Rather than judging the ageing population as a burden, it’s time to see the opportunities that can be gained from harnessing the skills and knowledge of an older workforce, while tapping into the demand from five generations of consumers. Without this shift in mindset, businesses are going to be at a serious disadvantage in the global marketplace.
The numbers speak for themselves – by 2050, more than two billion people will be aged 60 or over. Dominic Swords, Criticaleye Thought Leader and Business Economist at Henley Business School, says: “The biggest thing to observe is those businesses that notice that there is an opportunity here and that can innovate in a way that meets the needs of the population, whether it’s tailored holidays, or leisure facilities that service people with more time on their hands during week days.”
Simon Johnson, UK Managing Director at HarperCollins, says: “Book publishers have long successfully targeted the silver market. Technology offers the ability to increase access to our content. Device retailers regularly comment on older consumers being attracted by the variable font size on e-readers – the digital equivalent of the relatively niche large print format – and new features that sync audio to text on e-readers will surely open up the market for audio books.
“Digital and print on demand offers the potential of unlimited shelf space. With books staying ‘in print’ forever, it allows us to profitably target niches... But often, the same piece of base intellectual property will be compelling to widely different demographics. Our challenge is to work with our authors to properly create the different products from the IP that works for and reaches each demographic, and to do this at scale.”
Andy Pomfret, CEO of wealth management concern Rathbone Brothers, comments: “On the whole, this notion of an ageing population has been fairly good for us. Thirty-odd years ago men retired at 65 and were expected to live into their mid-70s, equating to ten years of retirement. Now, up until a year or so ago, you’d expect to be retiring at 60 and live into your 80s, so it’s doubled the amount of time you are in retirement. About half our clients are retired, which means we have them for twice as long.”
Preconceived ideas and stereotypes need to be quashed, such as how an older generation embraces technology. Mark Purdy, Senior Executive and Chief Economist at Accenture, explains: “If you think about the iPad, it's actually incredibly age-friendly. It's intuitive and designed for anybody to use. This idea that older consumers are less likely to adopt new technology is a myth... There are quite easy changes that manufacturers can make and by doing that they actually open up that segment of the population so they can tap into that important source of demand.”
However, it would be a mistake to ignore the differences between baby boomers, Gen X, Y and millennials. “In order to understand the impact on business of new products and services, you have to understand the properties, dimensions or attributes of the segment profiles, then, as a business, try and figure out how you can contribute to that,” says Steve Muylle, another Criticaleye Thought Leader and Professor and Partner at Vlerick Business School. He provides the example of ‘technology anxiety’ among patients in hospitals, where the younger generation might be happy to book an appointment online, whereas for older patients it remains important to have a person to talk to, either face-to-face or over the phone.
The other side to this is how businesses manage their workforce. This means getting smarter about incentives and tax systems that currently – in the UK at least – penalise people for working later in life, alongside encouraging flexible working to create an environment which accommodates the needs of different age groups.
Dominic says: “Flexibility [over retirement] can be a sensible idea, allowing people to stay in the workforce but on different contractual arrangements, like annualised hours so that the business can tap into capacity, knowledge and experience when required but not have a permanent, full-time commitment to it.”
The economic case for this appears strong, with a study by the UK Government last year showing that increasing time in the workforce by just one year per person would boost the level of real GDP by approximately 1 per cent.
Likewise, according to research by Accenture, in collaboration with Oxford Economics, increasing the number of older people in the workforce could see the US increase its GDP by $442 billion and lift employment levels by 5 million by 2020, while Germany could see a €61 billion hike in GDP, and a lift in employment levels of 1.5 million in the same timeframe, if it harnessed the power of the silver economy.
Mark comments: “If you think about the employee lifecycle, you start off in a job on probably a relatively low wage, you get more experience and then it plateaus just before retirement... Often it can be quite expensive to hold onto people at the top of the wage curve. So, one of the challenges is how to get more flexibility, and it's not always the case that just because someone is more senior they have to get paid more. Actually, people who are on the verge of retirement may not always want to work full time and at the same wage rate.”
There are examples of employers adjusting in order to capitalise on demographic trends. “BMW compared the productivity of younger and older workers in one of their factories and found that there was some decline in productivity with the older cohort,” continues Mark. “They reorganised the production line, introduced ergonomic equipment and looked at the health of the workers. They equipped them so that they could work better, and the difference in productivity disappeared.”
Dominic comments that, in the UK, the DIY store B&Q was one of the first to recognise that older, part-time workers could fill a need for providing advice on buying products. “The maturity that those people represent in the store has the double benefit to the workforce, both in terms of showing mature leadership but also because of the expertise, skills and knowledge that they can offer customers and staff,” he says.
Questions over demographics are as pressing in the East as in the West. Nandani Lynton, Criticaleye Thought Leader and Adjunct Professor of Management at CEIBS, Shanghai, says: “The change in China is coming among the under thirties, who have the bulk of the spending power, because not only will their parents give it to them, but also in terms of their sheer earning power, they are in a really good spot. That’s where industry has to look.”
As for ways to incentivise staff, Nandani says that although China will undoubtedly have to raise the retirement age, the bigger questions centre on how the older population is cared for. “Anything that a company can put together to help their younger workers, aged between 30 and 40, whose parents are already starting to retire… such as a mortgage for the house of the parents, more health insurance and so on, are some of the best ways to tie in your young people.”
For businesses and policymakers, the age profiles of the population cannot be ignored. There are tremendous problems to solve, particularly around healthcare, elderly care, the pensions time-bomb and whether a more active older workforce makes it harder for the younger generation to find employment.
What's certain is that the silver economy is here to stay. Dominic says: “As of the beginning of this year, the genuine front-end baby boomers hit 65 years of age and for the next 18 to 20 years we’re going to have an additional half a million people hitting retirement. The product and labour market model we’ve been used to will be forced to change, if they haven’t started to already.”
I hope to see you soon.