150 years of serving humanity
3 October 2017
Silver economy: the elderly form the market

At the turn of the 21st century, there was a lot of talking about green and digital economies. It seems that the time for silver economy has come. Silver economy focuses on older consumers: producers of goods and services adjust to the elderly’s requests, their wishes are taken into account by well-known brands. We have discussed the new economic trend with Liudmila Istomina, Ph.D. in Economics, a business consultant and, as she calls herself, an advocate of the elderly.

- Population ageing has been regarded as a risk for the economy that puts an additional pressure on it. Can this demographic process be somehow profitable and contributeto economic growth?

- Ageing of population is not a problem but a new resource of economic growth due to the expansion of the labor market, consumption and production. Silver economy will create millions of additional jobs and increase GDP by 2-2.5%, as Accenture and Oxford Economics have estimated.

In 2015, 901 million people over 60 lived on the planet. According to the UN forecast, there will be 1.4 billion by 2030 and over two billion by 2050. At the same time, according to the World Health Organization, the number of older people who won’t be able to take care of themselves will increase fourfold by 2050.

Silver economy emerged against the backdrop of those intimidating figures predicting the rapid growth of the economic burden on the younger generation, along with the threat of undermining national social policies. Silver economy recognizes population ageing as an obvious demographic trend and regards it as an opportunity for investment and economic growth.  

 

The “Silver Economy” concept is new for us. Could you please give it a definition?   

- Silver economy can be defined as the economic opportunities associated with public and consumer expenditures caused by the population ageing and the specific needs of people over 50.

It should be borne in mind that the ageing population is heterogeneous, with different patterns of behavior in the elder age and in the old age (WHO refers to persons over 60 as to elder people and to persons over 75 as to old people). The needs of older people are also diverse and are constantly growing.

If to consider the annual financial expenditures of American baby-boomers who are 60-70 years old now, it is obvious that they have exceeded expenditures of all other generations of their fellow citizens by 400 billion dollars per year. 70 % of the total net income of American citizens accounts for representatives of the generation 60+. It is predicted that by 2020, the older generation will spend over 15 trillion US dollars around the world.

China doesn’t lag behind. In China, the production of goods and services for the elderly generated 652 billion dollars, or 8 % of the country’s GDP, in 2014. According to the forecast of the National Committee on Ageing, the so-called “silver hair market” will account for one third of the entire Chinese economy by 2050.

Big business suddenly realized that by 2050, half a billion Chinese citizens will reach the age of 60. Dozens of companies began to revise their production, focusing on older consumers. These days, agencies offering services of qualified carers, housekeepers and nurses are opening in China, factories are releasing new models of wheelchairs, leading car manufacturers are developing easy-to-drive cars for older people. There is a popular new profession in China, a “retirement” financial adviser who explains to older people how to invest their savings properly.

Examples of sectors that are expected to benefit from the silver economy are health care (including medical devices, pharmaceuticals, telemedicine), health services and cosmetology, security, culture, education, entertainment, fashion, tourism, smart homes that support an independent life, service robotics, personal and autonomous transport, banks and related financial services.

- Has silver economy started developing in Belarus?

- The main obstacle to promoting the silver economy concept in Belarus mostly stems from some psychological issues. In our society, we seldom talk about the problems and needs of ageing, which leads to the fact that older people often feel incomplete. We should stop avoiding discussing old age, everyone will face it sooner or later, so it is pointless to sweep the topic under the carpet. We will start developing the market when we learn to see old age.

Life expectancy has increased, now it’s time to improve its quality. Older persons constitute a large percentage of clients of almost any business, from retail chains to private medicine. Today, some retail chains, travel agencies, and hairdressers give discounts to persons with a pensioner ID card. Fitness clubs began to introduce special programs for the elderly.  

But what kind of goods for pensioners do we have? Strange phones with big buttons, pillboxes, walkers, and tonometers. And then, much of this is usually made in China.

Our business is yet short-sighted in its belief that our older fellow citizens do not want to go on a tourist trip, relax in senior-friendly cafe, ride in a car convenient for their age.  

In fact, it is very simple to create a business focused on the older generation: we should do what is necessary for us but adjust it a bit to the limitations and needs of older people.

- Which areas of the silver economy, in your opinion, will develop in our country?

- The “silver” market is now full of free niches, and even existing services for the older generation don’t cover all their needs.

At an older age, people need care and assistance at home, rehabilitation, household services, equipment for communication facilitation, comfortable nursing homes providing assisted living for the elderly, insurance services, friendly urban environment, and much more.  

There is also need in new technologies. Virtual reality technologies have a great potential as they can help to diversify the lives of older people with limited mobility.

