While political, economic and technological changes can be hard to predict, demographics don’t lie. Within the next 10 years, more than 60 countries will have a median age above 35, and in 25 of these countries, half of the population will be over 45. they depend on what leaders do today. In this piece, political demographer Jennifer D. Sciubba explores the implications of this shift for businesses and policymakers, including its impact on the workforce, customer base, retirement expectations, and more. Ultimately, she argues that to adapt to our aging population, global leaders must recognize the reality that is evident today, understand which factors are certain and which can be influenced, and proactively invest in shaping the future.
According to the latest reports from the United Nations, two-thirds of the world’s population lives in countries with below-replacement fertility rates, while average life spans continue to rise. This means that many populations are rapidly aging and will soon start shrinking (if they haven’t already). At the beginning of this century, 32 countries had a median age above 35. By the end of this decade, that number will have more than doubled. And in 25 of these countries, half of the population will be over 45.
In many respects, we can think of the future as uncertain. But unlike so many technological, political and economic changes, demographic trends are extremely predictable. The aging of our population is all but inevitable and will have a substantial impact on global labor pools, markets and the future of work, with several important implications for business leaders:
1. An aging workforce
Due to declining fertility rates, countries like China, Canada, Italy and many others now have fewer new entrants into the workforce each year. As a result, companies increasingly find themselves asking older employees to stay longer. This will require increasing investment in training and development to help these older workers acquire new skills, as well as in additional accessibility and safety measures such as wearable exoskeletons to help older workers safely lift heavy loads on farms and factories.
Additionally, as new, younger talent becomes increasingly difficult to find, many companies are turning to automation to replace or augment certain roles. A large number of companies have started developing “digital workforce” tools that offer fully virtual sales associates, customer service representatives, and even companions for seniors. Between the growth of AI capabilities and changing demographic trends, these new technologies have the potential to become an increasingly substantial component of the modern workforce.
2. An aging clientele
Over the past decade, the global population over 70 grew by 627 million, from 5% of the total population to 12%. In another decade, 16% of the eight billion people on earth will be over the age of 70. This means huge opportunities for products and services that serve this older demographic.
The most noticeable growth sector is healthcare, where demand for geriatric, primary and specialty care medicines and related products, such as wearable blood glucose meters or electrocardiograms, is set to continue to expand. As life expectancy has increased, in many places, healthy life expectancy is lagging behind, meaning that finding ways to support the health and well-being of this growing demographic is not only a commercial opportunity, but will also be critical for policy makers and government leaders. For example, older people in the United States are more likely to live in rural areas, where health care is often less accessible. In Arkansas, Maine, Mississippi, Vermont, and West Virginia, more than half of the elderly population is rural, suggesting a substantial and growing demand for elder-focused health services in these markets.
Beyond healthcare and businesses with a focus on seniors, an aging customer base can also have implications for a wide variety of industries. For example, in real estate, aging homeowners may be looking to downsize, or adult children may be looking to purchase homes with room to accommodate aging parents. As demographics change, real estate agents can increasingly benefit from developing and signaling skills in helping buyers and sellers through these transitions, whether by obtaining professional development certifications or through other specialized efforts.
3. Change in retirement rules
Of course, age is just a number. When it comes to pension rules, expectations about how long workers expect to stay on the job don’t necessarily match lifespan. For example, based solely on age, Japan is the oldest country in the world, with 31% of its population aged 65 or older. In contrast, only 22% of the French population is aged 65 or over. As such, one might expect a larger percentage of the Japanese population to be retired, but in reality, a combination of differences in working cultures, social contracts between governments and citizens, and a variety of rules and policies mean that the average retirement the age in France is 10 years younger than in Japan: 61 versus 71. As a result, around 29% of the French workforce has actually retired, compared to only 24% of the Japanese.
Despite these shortcomings, legal changes to the retirement age are slow to take hold. In recent years, both the Netherlands and Ireland have canceled plans to raise the retirement age for pensions to match the lengthening of life expectancy. This is understandable, as legislation denying retirement is unpopular, but over the next few decades, creating some sort of mechanism to help older workers who choose to delay retirement will be crucial for employers, governments and citizens.
For example, many older workers who aren’t quite ready to retire have started to show an increasing interest in semi-retirement. In a recent survey of working baby boomers, the vast majority said they plan to pursue some form of semi-retirement, with 79% expressing interest in flexible working hours, 66% in transitioning into a consultancy and 59% for short-time work. But only one in five said their employer offered any of these semi-retirement options, suggesting substantial opportunities for employers to differentiate themselves in the competition for talent by offering non-traditional career paths. And when trying to understand a particular job market, leaders must consider not only how old people are, but also the flexibility of employment options and the various cultural rules and norms that can influence the true retirement ages of different countries.
4. Global markets on the move
Finally, it is important to recognize that our common assumptions about the demographic composition of different countries may be out of date. At the turn of the century, countries such as Japan, Italy and Germany were among the oldest populations in the world, but today Thailand and Cuba are equally old, followed by Iran, Kuwait, Vietnam and Chile. In a decade, we can expect smaller cohorts of young people in these countries to start entering the market as workers and as customers, thereby increasing the median age of these populations.
These are key considerations when identifying new markets for investment. Different countries will respond differently to these changes, and business leaders would do well to pay attention not only to a given market’s demographic trends but also to how its leaders are likely to react to them. With more and more senior citizens to care for, will governments take financial responsibility? Or are companies or individuals expected to shoulder the burden? A country’s approach to managing its aging population can affect its potential as a talent pool or client base in substantial and nuanced ways.
The future is clear
Today’s business leaders and policymakers face countless sources of uncertainty, but when it comes to demographics, the future is clear. The reality of our global population aging is evident now, as once a population’s fertility rate falls below replacement level (an average of two children per woman), it stays there. Barring mass immigration from places that still have young and growing populations, such as Ethiopia or Nigeria, this most likely spells a less populated future for most countries on our planet.
This clarity allows for forecasting and planning of a kind not possible in many other domains, where changes can be more difficult to predict. There is much fear of population aging and deterministic and pessimistic rhetoric is increasingly prevalent, but the effects of this trend on our businesses and governments will depend on how we prepare today. To adapt to an aging population, both business leaders and policymakers must recognize these realities, understand which factors are certain and which can be influenced, and proactively invest in shaping the future.