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The New Old Generation
Posted on October 6th, 2016 by Paul Hodges in Chemical R&D
Today’s aging populations are creating a paradigm shift for the green movement. The reason is that increasing life expectancy has created an entirely new generation of people – the New Old 55+ cohort. Even a century ago, life expectancy in the developed world was just 50 years, and half that in the emerging economies. But today, however, the average American male reaching 65 can expect to live to age 84.3, and a female to age 86.6.
This matters, because consumer market experts have long recognized that the ages 25 – 54 are the peak years for wealth creation and consumer demand. These are the years when people’s incomes rise as their careers develop. Their spending also rises as they typically settle down, buy houses and cars, and often have children. By contrast, the New Olders already own most of what they need, and their incomes decline as they move towards retirement.
The chart (based on Bureau of Labor Statistics data), confirms the dramatic fall in spending after the age of 55. Some items, such as travel, see a temporary boost as people take “trips of a lifetime” whilst they are still fit and well. But total spending falls 45% by age 75. Data on retirement savings supports this conclusion, as the median balance held in a 401(k) account by those approaching retirement is just $104k, which currently only provides $4k in annual income. Unsurprisingly, therefore, more than a third of all U.S. retirees rely on Social Security for more than 90% of their income, and two-thirds rely on it for more than half of their income. Yet the average monthly benefit is only around $1300.
This paradigm shift creates a major challenge, as well as opportunity, for the green movement. We have grown used to an economy powered by Baby Boomers – the largest and wealthiest generation that has ever existed. Their economic power appeared unstoppable, making cost a relatively minor barrier to the creation of a more sustainable economy. But now the U.S. is becoming an aging society, as the Boomers also have the highest life expectancy in history. 10,000 Boomers have been retiring every day since 2011, and this trend will continue until 2030.
As a result, the value proposition for the green movement can no longer simply focus on “doing the right thing for future generations”. Instead, affordability is set to become a critical success factor. Energy markets provide a key example of the challenges, and the opportunities, that this will create:
- The New Olders cannot afford to pay much higher prices for renewable energy, no matter how “worthy” the project
- Instead, greater stress needs to be placed on concepts such as the circular economy, which can reduce costs and help to create a more sustainable economy
Paradigm shifts such as these are never comfortable, as they inevitably create losers as well as winners. Some people choose to ignore the warning signs of change, and rapidly move into irrelevance. But others recognize the new direction and profit accordingly. For them, affordability will be the clarion cry to break down the barriers of the past, and to insist that going green is no longer something that is “nice to have”. Instead, it will enable them to become a winner in today’s New Normal world.
All opinions shared in this post are the author’s own.
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