does the demographic fact of 80 million baby boomers mean to health care? To the stock market? To the housing industry? To Social Security? To technology?
The boomers have always inspired a lot of research, simply because of their numbers. But last night I heard a talk by a very intelligent and well-prepared woman who controverted a lot of the stuff we hear about the near future and the onslaught of retiring baby boomers that will supposedly destroy the American economy.
First, Leann Lachman did the numbers. There are 25 million silent generation (World War II vets) left, followed by 37 million Depression and war babies. Presumably, most of them are already retired, and transferring wealth to their children, the 80 million baby boomers and their grandchildren children, Gen X and Gen Y.
I’m not sure how this works, but I think if you were born between 1946 and 1966, you are a boomer. That’s a twenty year period. The children of baby boomers, who are called the echo boomers, are now ages 10-27, and there are 73.1 million of them. Somewhere in between is Gen X, a mere 47.2 million.
And then there’s Gen Next, 20 million and growing. Just this week, a woman on the leading edge of the baby boom — a 56-year-old –gave birth to twins. At the same time, Gen X is starting to reproduce.
What the point? The point is, according to Lachman, that all these boomers won’t retire at once, overwhelming the health care system and destroying Social Security. They will retire in an orderly fashion over a twenty-year period, during which their 73 million children and Gen X and Gen Next will have time to save up enough to take care of them in their old age. They are also wildly transferring wealth to their kids in the form of downpayments on homes, college funds for grandchildren, etc.
This will make their children loath to leave them out in the cold as they age (or at least that’s the theory). How can you ignore grandma when she has funded not only your Ivy League education, but that of both your kids? And paid for the new roof on your house?
No, you’ll keep paying into Social Security.
This is quite a cheerful way of looking at things, compared to the recent Chicken Little scenarios of the two political campaigns.
I’ve exaggerated Lachman’s positions a little, but only to make you smile. She’s pretty positive about other aspects of the future as well: she says all the boomers won’t all go at once to fixed income products, knocking the socks off the equity markets. And when they do, real estate still doesn’t suffer.
The real estate market will continue strong, because real estate’s strong returns have made it part of people’s fixed income portfolios; even I have been receiving income from some buildings in San Diego for the past five years.( We bought them during the downturn, and no one’s really in a rush to sell them, as they have been refinanced and we’ve got our original investment back.)
It will continue to be especially strong in the Sun Belt states, because people are moving to warm climates. This creates opportunity in housing and retail — not only in medical facilities, assisted living, and retirement communities. People are buying second homes so they can retire and not retire simultaneously: Minneapolis with the grandkids for Thanksgiving, and then right out to Arizona for Christmas through Easter.
So who suffers in the future? Well, Europe does, because they are actually losing their labor force. Aging population, not enough children and no immigration. Whereas we have lots of children and lots of immigration.
And the office market, because the global outsourcing of skilled service jobs continues. By 2010, 1.7 million office jobs will go overseas, doubling by 2015 to 3.4 million.
Lachman believes we will replace those jobs with something, but she’s not sure what. I, of course, believe it will be small business and entrepreneurship, lean and mean, with strategic partnerships and strategic outsourcing (but no need for the kind of big office space of the past).
The most interesting thing she said: we will find it harder and harder to reach political consensus as we deal with age groups that have little in common with each other. By 2030, we will have almost as many 85-year-old women alive (the men die earlier) as 30-year-old men. We have ironed out the bulges in our population by keeping people alive longer, and having fewer children. We’re all going to have to learn to get along.
