As we previously reported in 2003, the largest graduating class in American history left high school in the summer of 2009. The expected effect on college communities – overcrowding and a real estate value boom – was mitigated by the overall financial meltdown – but all those graduates are still out there, looking for work, a place to live, and additional education.
The economy tripped, but the demographic shifts roll on. Demographics – “the facts and figures that describe population trends” – play a bigger role in long-term economics than the occasional credit crunch or the stock market’s daily volatility.
Demographic changes in the coming decade influence an entrepreneurial investor’s research choices.
For example, because of increasing longevity and relatively open immigration policies, the United States, unlike most nations, forecasts record numbers of both older and younger citizens over the next two decades. As we noted in the newsletter reference above, “Spending will increase in pharmaceuticals, diagnostics, nutrition, fitness and day care (for seniors as well as for children).”
Economists generally view dependency costs – the amount a working population spends to support children and seniors outside the workforce – as an economic hazard. Entrepreneurs see opportunity. Thus, companies like Senior Helpers have sprung up around the country, providing services to the elderly, from occasional chores to round-the-clock personal care. Franchisee Mike Fasth explains the opportunity: “The time, effort and expense of taking care of our elders was something that never occurred to most baby boomers until they had to deal with the challenges of their aging parents. The next challenge is - will the boomers be able to prepare adequately mentally and financially for when it is their turn to be cared for? Or will they be just as reluctant as their parents were?”
One forecast from our 2003 article may need significant adjustment, because demographers believed that in 2010, baby-boomers would begin to retire in significant numbers. It may be more accurate to say that significant numbers of baby-boomers will reach retirement age in 2010, but will be unable to retire because of financial difficulties over the last few years. If Slate and Newsweek writer Daniel Gross is correct in this assessment, baby-boomers might be back on schedule by mid-decade.
Another interesting trend is the way in which women now affect the economy. The New York Times reported on recent research showing that “women’s earnings have been increasing faster than men’s since the 1970’s.” The age cohort between 30 and 44 is the first generation in which more women than men have college degrees, and the article notes that sexual politics are shifting as increasing numbers of couples feature a woman as the primary earner. This statistic spiked during the recent recession, when unemployment among men swelled.
Of course, the demographic elephant in the room is China, to which the United States’ economy is inextricably linked. According to The Economist, China faces two statistical milestones in 2010: “…it will overtake Japan to become the world’s second-largest economy; and it will arrive at the peak of its ‘demographic dividend’, after which its dependency ratio of young and old to people in work will rise.”
The “demographic dividend” refers to lowered dependency costs because of the ratio of working people to children and the elderly. Some reporters have claimed that the world’s economic future depends on whether China’s economic boom is real or is the biggest accounting deception in history, but the demographic facts on the ground – including a growing population of dependent children and seniors – should be attracting the attention of entrepreneurs and investors looking for opportunity in education, healthcare, and senior services.