The Business of Aging

Posted Wednesday, February 20th, 2013  | Comments (2) rule
Corporations have a social—and fiduciary—responsibility to develop and provide products and services for older people
Florian Kohlbacher, PhD
Head of the Business & Economics Section
German Institute for Japanese Studies (DIJ), Tokyo
Research Fellow
Sloan Center on Aging & Work, Boston College

Business leaders in developed countries have their eyes on the “silver market”—members of the Baby Boom generation now entering retirement—because many have accumulated significant wealth and will soon have a lot of time on their hands. Most companies pitch their silver market strategies to the segment of the elderly population who are rich and young at heart, generally neglecting those who are poor and weak of limb. That’s a mistake, because in the silver market of the future, those who are old, poor, and sick will likely be the majority.

The United States, according to a 2011 survey of American demographic trends by the Congressional Research Service, “has been in the midst of a profound demographic change: rapid population aging.” By 2050, the research service reports, one in five Americans will be 65 or older. Also by 2050, the country’s most populous age group, accounting for 7.4 percent of the population, will be “the oldest-old”: age 80 and above. Moreover, the report says, the numbers of older people in poor health “are almost certain to rise.”

Japan is the world’s most rapidly graying nation. It’s good place to look for a preview of what’s to come in the United States and other countries, and what these changes mean for businesses.

The age at which physical decay often starts to accelerate dramatically is 75. In Japan, those who are 75 and older already make up more than 10 percent of the population—a share that is increasing. Social stratification—kakusa shakai—creates economic disparities that put this age group at a unique disadvantage. As a result, although a third of the Japanese population is employed, a high ratio of nonregular employees—those without permanent, full-time jobs—do not or cannot pay for health insurance or pensions.

Although Japan’s Baby Boom generation are famously affluent consumers who live and work on the bright side of the silver market, economic inequality and poverty are increasing among the elderly. In an article for the journal Japan Close-up a few years ago, Andrea Weihrauch and I attribute the change to “the effect of the aging of society itself” as Japan “struggles to cope with the exploding costs of its aging population and tries to cut back on its safety net of universal health care, pensions, and welfare benefits for seniors.” The result is a demographic time bomb that ticks louder every day.

In Japan, as in the United States and other countries (developing as well as developed), businesses must prepare today for the realities of the silver market of tomorrow, in order to leverage the looming demographic crisis as an opportunity.

Social responsibility is economic wisdom

Do corporations have a social responsibility to provide transgenerational and age-friendly products and services to support the daily lives of older people? Against the backdrop of these demographic trends, the question takes on new urgency. Supporting seniors in their everyday lives and enabling them to grow old in a humane way are not simply matters of corporate philanthropy. Given the right business model, socially and ethically responsible action can also yield economically responsible profits, not to mention positive public relations.

The late management guru C.K. Prahalad has shown how this works for markets in developing countries in his seminal book, The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits. The title refers to consumers and potential entrepreneurs at the bottom of the income and wealth pyramid. This concept can be applied to the silver market of the future, in which those at the top of the age pyramid will be at the bottom of the income/wealth pyramid.

The same economies of scale that Prahalad says can be achieved by marketing to the large, poor populations of developing countries can be achieved by marketing to large, poor, elderly populations everywhere. Products with adapted functionalities, foods packaged in smaller servings, and packages or products specifically addressing the needs and means of poor, elderly people are just some examples. Population size ensures that profits can be gained even from sales with narrow margins to poor, elderly consumers, because the group’s combined total fortune is substantial—and growing. Most important, elderly consumers will benefit, as their standard of living, quality of life, and subjective well-being improve.

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Over 70 and Back to Work?

Posted Monday, February 4th, 2013  | Comments (4) rule
The following blog is reposted with permission from Squared Away: Financial Behavior: Work, Save, Retire. Sponsored by the Center for Retirement Research at Boston College, Squared Away is a blog is for individuals, as well as practitioners in the field of financial literacy, including financial advisers, educators, employers, government and foundation officials, and researchers.
Kimberly Blanton
Boston College Center for Retirement Research
Phone: 617 552 6896

For Vita Needle Company’s elderly employees, work is the essence of the fulfillment they feel in their lives.

Howard Ring, a 78-year-old engineer – like many of his coworkers – initially went back to work after retiring, because he needed more money. And Vita Needle would hire him.

“What I found there was more than just a job,” he says. In the video below, Ring and his elderly coworkers talked about what they derive from work during an October panel discussion at the Newton (Mass.) Free Library.

Is Vita Needle a window into the future? Will growing ranks of retired but still-vigorous boomers return to work after a couple of years, when they grow bored with golf or bridge?

Returning to work – or remaining employed – has proved extremely difficult in the wake of the 2008-2009 stock and housing market collapses. More late-career workers lost their jobs in the Great Recession than in previous downturns, and their jobless spells lasted longer, according to a forthcoming study by the Center for Retirement Research, which funds this blog. Now that the economy is growing, it isn’t generating enough jobs to employ the elderly who do want to work, the study found.

Vita Needle’s heavy reliance on older employees is “unique,” said Marcie Pitt-Catsouphes, director of the Sloan Center on Aging & Work, which is also at Boston College.

Older workers make excellent employees, she said – they demonstrate a strong work ethic and great attention to detail, whether safety concerns or a customer’s precise product specifications. But a future of workplaces bustling with aging boomers “is not coming unless there is more labor market demand,” she said.

Vita Needle employees like Rosa Finnegan – age 100 – are such an anomaly they have become virtual celebrities. They were featured on a German documentary and public television and studied by Olin College professor Caitrin Lynch in her book, “Retirement on the Line: Age, Work, and Value in an American Factory.”

But Squared Away can’t help wondering whether baby boomers, who have put their stamp on so many other aspects of American life, may also redefine the meaning of retirement.

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