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strategy and business
Published: February 23, 2010
 / Spring 2010 / Issue 58

 
 

Facing Up to the Demographic Dilemma

S+B: As we turn to potential solutions to some of the problems posed by population aging, are there approaches from business that could be helpful?

LEHMANN: We have to explore all sorts of different options. One obvious solution that would be beneficial for both Japan and Europe as they try to deal with aging populations would be to open up the frontiers to migration and allow in younger workers from less-developed countries. Another idea is to encourage elderly people to live elsewhere — it’s something the Japanese tried in the past, but dropped. It was unpopular, but it’s something I’m advocating in Europe. It helps on the pension front. You say, “Look, the bad news is that we have to reduce your pension. The good news is we’re moving you to Libya, where the standard of living is much lower and your pension will go a much longer way.”

HORI: I don’t think those policies are politically practical, and they won’t solve the problem.

LEHMANN: They are certainly not a major part of the solution, but they are ideas that could help, and there may be ways to make them attractive to people. I think the globalization of aging is one of the options that should be explored, even if some of the solutions are difficult or unacceptable for political or other reasons.

MA: One of the problems with focusing on solutions is that as policymakers and businesspeople think about community resources and corporate commercial resources, they currently don’t see the potential market power of the aging population. But when a quarter of the total population in the world is aging, they cannot disregard that. Those people have to be accommodated. I would give one example of ageism in Hong Kong. When you visit the department store, the sales assistants are very welcoming to young women, encouraging them to linger and shop. But they assume that elderly women are not potential customers, and try to make them leave. It’s a totally different attitude and suggests the kinds of cultural shifts that are necessary.

WANG: It’s interesting to think of what the “silver” GDP will be in the future. The more we can quantify the consumption of the elderly, the better we can gain an appreciation of the business they generate, and think of the steps that will stimulate this silver market.

HORI: The Japanese government is taking steps to address these challenges. The new government, the DPJ [the Democratic Party of Japan, which was swept into power in August 2009], will introduce a US$260 allowance per child per month to encourage larger families. Additional child-care services will also be implemented. Although that does not provide a short-term solution or a midterm solution, it will help over time. We’ve seen birthrates increase in some developed countries, such as France. Other partial solutions may include encouraging more women to join the workforce, extending retirement ages, and, as we discussed, encouraging countries to welcome foreign workers.

But when you look at specific issues like our pension system, eventually elderly people are going to have to accept the fact that they will get their pensions later, and those pensions will be smaller. That’s going to be an issue. As we discussed, however, many people are not aware of what’s going to happen in 10 to 15 years’ time, and that there is an urgent need for change.

 
 
 
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Resources

  1. David E. Bloom, David Canning, and Jaypee Sevilla, The Demographic Dividend: A New Perspective on the Economic Consequences of Population Change (RAND Corporation, 2003): A review of the effects of demographic change on economic growth.
  2. Chiemi Hayashi et al., “Transforming Pensions and Healthcare in a Rapidly Ageing World: Opportunities and Collaborative Strategies” (World Economic Forum, 2009): A detailed look at the question of aging societies and their implications for health care and pensions.
  3. Florian Kohlbacher and Cornelius Herstatt, eds., The Silver Market Phenomenon: Business Opportunities in an Era of Demographic Change (Springer, 2008): Leading experts examine the business opportunities and implications of aging societies in this collection of 33 essays.
  4. George Magnus, The Age of Aging: How Demographics Are Changing the Global Economy and Our World (Wiley, 2008): How low birthrates and rising life expectancy are leading to rapid aging and a stagnation or fall in the number of people of working age in Western societies.
  5. Nandan Nilekani, “India’s Demographic Moment,” s+b, Autumn 2009: The economic force of a burgeoning population.
  6. Richard Rawlinson and Natasha Kuznetsova, “50-plus: A Market That Marketers Still Miss,” s+b, Spring 2009: Why companies miss out by failing to market to aging baby boomers in the U.S. and western Europe.
  7. For more thought leadership on this topic, see the s+b website at:
    www.strategy-business.com/organizations_and_people.