The most influential Megatrends set to shape the world through 2030, identified by Euromonitor International, help businesses better anticipate market developments and lead change for their industries.
Better healthcare and living standards are allowing the world’s population to live longer. Japan, Monaco, Germany and Italy have the largest proportions of over-65s globally, which are growing rapidly and placing strains on government and company finances. Developing countries with much bigger populations, like China and India, are seeing similar demographic trends. Ageing populations will create opportunities for targeting older consumers, but present challenges for businesses and governments.
The proportion of over-65s in the global population has risen from 5.9% in 1980 to 8.0% in January 2011, when this group totalled 552.4 million people. Life expectancy at birth reached 69.9 years in 2010. This is the result of improved healthcare, rising living standards, better nutrition and lower poverty rates;
Japan has the oldest population in the world, with 23.3% aged over 65 in January 2011 and a life expectancy at birth of 83.1 years in 2010, the highest in the world. All the other countries in the top 10 oldest as of January 2011 are in Europe, with Monaco in second place followed by Germany, Italy, Greece and Sweden;
Major regional variations are evident. Western Europe is the region with the world’s oldest population (as a proportion of the total population), with 16.5% of people aged over 65 in January 2011. In contrast, only 3.2% of the population in sub-Saharan Africa were aged over 65 in January 2011;
Many, though not all, over-65s are not economically active and in many countries receive state pensions or subsidised services. This is placing a significant and growing financial burden on governments and working-age populations. The old-age dependency ratio (the number of over-65s as a proportion of the working-age population aged 15-64) has risen globally from 10.0% in 1980 to 12.0% in 2010;
There are growing opportunities for businesses to target older consumers, especially in developed countries. Older consumers tend to have comparatively high disposable incomes as they often have fewer dependents and debts than younger generations, allowing greater discretionary spending. However, in many developing countries, older people are often more reliant on younger family members for financial support and have less spending power. Future generations of over-65s are likely to be worse-off than their predecessors, working longer with less generous benefits.
Top 10 Countries with the Highest Proportion of Over-65s: January 2011
% of total population
Source: Euromonitor International from national statistics
Japan has by far the world’s oldest proportionate population due to long life expectancy, low birth rates and high standards of healthcare. Similar reasons explain why Germany, Italy and Greece all have ageing populations. Monaco has the second-highest proportion of over 65s in the world due to a large number of retirees in a very small population;
In general, developed countries tend to have higher standards of living that improve life expectancy, as well as lower birth rates, arising from greater female employment and an older average age at childbirth, which means the older population accounts for a growing proportion of the population;
China, however, has the largest over-65 population of any country at 132.7 million in January 2011, equivalent to 9.9% of the Chinese population and 24.0% of the world’s total number of over-65s. India has the second-largest over-65 population at 59.8 million, equivalent to 5.0% of India’s population in January 2011 and 10.8% of the world’s over-65 population;
Developing countries, especially in sub-Saharan Africa, tend to have higher (though falling) birth and fertility rates, lower-quality healthcare and greater poverty rates that account for much younger populations. In Uganda only 2.5% of the population was over 65 in January 2011 and the median age was just 15.7 years in 2010;
There are also anomalies, for instance several small Gulf Cooperation Council (GCC) states such as the UAE and Qatar, which have the lowest old-age dependency ratios in the world at 1.2% and 1.3% respectively in 2010. This is because the majority of the population are foreign nationals, who are theoretically not permitted to remain in the country after retirement age.
Pressures on government finances
The majority of over 65s are not economically active (employed or unemployed people furnishing the supply of labour for the production of goods and services). In Germany, only 4.2% of over-65s were economically active in 2010. Older consumers make limited tax contributions and receive financial and other state benefits that are essentially paid for by the economically active population;
This is placing a growing strain on government finances. For instance, the number of pensioners (those of state retirement age and above) grew by an annual average of 1.8% in Germany between 2005 and 2010, while the total population shrank by 0.2% per year over the same period. Germany has one of the highest pension deficits in the world;
Companies are also struggling with large pension deficits due to payments to retired employees. A trade survey found that the world’s 100 biggest companies had a combined pension deficit of US$209 billion at the end of September 2010.
Consumer market opportunities
Despite the increased burden that older age groups place on the state, they constitute an important and growing consumer market:
Over-65s often have a relatively high disposable income, especially in developed countries, partly because they often have no direct dependents and have paid off debts, such as mortgages, leaving greater spending power for luxuries and non-essentials;
Over-65s in Australasia and North America have much higher annual gross incomes than in some other regions at US$49,803 and US$34,446 respectively in 2010. Between 2005 and 2010 average gross incomes of those aged 65+ grew quickest in Australasia and Latin America, where they rose at average annual real rates of 6.2% and 5.1% respectively;
In contrast, patterns in developing countries can often be different. In many cases older family members are financially supported by younger ones, partly because of insufficient state support for retirees but also because of social and cultural norms. This places additional strain on younger family members and can reduce the ability for other types of spending. Lower average incomes mean that the market potential in developing regions is still limited compared to developed countries;
Average Annual Gross Income of Population Aged Over 65 and Average Annual Real Growth in Income by Region: 2010 and 2005-2010
US$ per capita / real average annual growth %
Source: Euromonitor International from national statistics
In developed countries, 57.1% of those aged over 65 were female in January 2011, and 54.5% in emerging and developing countries, with implications for companies targeting this age group, especially in terms of healthcare, leisure or anti-ageing beauty products. Females tend to have longer life expectancies than men;
Consumer spending of older households will differ from younger households creating variation in demand, with growing opportunities for health goods and medical services, as well as food and drink, as older consumers tend to stay at home more than younger consumers.
Many governments in developed countries are planning to raise the age at which people are entitled to state pensions. In France, it was decided in 2010 to raise the minimum retirement age from 60 to 62 by 2018;
Similarly, many public and private sector employers are reforming pension schemes, often by increasing the level of employee pension contributions or by closing schemes entirely. This places extra financial pressure on working-age consumers, who are required to set aside larger proportions of their disposable incomes;
People approaching retirement age, as well as future generations, may need to change their attitudes towards retirement. Many will continue to work until an older age in order to save enough to support themselves through retirement, while also needing to save more during their working lives. These are sensitive issues and have already led to industrial action across many developed countries.
Globally, the number of over-65s is forecast to rise by 3.1% on average annually between January 2011 and January 2020, by which time they will represent 9.6% of the world population. Ageing trends in developed countries are likely to accelerate, exacerbating problems for government finances. Japan’s old-age dependency ratio is forecast to be 48.8% by 2020, by far the highest in the world, while it will also have the largest proportion of over-65s at 28.9%, followed by Germany (23.0%), Italy (22.8%) and Monaco (22.6%).
Developing countries will continue to experience similar problems with rising old-age dependency ratios. In China, for instance, this is forecast to grow from 13.1% in 2010 to 18.3% in 2020, by which time an extra 79.4 million people will be over the state retirement age. However, they will in general retain more youthful populations than developed regions.
Even with reforms, government and company pension deficits are likely to widen. Ageing populations are expected to present a bigger challenge in the long term to governments than the global financial crisis of 2008. It is likely that further reforms will be required, with the risk of causing social tensions and industrial action.
Maturing demographics will create opportunities for businesses targeting older age groups. But in general, future generations of over-65s are likely to be worse-off than their predecessors, working to an older age and receiving less generous benefits from governments or employers.