Like in several domains of intensive change in modern society, the full impact of population aging is being realized very slowly, and with important delay. Adjustments are needed in numerous policy areas and sectors: from employment, pensions, entrepreneurship and innovation support, to health, taxation, and conditions of financial services.
In most countries when you retire, instead of receiving through pension the money you have been paying to the pension funds for about 40 years, you are receiving less than that, while pension funds are “Swimming in money”, and often investing irresponsibly.
When being over 65, the banks will not give us any credit – which is not justified by any demographic statistics, nor by any degree of common sense! In many companies around the world, when you reach the age of 65, you will be expected to retire, though your experience, knowledge and skills, could undoubtedly provide a valuable contribution. Again – what a nonsense?!
All this is happening when life expectancy in developed countries is around 80 years, and instead of adjusting relevant laws and customs to the new demographic reality, most countries stick to some traditional patterns. The USA and Japan are largely an important exception, and why other countries fail to adopt similar policies? Except for inertia, it is difficult to find any rational explanation for the situation, and even more difficult to see who and how could bring about the necessary changes.
In public opinion the seniors are still predominantly perceived as the people to be cared about. Statistics in France gives a very different picture: only 6% of the over 50’s is actually in a dependant state. Therefore, silver economy is a major, still poorly recognised opportunity.
Defining the silver economy
It covers economic processes engaging and being engaged by the seniors, and those product and service providers using and being created for them. Let us first identify the demographic dimension of silver economy, and then look at its economic dimension.
The share of seniors (aged over 65) in 27 EU countries in 2022 has been 17% and in 2045 it is expected to be 31% among women and 26% among men. In 2021 - in France for example -- there were 13 million seniors, while for 2070 they are expected to be about 22 million – almost double! The retirees represent over 30% of total population of China, Japan and South Korea.
Of course, a factor in population aging is not only longer life expectancy, but also modest population growth – in some countries even shrinking of it. For the first time since 1950 global population growth in 2020 has fallen under 1%, and in 61 countries population decrease is expected for the period 2020-2050 to be at least 1%.
Economic repercussions of aging population are big and important. Seniors are becoming economically more important than ever: they are the wealthiest and fastest growing segment of population. In first quarter of 2022 US citizens over 70 years have reached 26% of the national aggregate net worth. During the decade 2015-2025 the seniors are expected to contribute even 50% to the global Gross Value Added growth, about 30% to growth of productivity, and some 13% to overall employment.
These are just some indications of the dramatic changes having taken place over the last half century – of which we are still not fully aware. However, in academic research, this has become one of the hottest topics, there are abundant works published in economic literature, and some universities have already started to offer courses on “Silver economy Management”.
In their 70-ies and 80-ies most of todays’ seniors refuse to accept the traditional position of “the elderly”, who were preoccupied mostly with their health and relaxation, while actually waiting for “the departure”.
The rest of society did not pay much attention to the elderly, viewing them almost as a burden for society and their own families. This has changed quite dramatically, especially in the most advanced societies, where average life expectancy is around 80, while in Japan and Hong Kong it has gone over 85 years. This implies an increase of the potential total work force of a country for 10-15%. Who could disregard the favorable economic impact of these changes on respective national economies - together with the reduced share of conventional “retirees” in the society - for the same proportion. This has undoubtedly important, positive repercussions on national accounts (more taxes being paid from the income earned, higher spending, etc.).
A well-performing silver economy is based and actively supported by many economic and other policies at national, regional, as well as corporate level. Through favorable conditions the extended work should be created at all these levels, and what is needed is also an adequate shift in public perception of the seniors and of course their motivation to remain active much longer than before. Is it unexpected to find the most advanced economies and societies to lead the way also in building silver economy? Certainly not, but how did they manage to create the right conditions? They have created the needed material/objective, as well as the socio-psychological conditions, enabling seniors to be fully and readily accepted, as part of the active society, much sooner than other societies.
When defining the dimensions of Silver economy, the following figures say it all: we are referring to about 100 million people, and a turnover of about 6 trillion € (in 2015 it was 3.7 trillion). According to the latest demographic forecasts in Europe by 2060 the elderly will represent 1/3 of the total population.
