The Longevity Economy Flywheel: Older Workers Become Coveted Consumers
Older people need to keep working. Employers need to retain and attract seasoned talent. Sounds like a perfect match.
At its essence, the “Longevity Economy” is simple.
People aged fifty and over already account for more than half of consumer spending in the United States and 83 percent of household wealth. And by 2030, people above sixty will become the largest consumer bloc of all, which will endure for many decades and become the new normal.
That much is clear. Add in the demographic inevitability of an increasingly older population thanks to longer lifespans and healthspans combined with plummeting birth rates, and it would seem like we’d be in full swing into a massive restructuring of society in general and the world of work in particular.
Alas, things don’t happen as efficiently as we might like in the real world. But then again, that’s a big part of the opportunity we’re looking at. The good news is that the convergence of powerful market forces is energizing a longevity economy flywheel, building unstoppable momentum.
For decades the economic power of older people has been less attractive to businesses due to retirement. Once retirees become fixed-income citizens, spending tends to decline. And the spending that does happen usually goes to specific industries, like travel and healthcare. The idea that “everyone” over age 65 is retired is, of course, a myth.
Tossing additional water on the smoldering campfire of later-year spending is the fact that many employers tend to push older workers out of jobs whether they want to go or not, again due to misconceptions about productivity and ageist stereotypes. In a sobering piece from ProPublica, data reveals that once you’re over 50, odds are the decision to leave your job won’t be yours. Although age discrimination is illegal, companies use layoffs and coerced “early retirement” to shed themselves of older employees.
That brings us to the true irony of our mythical conception of retirement combined with those ageist employment practices. Despite being part of a large cohort with more household wealth in the aggregate, most people approaching age 65 won’t be able to afford retirement without suffering a substantial drop in their standard of living.
Add to that the prospect of living for decades past retirement age, and soon almost no one will be able to afford to just quit at 65. The combination of those two realities is why more people than ever are already working past retirement age. This trend will greatly accelerate by the time Generation X starts hitting the mark.
But here’s the twist. We’re in the midst of a labor shortage that many consider perpetual from here on out. That’s because at the same time older people are living longer, healthier lives, birth rates have plummeted well below even replacement rates.
Older people need to keep working. Employers need to retain and attract seasoned talent. Sounds like a perfect match.
The Rise of the 60-Year Career
According to the Stanford Center on Longevity, half the children age seven and under today can expect to live to 100 years old. Those same children should expect to work for at least 60 years, as opposed to the 40 years we currently consider a normal-length career.
This is all based on simple demographic extrapolation based on life expectancy trends. However, it doesn’t take into account any age-reversal treatments that seem likely to emerge in the next two decades. That’s the wildcard you can learn more about here.
Just like our concept of retirement at 65 has already become largely a myth, the 40-year career is on the verge of extinction. Older Baby Boomers are likely the last segment that will retire en masse in their 60s, which has been the initial catalyst for a perpetually tight labor market going forward.
In many developed economies, large numbers of employees from the out-sized Baby Boomer generation have retired in recent years while members of the Millennial generation have moved past entry-level roles. These shifts have created talent shortages in the comparatively smaller Generation X and Generation Z cadres at the leadership and entry-levels, respectively. Labor economists predict such shortages will represent a permanent market condition, persisting well into the late 2030s or beyond.
Now, add in a continuous drop in entry-level workers, thanks to fewer babies being born. The National Bureau of Economic Research found that birth rates in the U.S. have declined by nearly 20% since 2007, while the fertility rate has been below the replacement level for decades.
They say necessity is the mother of invention. It’s also the driver of change. In this case, change results in a win for older adults who need to not only keep working, but also to be valued and respected in the workplace. This change also gives companies the talent they desperately need while unlocking massive economic gains as the people with all the money spend more of that cash for longer.
The U.S. Bureau of Labor Statistics estimates that by 2025, 25% of the workforce will be over 55, with a third of that percentage being 65 or older. By the time Generation X begins turning 65 in 2030, we should see the number of active workers older than the traditional retirement age increase substantially.
The longevity economy is already here, based on extended healthspans and careers, and this is the spark for a flood of continued spending. An AARP study quantified the economic losses caused by age discrimination that forced older adults out of the labor market:
The findings show that the U.S. missed out on a potential $850 billion in GDP in 2018 (an uplift of more than 4%) because those age 50-plus who wished to remain in or re-enter the labor force, switch jobs, or be promoted within their existing company were not given that opportunity.
