THE ENTERPRISE
Shifting the Shape of Society—The First of Six Events-Demographics
1. Shifting Demographics of Civilization
Demography is destiny. Absent famine, war or pestilence, those who are born, will get older as they live and then die. The consequences of this certainty are numerous and certain.
---Negative Population Growth In Countries/Continents---Population Explosions In Less Developed Countries
(I have placed the direct excerpts from Herb Meyer's work in [----italics] to separate them from my observations.)
----“Most countries in the Western world have stopped breeding. For a civilization obsessed with sex, this is remarkable. Maintaining a steady population requires a birth rate of 2.1. In Western Europe, the birth rate currently stands at 1.5, or 30 percent below replacement. In 30 years there will be 70 to 80 million fewer Europeans than there are today. The current birth rate in Germany is 1.3. Italy and Spain are even lower at 1.2. At that rate, the working age population declines by 30 percent in 20 years, which has a huge impact on the economy.”
Aging Populations of US, Europe, Japan
----“When you don't have young workers to replace the older ones, you have to import them. The European countries are currently importing Moslems. Today, the Moslems comprise 10 percent of France and Germany, and the percentage is rising rapidly because they have higher birthrates. However, the Moslem populations are not being integrated into the cultures of their host countries, which is a political catastrophe. One reason Germany and France don't support the Iraq war is they fear their Moslem populations will explode on them. By 2020, more than half of all births in the Netherlands will be non-European. The huge design flaw in the post-modern secular [European] state is that you need a traditional religious society birth rate to sustain it. The Europeans simply don't wish to have children, so they are dying.”
Failure to Assimilate
The failure to assimilate or be integrated into the countries to which immigrants move is a serious problem, evidenced nowhere more than our US border states, especially California. When our ancestors came from Europe to America (the land of opportunity) for a generation or so, they lived in enclaves and clung to their native languages. But they learned to speak, read and write English because it was required if they were to realize “the American dream.”
After a generation, and two at most, these immigrants had legal citizenship and were now “Americans” even if they hung onto a part of their native language(s) and heritage(s). They became part of the great “melting pot” that was the United States. Immigrants from Mexico often come here simply to earn money and take it back to Mexico. We call them “guest workers” or in more cases than not, “illegal aliens.”
Incredibly Low Birth Rates
The statistics Herb Meyer cites are staggering.
----“In Japan, the birthrate is 1.3. As a result, Japan will lose up to 60 million people over the next 30 years. Because Japan has a very different society than Europe, they refuse to import workers. Instead, they are just shutting down. Japan has already closed 2000 schools, and is closing them down at the rate of 300 per year. Japan is also aging very rapidly. By 2020, one out of every five Japanese will be at least 70 years old. Nobody has any idea about how to run an economy with those demographics. … Japan no intention of bringing in immigrants. Property values in Japan have dropped every year for the past 14 years. The country is simply shutting down.”
Longer Life Expectancies, Less Money to Last
The aging of populations combined with greater life expectancy due to improved medical care is creating a crisis of epic proportions, not just in Japan but also in Europe and the USA. As people age they are both less able and less inclined to work the kind of jobs and schedules they did when they were younger. The principle of “pensions” (originated in Europe) and of “Social Security” has led these aged and aging people to believe they neither should work, nor should have to work.
Yet many of them are woefully unprepared to sustain the life style they have become accustomed to while they were working. Savings are low, investment skills are spotty, and retirement assets are inadequate. And as the working portion of the population continues to decline, the amount it must be taxed to support the non-working parts must grow. Otherwise benefits must be cut dramatically and the “retirement age” pushed out. This will require people who have “retired” to return to a employment in companies that are loathe to take on the elderly people with their slower work pace and tendency toward expensive health problems.
Birth Rates and Economics--Meyer Explains:
----“Why are the birthrates so low? There is a direct correlation between abandonment of traditional religious society and a drop in birth rate, and Christianity in Europe is becoming irrelevant. The second reason is economic. When the birth rate drops below replacement, the population ages. With fewer working people to support more retired people, it puts a crushing tax burden on the smaller group of working age people. As a result, young people delay marriage and having a family. Once this trend starts, the downward spiral only gets worse. These countries have abandoned all the traditions they formerly held in regards to having families and raising children”.
----“The U.S. birth rate is 2.0, just below replacement. We have an increase in population because of immigration. When broken down by ethnicity, the Anglo birth rate is 1.6 (same as France) while the Hispanic birth rate is 2.7. In the U.S., the baby boomers are starting to retire in massive numbers. This will push the "elder dependency" ratio from 19 to 38 over the next 10 to 15 years. This is not as bad as Europe, but still represents the same kind of trend.”
----“Western civilization seems to have forgotten what every primitive society understands: you need kids to have a healthy society. Children are huge consumers. Then they grow up to become taxpayers. That's how a society works, but the post-modern secular state seems to have forgotten that. If U.S. birth rates of the past 20 to 30 years had been the same as post-World War II, there would be no Social Security or Medicare problems."
The Wave of Aging Boomers but Too Few Workers
There are enormous monetary and financial implications of these seismic demographic shifts. There is currently a lower proportion of the US population in the “prime working ages” of 34-49 years old than would be “normal.” This is the 'baby bust” that followed the “baby boom.” Each year 3 to 4 million (give or take a few) Americans reach 60 years old, and this will continue from now until about 2030-23 years from now.
These people are or will soon be leaving the active work force, taking with them knowledge, experience, and effectiveness.
Immigrants, outsourcing, and a smattering of youthful high achievers are replacing them. The social turmoil will be huge. The organizational turmoil will be larger yet. The economic impact will be largest of all. Think of a major sporting team that has all of its experienced, championship players leaving over relatively a short period of time. Trouble, for sure; disaster, maybe.
