Today’s entrepreneurial business owners face countless sources of uncertainty but when it comes to demographics the future is clear. Globally the population is ageing. This will have consequences for policy makers and have major implications for businesses.
According to the UN 2/3 of the global population live in countries with below replacement fertility rates while at the same time average lifespans continue to grow. This means that many populations are both ageing and will soon begin to shrink, meaning a greater proportion of older to younger people.
In the UK, this has particular implications for government spending and hence the need to raise taxes. Neither state pensions nor public sector pensions are funded (meaning that there is money set aside to pay them). As average lifespans continued to grow there will be a greater amount to pay out of government income in pensions with fewer economically active people to provide that income. Where will that money come from?
An ageing customer base
At the same time meeting the needs of an ageing customer base will provide huge opportunities for entrepreneurial businesses.
The most obvious sector for growth is healthcare because while life expectancy has risen in many places healthy life expectancy lags behind. Finding ways to support the health and well-being of this growing demographic isn’t just a business opportunity but will be critical for policymakers.
With more and more elders to care for will governments be willing – or even able – to take on the additional financial responsibility or will individuals be expected to bear that burden? Will increasing inequality be the result with the less well-off no longer be able to care for themselves?
Beyond healthcare businesses with a particular focus on the elderly will not only have a larger market to serve it will also have to meet the changing needs of this customer demographic. Already in Japan, for example, where 31% of the population is 65 or older, adult nappies outsell babies’ nappies.
Just as most homes already have a digital virtual assistant, so digital robots that move around will become commonplace.
An ageing workforce
An ageing workforce means that businesses will increasingly find themselves asking older employees to stay on longer. This will necessitate increased investment into training to help these older workers acquire new skills.
In some countries this will require a change in work culture; in France, for example, the average retirement age is 61 (versus 71 in Japan). As a result 29% of France’s workforce has effectively retired.
But legal changes to increase retirement ages are unpopular; both the Netherlands and Ireland have cancelled their plans to increase retirement ages for pensions to match life expectancies in recent years even though policymakers are well aware that the increasing financial burden on the State is unsustainable.
As younger employees become harder to find many businesses will turn to automation and a digital workforce to replace certain roles such as sales assistants, customer service representatives and even companions for the elderly.
This trend will also require policymakers to reconsider their immigration strategy. The NHS and hospitality sector in the UK would collapse without doctors, nurses and workers from overseas. It was interesting to hear Rishi Sunak say at the recent CBI annual conference that he wanted a “highly competitive immigration system that allows businesses to access the best and brightest from around the world.”
He will most certainly get his wish. As global warming continues to make north Africa and southern Europe increasingly uninhabitable there will be an inevitable population shift from these areas to the cooler countries in northern Europe.
This will present an interesting challenge for government. If younger economically active immigrants regenerate the UK’s workforce and the population decline can be halted or even reversed this presents a possible solution to the UK’s ageing population problem.
This will require the political will as Sunak said: “to give the British people trust and confidence that the system works.”
The future for businesses
These challenges are huge and, in some cases, already upon us. Those businesses that can evolve their business models the fastest to take account of both an ageing customer base and ageing workforce will have a significant competitive advantage in the years to come.