Whether employers want to end age discrimination because it’s the right thing to do is thankfully beside the point. They have to embrace older workers, given the demographic reality. And that means every year, hundreds of billions of dollars will be added to the GDP in the United States alone. AARP estimates that embracing older workers will add $2 trillion to GDP in 2030 and $3.9 trillion in 2050.
In short, the people with the most money will spend more for longer, creating vast amounts of additional economic activity. The recomposition of the workforce that’s already underway is one of the key catalysts for the vast opportunity you should be preparing for right now.
News Flash: Older Workers Rock
Given the level of age discrimination in the workplace, it seems likely that employers feel they're making a concession by retaining and hiring older workers. Nevertheless, the truth is that building an age-inclusive workplace can deliver substantial benefits to businesses. Older workers bring knowledge, expertise, experience, and arguably greater reliability to their organizations.
Once again, we plainly see how we’ve been shooting ourselves in the foot as a society with our propensity for ageism. While it may feel less than ideal that it’s only due to the quest for the almighty dollar that our irrational youth-focused culture will shift older, it’s still a change we should welcome and participate in.
As with other incorrect and ageist assumptions, it turns out that businesses will not suffer from relying on older workers. Contrary to popular belief, there’s an increase in productivity in knowledge-based jobs with age. While productivity eventually levels off as age increases further, it doesn’t go down.
Productivity is only the beginning. Older workers bring a whole host of other benefits as well:
They are enthusiastic learners and are keen to keep their skills current.
They possess invaluable institutional knowledge accumulated over years of experience.
They often exhibit remarkable dedication and loyalty to their employers.
They bring well-developed interpersonal skills, creating a more cohesive and harmonious work environment.
Plus, research shows that multigenerational teams with a wide age range perform at higher levels compared to teams with a narrow age range. Makes you wonder what else we missed out on thanks to the retirement myth and misguided age discrimination.
Once you consider the employment dynamics, it’s now looking inevitable that a greater representation of older people in the workforce will lead to a larger and more vibrant number of older consumers. While it’s to be expected that a significant evolution in business and society will happen thanks to a massive shift in the demographics of commercial activity, it’s still staggering in scope.
But it’s also still early. And that’s why those paying attention now will be able to stake lucrative claims in the expanding longevity economy.
Building Out the Longevity Ecosystem
It turns out that older workers make great employees. But older people are also really good at starting businesses, which provides a competing option to employment.
What we’re on the cusp of will take us from older people being essentially invisible to a future when they become the focal point of the broader economy. That’s a massive change that will create wealth for a whole new cohort of entrepreneurs, freelancers, consultants, and small businesses.
And I suspect that many of these businesses will be started and run by those who themselves are part of the “new midlife” that runs from age 50 to 75. As we’ll see in upcoming issues of Longevity Gains, serving older entrepreneurs and solo contractors is a massive business opportunity in itself that falls within the purview of “long life learning.”
The need for perpetual training, retraining, and upskilling is not limited to entrepreneurs or even older people. It’s an issue impacting workers of all ages, and in-house training programs can’t possibly keep up, much less provide the best curriculum and instruction available.
A McKinsey Global Institute paper estimates that 80% of the workforce lacks the skills for most jobs that will be available in the next five to 10 years. This “skills gap” is a problem right now and, much like a tight labor market, is likely to persist permanently as technological change accelerates.
The prominence of older adults will explode the economy across the board, making a specialization in the longevity consumer a safe career bet. But the brand new opportunities that emerge due to a significant overhaul of the world of work, such as a vast increase in an array of online education, are likely to catch the eye of content creators and digital entrepreneurs like you.
This is interesting to read and I feel similarly.
My Dad, at 77 is facing extreme ageism at his work - quite shocking really because he is extremely knowledgeable in his industry and they should be coveting that knowledge not shaming him for being in his 70s and still working.
And then last night we had a mortgage salesperson meet with my husband and I (we are in our early 50s) and he asked us when we were planning to retire - I almost laughed out loud. Obviously he doesn't know who we are and he could do with reading this article because retirement for me will come the day I die. I'm living life, mixing money generation and parenting and everything else and will continue to do this. Why would I need to "retire" from this? I enjoy what I'm doing currently and setting things up for a new path in a few years.
Interesting read, Brian. The one question I have, as a boomer attempting to reinvent myself as a novelist, is what about the impact of AI? Will it be able to take up the slack in the shrinking labor market, or will we still see more knowledge (and other) workers losing their jobs to the algorithm? Would love your thoughts on this.