And yet the cause and the impact, as usual are related.
The “Catch 22” of Wall Street and Pension Funds
People have complained for years about how Wall Street's demands cause American companies to do bad things, dumb things or at least mercenary things. Outsourcing jobs is just one example. So is “downsizing.” This puts thousands of “hourly workers” out of jobs. Yet why does Wall Street press for this? Because it wants to meet the expectations of investors, most of whom are large investment funds. What kind of funds? Pension funds, mostly, but mutual funds too.
Who are the investors in these mutual funds? The very workers who are being laid off, that's who. Who are the pensioners whose pension funds are still under funded in spite of Wall Street's and the fund managers' headlong rush for returns? The pensioners are those very same people being forced into early retirement without enough pension or savings to live as they have been accustomed to. “What goes around-comes around,” in both good and bad ways.
Gender Equity and Diversity
Meyer touches another pair of issues that are of today's hot buttons: “gender equity” and “diversity.”
----“The world's most effective birth control device is money. As society creates a middle class and women move into the workforce, birth rates drop. Having large families is incompatible with middle class living.”
Who would have thought of this as a consequence of letting women realize their potential? In decades past, a baby boom was created. Now it will be much more expensive, harder to do and socially unlikely."
----“The quickest way to drop the birth rate is through rapid economic development. After World War II, the U.S. instituted a $600 tax credit per child. The idea was to enable mom and dad to have four children without being troubled by taxes. This led to a baby boom of 22 million kids, which was a huge consumer market that turned into a huge tax base. However, to match that incentive in today's dollars would cost $12,000 per child.”
Male-Female Gender Imbalance in China & India
----“China and India do not have declining populations. However, in both countries, there is a preference for boys over girls, and we now have the technology to know which is which before they are born. In China and India, many families are aborting the girls. As a result, in each of these countries there are 70 million boys growing up who will never find wives. When left alone, nature produces 103 boys for every 100 girls. In some provinces, however, the ratio is 128 boys to every 100 girls.
The birth rate in Russia is so low that by 2050 their population will be smaller than that of Yemen. Russia has one-sixth of the earth's land surface and much of its oil. You can't control that much area with such a small population. Immediately to the south, you have China with 70 million unmarried men - a real potential nightmare scenario for Russia.”
So now what?
What does this all mean? What are we to do? Here are a few of Meyer's observations. I'll close with some of mine.
----“Europe and Japan are dying because their populations are aging and shrinking. These trends can be reversed if the young people start breeding. However, the birth rates in these areas are so low it will take two generations to turn things around. No economic model exists that permits 50 years to turn things around. … Europeans aren't willing to give up their comfortable lifestyles in order to have more children. In general, everyone in Europe just wants it to last a while longer. … They don't want to work very hard. The average European worker gets 400 more hours of vacation time per year than Americans. They … don't want to make any of the changes needed to revive their economies.”
Of course remember the caveat. There are things that can change demographics. Famine, war, pestilence, ethnic cleansing, are just a few. Consider how likely each of these is. They are not very likely to be widespread in today's society (at least we hope not). But a few instances are shocking if we think about them.
----“The summer after 9/11, France lost 15,000 people in a heat wave. In August, the country shuts down while everyone goes on vacation. The severe heat wave killed 15,000 elderly/infirm people living in nursing homes and hospitals. Their children didn't even leave the beaches to come back to bury them. Institutions had to find enough refrigeration units to hold the bodies until people claimed them. This loss of life was five times bigger than 9/11 in America, yet it didn't trigger any change in French society. When birth rates are so low, it creates a huge tax burden on the young. Under those circumstances, keeping mom and dad alive is often an unattractive option. That's why euthanasia is increasingly popular in European countries.”
Implications-There Are Many
In the U.S. we also have an aging population starting to retire at a massive rate. This could have several possible major impacts:
--Possible massive sell-off of large four-bedroom houses and a movement to condos, patio homes, etc.
--A huge drain on the treasury for Social Security and Medicare.
Boomers vote, and they want their benefits, even if it means putting a crushing tax burden on their kids to get them. (We are the only country in the world where there are no age limits on medical procedures.)
--A huge drain on the health care system, (which will also increase the tax burden on the young, causing them to delay marriage and having families, driving down the birth rate even further.)
Solutions? Sure. Look for them.
But “every dark cloud has a silver lining.” such demographics present enormous opportunities for products and services tailored to aging populations. The challenge is to find them, understand them and serve them. For example, there will be tremendous demand for caring for older people, especially those who don't need nursing homes but need some level of care. Ditto for products they can use with impaired physical or motor skills.
Perhaps a “cottage industry” will develop whereby the healthier people make a business of taking care of three or four people in their (too large) homes.
The demand for that type of service and for innovative products to physically care for aging people is already big and will get much bigger. Products that play to the infirmities of aging, without being offensive about it, are likely successes.
What can you do? Look outside your four walls and think about what drives your work, your business and your life. Study the impact of demographics on your business, on the customers you serve and the ways you serve them. Stay tuned to where the action is-and where it's going.
Demographics are greatly underrated as an indicator of where the opportunities are now, and will be in the future. How populations will grow and shrink is much less understood than it should be, given its inevitable importance to business and society. Businesses need customers. Find the customers. Then understand what they buy and why they buy it. Then sell it to them.
Study the demographics (and psychographics) in each of your markets and then plan accordingly. This great demographic shift is just one of the Six Events that are shifting the shape of our future and the future of our children and grandchildren. Forewarned is forearmed.
Best, John
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