The global demographic shift is an opportunity
There is a demographic transition towards aged populations underway in the world. Adaptation strategies will require governments, businesses and common people to make key adjustments. This may usher in a great opportunity for India
With a calming budget behind us, I want to shift focus to a megatrend that got no attention in Davos this year. CEOs at the World Economic Forum repeatedly highlighted three trends – the unfolding geopolitics; the inescapable challenge of global warming and the need for companies to strengthen their net-zero commitments; and the accelerating Artificial Intelligence (AI) revolution and its pervasive presence across businesses. The shiny new object was the potential of ChatGPT, both good and bad. All companies need to evaluate the concentration risk in the feedstock they import, test the resilience of their supply chains, analyse the investments needed for their net-zero commitments, and check the adoption of digital and data in every aspect of their business. There’s no quarrel with that. However, what was ignored was the massive demographic transition underway in the world.
As I write this, India is set to overtake China and become the most populous country in the world. The world’s population has topped eight billion. If we look at the spread of average age, the data is both stark and scary. The average age in Africa is 17, India is 27, China is 38.4, the United States is 38.5, Europe is over 40 (with Germany and Italy in the mid-forties, the United Kingdom and France not far behind), and Japan in its own league at 48. The global population will continue to expand, cross nine billion by 2040, and reach its peak of 10 billion by 2070. Eight countries will account for this rise, and other than India, all the other seven are in Africa.
In India, the bulk of the rise is set to come from Bihar and Uttar Pradesh. Many of these children will be malnourished, poorly educated and with patchy access to health care. The same will be true for many of those born in Africa.
The population of Japan, Italy, Germany, and China are all in decline. The global age demographics today count 1.5 billion people over 65; the fastest growing age group in the world is over 100. What does this demographic transition require of governments, industries, and companies? When I started work in 1982, the retirement age in India was 58, at a time when the national life expectancy was just 54. This century has turned the tide.
Governments across the world, especially in the First World, where life expectancy has touched 80, must rethink their 60 to 65 year retirement ages to manage the pension burden. A rethink of migration policies is always sensitive: Angela Merkel lost support in Germany after letting 1.5 million Syrian refugees in, and yet, intelligent immigration policies are required, even though they will be accompanied by social tensions on account of the different races, languages and ethnicities of the migrants.
Industries will need to rethink their business model. The consequences for health care are obvious. Care will become one of the biggest global employers and most urgent global needs. Doctors, nurses, and attendants – in addition to the use of data, remote consultation, testing, and medical tourism – will become necessary. The focus on education will need to expand. Where average ages are high, adult education will become a major requirement. Pedagogy methods will need to adapt to teaching middle-aged students, and new teachers may be needed to teach them. The syllabi for adults will need to be different, and a whole new industry will have to be developed.
The demographic change will also have major implications on financial services. One of the largest product segments in retail, for example, is mortgages. As people age, the requirement may shift from mortgages to reverse mortgages. What will the reverse mortgage product suite be? What accompanying insurance will be needed for those who outlive their reverse mortgage? What about investment and savings options? If populations start declining, how much will the residential construction industry change? Will housing demand change? Will old-age condominiums replace large houses? What kind of cars will be sought? Till the advent of driverless cars, will ride-sharing become the norm?
The garment and fashion industries will need to adjust to the elderly. The demand for warmer and looser clothing may increase. Likewise, accompanying hygiene products such as diapers may have to shift their focus from the young to the elderly. The entertainment industry may need to introduce a genre called baby boomers. Font sizes in advertisements, lighting in restaurants, and dinner timings may all need to change.
Companies will also have to adjust to the changing demographics. The search for young talent may give way to reskilling experienced employees. Company training programmes will need to adapt to continuous skilling and retraining. Career paths will need to be adjusted to a higher proportion of employees working part-time or on contract. Company cultures will need to foster a lifelong learning mindset as working lives expand to 50 years, with life expectancy already touching 80 in many parts of the world.
The full ramifications of the demographic transition underway are not yet getting the attention they deserve. The transition is every bit as fundamental as the other three we heard about at Davos. It is also harder to change population dynamics once they get embedded, as China is discovering at a cost. Governments and companies can ignore demographics and ageing only at their own peril. India should not. It could be India’s greatest opportunity in the coming decades.
Janmejaya Sinha is chairman, BCG India
The views expressed are personal
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