By: Sophia Dimitriadis

When we think about our ageing population, we tend to fixate on seemingly inevitable doomsday fiscal projections, while we ignore the abundant economic opportunities afforded by longer lives.

The economic footprint of older adults is substantial and growing, upending conventional wisdom about how ageing affects the economy. Older households (aged 50 and over) own 52% of total disposable income, thus already dominating the UK consumer market. Their market share is expected to grow from around 54% today to 63% by 2040 after housing costs. This rapid increase in demand is not only caused by the growing number of older consumers; the average older consumer is also spending more. [i]

As a society we have the opportunity to build on the potential of spending by older consumers. Indeed, our latest report on “Maximising the longevity dividend” finds that supporting adults aged 75+ to spend the same as their 65-74-year-old peers could add 2% to GDP every year by 2040. We know that consumer spending falls and savings tend to increase at older ages. And while this may be linked to a desire to pass on inheritance to consecutive generations, there are also a number of avoidable barriers to spending in old age that we have the agency to tackle.[ii]

Previous research has found that poor health, the anticipation of uncertain care costs, poor internet access and a lack of age-friendly town centres – including transport options and retail areas – can hinder spending at older ages – and addressing these issues could cost very little.[iii] For example, the Kaiser Supermarket in Berlin became age-friendly through small changes, such as providing lower shelves and larger labelling. Following redesign, the supermarket increased its sales by 25 per cent.[iv]

Currently, most products and services are not designed to be age-friendly.[v] And marketing budgets continue to disproportionately focus on younger consumers, fuelled by negative perceptions of ageing.[vi] The limited product innovation for ageing that does occur often targets a minority of older adults, predominantly in care settings or only at the higher end of the older consumer base.[vii]

However, despite widely-held assumptions that health is the main area of spending growth for older people, we are actually seeing the biggest growth occurring in areas such as leisure, household goods and services and transport.[viii] We need to challenge outdated ageist stereotypes of the “older consumer” and understand the heterogeneity of our ageing population. Just as with younger consumer groups, older consumers’ preferences are constantly evolving – with the top consumer sectors for older adults changing over time.[ix] Businesses that adapt fast to this evolution in demand will reap the rewards and gain access to a growing export market. Indeed, in the US, the economic impact of spending by over-50s is estimated to exceed the economy of Japan.[x]

Businesses and policymakers need to wake up to the opportunities of older spenders and address barriers that are keeping them out. However, without the involvement of older adults, this will surely fail, as ageism underlies many of these obstacles. Only by incorporating the lived experience of older adults in the design and innovation process can business gain a realistic insight into older consumer preferences.

Realising these economic opportunities would be a win-win for our society. This would increasingly benefit GDP as the population ages, help pay for age-related fiscal costs (by boosting VAT revenues) and sustain overall aggregate demand in the economy. Most importantly, this could support people in later life to age healthily, live independently, and reduce isolation, thereby lowering fiscal costs themselves.

As Prof. David Bloom (University of Harvard T.H. Chan School of Public Health) suggested in a recent ILC publication, “demographic trajectories are not set in stone, nor are their implications for social, health and economic outcomes”. We need to be ambitious; the prize from realising these opportunities is large. We can’t afford to miss out.

References:

[i] ILC UK. (2019). Maximising the Longevity Dividend. Available at: https://ilcuk.org.uk/wp-content/uploads/2019/12/Maximising-the-longevity-dividend.pdf; Brancati, C. Beach, B. Franklin, B and Jones, M. (2015). Understanding retirement journeys: Expectations vs reality. An ILC report for Prudential. Available at: https://www.prudentialplc.com/~/media/Files/P/Prudential-V3/content-pdf/analysis/retirement-journeys.pdf

[ii] Brancati, C and Sinclair, D. (2016). The Missing £Billions. The economic cost of failing to adapt our high street to respond to demographic change. International Longevity Centre-UK. Available at: https://ilcuk.org.uk/wp-content/uploads/2018/10/ILCUK-The-Missing-Billions.pdf; M, Hurd and S, Rohwedder;

[iii] Brancati, C and Sinclair, D. (2016). The Missing £Billions. The economic cost of failing to adapt our high street to respond to demographic change. International Longevity Centre-UK. Available at: https://ilcuk.org.uk/wp-content/uploads/2018/10/ILCUK-The-Missing-Billions.pdf; M, Hurd and S, Rohwedder. (2008). The Retirement Consumption Puzzle: Actual Spending Change in Panel Data. NBER Working Paper No. 13929. Available at https://www.nber. org/papers/w13929.pdf; AGE UK/ILC-UK. (2010). The Golden Economy: The Consumer Marketplace in an Ageing Society. Available at: https://www.ageuk.org.uk/Documents/

[iv] IPPR North. (2014). Silver Cities: realising the potential of our growing population. Available at: https://www.ippr.org/files/publications/pdf/silver-cities_Dec2014.pdf

[v] AGE UK/ILC-UK. (2010). The Golden Economy: The Consumer Marketplace in an Ageing Society. Available at: https://www.ageuk.org.uk/Documents/EN-GB/For-professionals/Consumer-issues/The%20Golden%20Consumer%20October%202010_pro.pdf?dtrk=true

[vi] AGE UK/ILC-UK. (2010). The Golden Economy: The Consumer Marketplace in an Ageing Society. Available at: https://www.ageuk.org.uk/Documents/EN-GB/For-professionals/Consumer-issues/The%20Golden%20Consumer%20October%202010_pro.pdf?dtrk=true

[vii] Centre for Ageing Better. Industrial Strategy Challenge Fund Healthy Ageing Challenge; Framework. Available at: https://www.ageing-better.org.uk/sites/default/ files/2019-02/Healthy-Ageing-Challenge-Framework.pdf

[viii] ILC UK. (2019). Maximising the Longevity Dividend. Available at: https://ilcuk.org.uk/wp-content/uploads/2019/12/Maximising-the-longevity-dividend.pdf

[ix] ILC UK. (2019). Maximising the Longevity Dividend. Available at: https://ilcuk.org.uk/wp-content/uploads/2019/12/Maximising-the-longevity-dividend.pdf

[x] AARP Oxford Economics. (2016). The Longevity Economy. How People Over 50 Are Driving Economic and Social Value in the US (2016) AARP Oxford Economics. Available at: https://www.aarp.org/content/dam/aarp/home-and-family/personaltechnology/2016/09/2016-Longevity-Economy-AARP.pdf