What is so new in the period of silver economy? Let us not forget, that for the first time in human history we have the situations where even 5 generations can work together and jointly addressing challenges at hand. With the interest for productive collaboration, this offers unprecedented opportunities for combining experience and knowledge of various generations with unique potential.
At the 2019 High Level Forum on the Silver economy - organized by the Global Coalition on Aging - the following important 5 conclusions have been adopted:
- Reimagining aging requires a societal shift, led by global institutions, government, business, and individual commitments to ending ageist stereotypes.
- All employers have a role in reframing the workplace to fully leverage the contributions of all five generations working together.
- Harnessing the full potential of the Silver economy relies heavily on transforming healthcare systems to focus on wellness and prevention.
- Elders' caregiving is a critical component of the healthy aging continuum with the potential to fuel the Silver economy.
- The Silver economy will thrive and scale through dedicated attention to a hospitable marketplace that supports innovation.
These conclusions illustrate very well the two important points always to be kept in mind when discussing issues of silver economy: first the complexity of the aging phenomenon, and secondly its potential for innovation – since every generation brings into the process its own views, experiences and values. This is very important, as innovation contributes about half of the GDP growth (established by Swedish professor Charles Edquist from Lund University).
Some silver economy success stories
The IBRD and WHO statistics indicate that in 2020 we live an average of 72.5 years, 20 more than in 1960, and that the total population over 60 will have doubled by 2050 compared to 2000. The main consequence of increased longevity, coupled with the general decline in the birth rate worldwide, is the reversal of the population pyramid. This means that there are more and more older people and fewer young people, something that was verified in 2018 by an extraordinary occurrence: that year, the over-65s surpassed the under-fives for the first time in history. Here are the top 10 countries by share of senior (over 65): Japan, Italy, Finland, Greece, Germany, Bulgaria, Croatia, France, and Latvia.
The seniors in France hold over 45% of the purchasing power at the national level, with a calculated total of 132 billion euros. The over 60‘s are calculated to hold 60% of the private wealth. When projected to 2050, those over 50’s will increase by 75%, whereas the under 20’s are expected to rise by only 1%. According to the Social Research Centre (CREDOC), the seniors’ market will provide 45% of the total demand within various markets, 64% for health by 2015, 60% for food, 58% for equipment, 57% for leisure, 56% for insurance. It is the seniors that assure a large part of the markets in France.
Already in 2013, the French Minister for Industrial Recovery along with the Minister for Ageing and Autonomy launched the silver economy Industrial Network. This network proposed a series of actions to tackle the issue of an ageing population and reducing the risk of a stagnating economy. This network proposed the development of a national strategy, supported and diversified by regional activities and strategies. Three regions were to be proposed as pilot regions and quickly to be followed by the launching of the first service labelled as ‘silver economy’.
Discussions were made about developing products and services for the senior’s market, taking into account three criteria: health, free-time and purchasing power. By considering these issues, companies are expected to have a better chance to develop new products successfully. Contrary to common thought, the seniors’ market is made up of a majority of healthy and autonomous people. Actually even 73% of the over 85’s is in good health and independent.
People aged over 50 years are now over 4 million in Portugal, more than 39% of the national population. Life expectancy at birth in Portugal is 80.3 years for women and 73.5 for men, and it is expected that by 2050, the elderly population will increase by 1% per year. The total number of people aged over 60 will have increased 40% over 2050; and the population over 75 years will have increased by 80%. Complicating this is the geographical distribution characterized by an ageing population predominantly in coastal departments that highlights that the issue is not homogenous across Portugal. The impact on the economy is pronounced with persons over 64 years having a 24 % risk of poverty. Projections from the European Commission estimate that the total public expenditure related to ageing in Portugal will increase drastically in the period 2007-2060, a change in the order of 3.4 percentage points of GDP. Portugal is predicted to record a variation in public pension expenditure between 2007 and 2060 of 2.1 percentage points of GDP. Regarding the change in public expenditure on health care it is 1.9 percentage points of the GDP. The projection for public expenditure on education in Portugal by 2060 is predicted to be a decrease of 0.3 percentage point of GDP. However, investment in human capital, creating incentives for lifelong learning and a focus on quality of training will be crucial for increasing the productivity of the future.