It is expected that, along with the telemedicine development, gadgets for remote health monitoring will become popular. It is logical to assume that pensioners will constitute a significant part of the clients of future telemedicine services.

Portable devices with geolocation and alarm button for an ambulance speed dial are also gaining popularity among older people these days. Today, the “Life Button” is developed under a franchise agreement in the regions of Russia: local entrepreneurs are opening 24/7 help centers for older subscribers. In the near term, the service will be expanded and by clicking the “Button” the client, apart from calling the ambulance, will be able to call plumbing services, make an appointment with a doctor, order food at home, call social taxi, choose a nurse, look through leisure options, or get psychological help.

Today, the generation that managed to live outside the Soviet economy model is entering the third age. They are no longer ready to lock themselves up at home, having cut all their connections with the outer world and entertaining themselves solely by remembering their past. Many of these people continue to work and remain financially independent for a long time, they are focused on high-quality services and want to maintain their usual level of consumption. Accordingly, they will demand a higher quality of life at an older age and will be willing to pay for it. This also creates new business opportunities.

- According to statistics of 2016, every fourth Belarusian pensioner works and this figure has been gradually increasing since 2011. Can we consider it a positive trend in terms of the economy?

- Older people began to work longer in all countries. This is facilitated by improving medical care, increasing life expectancy, raising the retirement age and improving health.

For example, since 2000, the employment rate for 60-64-year-olds has more than tripled in Bulgaria and Hungary and more than doubled in Latvia, the Czech Republic, Finland, France, and Germany. According to the Organization for Economic Co-operation and Development (OECD), in 2015-2016, this figure was the highest for 55-64-year-old citizens of Iceland (84.7%), New Zealand (76.1%), Sweden (74.5%), Switzerland (72.8%), and Norway (72.6%).

In 2015, in the 65+ age group, 39.1% citizens of Iceland, 43.3% citizens of Georgia, 31.5% citizens of Korea, 22.7% citizens of Japan, and 19.2% citizens of Israel were employed.

On national average, every fourth pensioner continues to work in Belarus (about 627 thousand persons), while almost every third pensioner continues to work in Minsk (more than 170 thousand persons). Also, there are twice as many women as men among working pensioners.  

In recent decades, the European Union has applied the active ageing concept of the World Health Organization. The quality of life of an elderly person, which is determined by three groups of factors, such as health, community participation and security, is seen as a priority. Labor activity is considered as one of the forms of social activity.

In many developed countries, measures that allow older workers not to stop working are being developed and implemented. The state grants subsidies to employers in case they recruit older workers, create working conditions for the elderly, and introduce a flexible schedule. Also, the authorities support programs for employee retraining and promote entrepreneurship among the elderly.

The concept of lifelong education assumes that an employee at any age can obtain new professional competencies required by the economy. The state itself can develop and finance retraining programs, or it can subsidize the employer or employees. There are good examples. In Germany, for instance, older workers in small and medium-sized enterprises receive compensation for refresher courses if they undergo such training on their own initiative outside the enterprise. In Australia, a state-business partnership has been created to support employers who train and retrain older workers.

In Belarus, too, there is education for older people and interest in it. For example, according to the University of the Golden Age in Belarus (Hrodna), people aged 50+ enroll in computer, interior and landscape design, video shooting, floristry, massage, pastry cooking and handcraft courses for fun. To master professional skills, people choose such courses as accounting and train to become cashiers, personal computer operators, storekeepers.   

- But employers often do not want to hire older people anticipating that their deteriorating health or lack of modern professional skills will make their work less productive.

- Yes, there is such a problem. Apart from finding ways to encourage potential retirees to continue working, it is important to make sure that the employer is ready to hire older workers. Special subsidies or tax benefits for employers may become a direct financial encouragement. For example, since 2004, one of the social taxes on the wages of older workers aged 50 years and older has been canceled in the Netherlands, which reduced employers’ expenditures for this group of employees by 5%. In Germany, in 2003, state subsidies which can reach 50% of wages and are calculated for a period of up to three years were introduced for hiring workers aged 50 +.

 

- There is an opinion that the elderly get jobs leaving young people unemployed.  

- Recent studies of Russian scientists have shown that the growth of employment of older workers and unemployment of young people are not related to each other. In their opinion, each group aims to fill a different segment of the market, while professional specialization, in its turn, opens up opportunities for cooperation. Young and old people choose different professions, work in different sectors, have different qualification levels.

Now that the labor market is beginning to experience the effects of the demographic decline of the 1990s, business demand for older professionals will grow.

Apparently, the increase in employment among the older generation will increase the demand for additional education and job search for the elderly. I believe that there also will be a demand for retraining “silver age” professionals. The retirement age is rising, and the acceleration of technological progress requires new competencies. Elderly Internet users will become active clients in the sphere of online education.