Singapore is one of the fastest ageing populations in the world, with one in four Singaporeans expected to be aged 65 and above by 2030. While this “demographic curve” can pose a “significant strain on the society”, such as increased healthcare needs, it can also be a window of opportunity, said Finance Minister Lawrence Wong. This “silver lining” is set to be a US$72.4 billion market in Singapore by 2025, according to the Asia Pacific Silver economy Business Opportunities Report 2020, released by business consultancy Ageing Asia. The same report also named Singapore as the top market in terms of silver economy potential. The ranking took into account factors such as the size of the ageing population, per capita household savings, and life expectancy. Food is one immediate area of opportunity, Enterprise Singapore’s assistant chief executive officer Dilys Boey told CNA. Companies such as Silver Connect are already stepping up to meet the health and nutritional needs of seniors, she added. The agency also provides support for firms to innovate. Through a Food for Elders programme, for instance, Silver Connect received grants to co-develop pureed local snacks, such as chwee kueh, with specialist dieticians and speech therapists from Khoo Teck Puat Hospital. Healthcare is the other immediate opportunity. Enterprise Singapore said it has observed an increase in demand for community-based technology solutions given the rise in chronic disease and the country’s focus on active ageing. Beyond disease management, wellness and prevention are other growth areas. Digital services and infrastructure are also areas that local businesses are keen to capture the “silver dollar”. These include developing assisted living solutions, wellness and fitness technologies targeted at seniors, the agency said.
In Japan cctive aging measures have developed as a national government initiative already since the 1960s. During the past half-century, the Japanese government initiated various active aging efforts that have greatly contributed to healthy ageing and possibly extending the nation’s life expectancy. Since the 1960s, urbanization trends, economic growth, high literacy rates, and changes in the living arrangement from living with adult children’s family in old age to living only with one’s spouse or alone have buttressed the support of national active aging initiatives.
While there has been evidence of a decline for senior clubs and their level of participation, senior colleges, which have also received some policy and financial support, may be seen as another avenue for active aging program development. Municipalities and universities have initiated them jointly.
With population decline, population aging, and declining fertility rates, Japan’s financial challenge to maintain its level of support for past older adult programs may face future challenges in maintaining its current level of support. Tax increases are already occurring and retirement age for pensions are changing. In concert with the government, some gerontological professional consortiums are creating a new push to encourage older adults to remain employed. In keeping with this government effort to encourage the continued employment of older adults, the mandatory retirement age in Japan is about to be extended beginning in 2023. Perhaps active aging in Japan is shifting to expand the productive role of retiring older adults beyond senior employment centers with the approaching 100-year life.
There are two general conditions to be fulfilled to enable successful development of the silver economy:
Public support to government strategies and policies about seniors – meaning that the society has fully understood that the concept of “elderly citizens” should be adjusted to new demographic reality, and people over 65 should not be regarded as a burden but treated as fully respectable and actively contributing part of society, and being offered at the market the products and services responding to the specific needs of the seniors.
Smoothly functioning regulatory environment -- meaning that the whole range of regulations were adopted, and policies measures are being undertaken in order to support the seniors in continuing their fully active life, by extended work and employment, and spending their income in favor of supporting the economy and enjoying themselves.
How come that this seems so self-explanatory, and yet most societies find it difficult to understand and act accordingly?
On the surface the main problem are the governments failing to understand the new situation, and therefore not introducing necessary adjustments in many policy domains. However, even more important factor is probably the lack of pressure upon governments by the seniors themselves. And why is that the case? There are probably two major reasons for the challenge: many of the seniors are themselves not fully aware of the extent things have changed during their own lifetime – which require adjustments; and secondly, the seniors have the numbers as part of the electoral body, but are not adequately politically organized.
So, we come to the obvious conclusion: even in best democracy, unless those most directly interested in a problem act efficiently, little will be done to serve their interests. And, as the population aging process is expected to continue quite intensely, seniors are advised to become much more active in proposing and requesting changes needed to address their concerns – many of them going well beyond their own interests.
As this is to a large extent also a problem of public awareness, it is important that the media contribute to the fuller public understanding of the issues of ageing and the potential of silver economy.