The Seven Myths of Population Aging:

How Companies and Governments Can Turn

the Silver Economy into an Advantage
By Julika Erfurt, Athena Peppes and Mark Purdy

Point of View

February 2012
 The Seven Myths of Population Aging

From Asia to the Americas, populations are getting oldera trend that
is likely to continue for decades to come. So far, however, while perhaps
acknowledging the existence of this trend, policy makers and business leaders
have done little to prepare for it. In many cases, this inaction stems from
misconceptions about older workers and consumers. We have identified
seven common myths surrounding aging populations and highlight how
organizations can find growth where others see only cost and limitations.

Were none of us getting any younger, government and business, we frequently a proportion that is steadily rising.1 The
the saying goes, and its as true today as encounter misconceptions about the topic. United Kingdom now has more people aged
ever. Whats different today, however, is These misconceptions have arisen from 60 or over than aged 16 or under.2 Business
that the global population isnt getting various sources. Some are the product leaders and policymakers understand that
any younger either. In fact, because of erroneous conventional wisdom, some this trend stems from declining birth rates
people are living longer and having fewer are rooted in outdated assumptions and and a dramatic increase in life expectancy.
children, its aging rapidly. Whereas today perceptions, and others overlook the extent
the global population aged 60 or over to which policies and actions can address However, many mistakenly believe that
numbers nearly 750 million (more than the aging trend. the populations of emerging economies
10 percent of the overall population), by are immune to this trend, and that their
2050 its expected to soar to more than 2 Here we examine seven of these large, younger populations will be the
billion (perhaps exceeding 20 percent of misconceptions, or myths, and set the salvation of the global economy. Goldman
the overall population). Of the forces that record straight for each. Our objective is Sachs stresses that young populations and
will shape society and the global economy not only to dispel these myths, but also to rapidly expanding domestic markets will
over the next decades, none is more certain illustrate how companies and governments turn the BRIC countries into four of the six
and predictable than population aging. In can spur growth and capture economic largest economies by 2030.3
China and Japan this has led to inverted opportunities by crafting the right response
family pyramids, also called four, two, to population aging. In reality, however, the populations of
one in reference to four grandparents, two emerging economies, such as China, Brazil
parents, and one child. and Mexico, are also getting older at a
Myth #1: Emerging economies will comparable pace. In 2010, those aged
Despite the likelihood that the planets balance out the silver tsunami of 60 and over represented 12 percent of
population will steadily become much older developed economies the population in China, 10 percent in
over the next four decades, many business
leaders and policymakers dont have a good Reality #1: Population aging is a
grasp of the realities of population aging. global trend that affects many
In our conversations with leaders in both emerging economies

Its widely recognized that the populations

of developed economies are aging. In
Japan, more than 30 percent of the
population is already aged 60 or over,

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The Seven Myths of Population Aging

Brazil, and 9 percent in Mexico. By 2050, nearly half the population today is under
these figures are expected to increase to 25 years old. But even in those cases,
31 percent, 29 percent and 28 percent, considerable investment will be needed
respectively.4 (See Figure 1.) to convert raw numbers of young people
into an employable and productive
Even countries with relatively youthful workforce that can be mobilized for
populations appear to be unable to future economic advantage.
avoid a similar fate. For example, Iran is
experiencing the worlds most rapid decline Business leaders and policymakers in the
in birth ratesfrom a high of nearly 2 developed economies should not expect
million births per year between 1985 and that relatively younger populations in
1990 to a current level of around 1.2 emerging economies will provide an
million births and a projection of 700,000 automatic customer base or workforce
births by 2050.5 South Korea currently has to replace their aging counterparts in
one the youngest populations among OECD developed economies. And leaders in
countries, but will become the second emerging economies must also find ways to
oldest by 2050.6 sustain the employability and productivity
of their aging populations.
Of course, there are some countries whose
populations will remain relatively young.
For example, in India and South Africa

Figure 1: Emerging markets: getting older, too

In three of the leading high-growth emerging markets, the percentage share of the total
population over the age of 60 is trending rapidly upward; in parallel, the percentage of
those under 15 is shrinking. Developed economies cant depend on youthful populations in
emerging economies to bail them out by keeping productivity and output high.

under 15 over 60
Brazil 2010
2030
2050

China

Mexico

35% 25% 15% 5% 5% 15% 25% 35%

Source: United Nations Population Division.

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The Seven Myths of Population Aging

Myth #2: Countries with aging the UK government introduced tough age Our research at Accenture, in
populations face decades of low growth discrimination laws, and in 2011 went collaboration with Oxford Economics,
one step further to completely abolish shows that by increasing the number of
Reality #2: By taking steps to increase the default retirement age of 65. The UKs older people in the workforce and making
the employment of older workers, employment relations minister, Ed Davey, productivity-enhancing investments
countries can avert economic stagnation explained in support of the move that in human capital, governments and
retirement should be a matter of choice businesses could boost economic growth
Commentators have been sounding alarms not compulsion.7 and job creation. We estimate that the
about the dire consequences of an aging United States could increase its GDP by
population for a long time. According to We see significant opportunities to increase $442 billion and lift employment levels
these commentators, population aging will the time that people spend in productive by 5 million by 2020. (See Figure 2.) In
inevitably result in economic stagnation at employment. The OECD average for Germany, similarly measures to harness
best and decline at worst. estimated years in retirement is 21 to 28 the silver economy have the potential
years for women and 14 to 24 years for to boost GDP by 61 billion and lift
The scenario is indeed an alarming one. men.8 A UK government study released employment levels by 1.5 million by 2020.
Aging populations increase the financial in 2011 found that increasing time in the The research uncovered a similar story in
burden on governments, creating a pension workforce by just one year per person the United Kingdom and Spain.
time bomb and increasing demands on would boost the level of real GDP by
health-care and elder-care systems. As approximately 1 percent.9
more people enter retirement, a vicious
cycle of lower growth and higher taxes will
arise. With fewer people in the workforce,
disposable incomes will fall, reducing Figure 2: More older workers = higher GDP
consumer spending.
More workers in an economy lead to higher growth. In the United States, we estimate that
In reality, this outcome is not inevitable. increasing the number of older workers would lead to significant increases in total GDP.
Leaders in both the public and private
sectors can help their economies avoid
21 165
this fate by taking steps to harness the
productive potential of people who are 20 160
living healthier lives, not just longer ones.
In practice, this means addressing the 19

Employment (million)
155
GDP (US$ trillion)

incentives and systems that prevent older

people from staying in the workforce, 18
such as early retirement provisions, or 150
pensions and tax systems that penalize 17
people who work later in life. In 2006, 145
16

15 140

14 135
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

GDP, increment in alternative trajectory, constant 2010 prices (left scale)

GDP, current trajectory, constant 2010 prices (left scale)
Employment, alternative trajectory (right scale)
Employment, current trajectory (right scale)

Source: Accenture, 2011.

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The Seven Myths of Population Aging

Myth #3: Employment is a zero-sum Myth #4: Older workers tend to be companys expected overall workforce
game, so retaining older workers less productive profile in 2017. The changes covered health
will only worsen the crisis of youth care management and skills enhancement,
unemployment Reality #4: Organizations can sustain as well as improvements to the workplace
older workers productivity by adapting environment, such as orthopedic footwear
Reality #3: Retaining older the workplace to their needs and adjustable work tables. The production
workers is likely to increase overall lines productivity improved 7 percent in
employment growth The myth is contained in this scenario: An one year, bringing it to the same level as
organization primarily employs people aged lines staffed by younger workers.16
Unemployment is reaching record levels, 50 and over, having long tenure. While they
particularly among the young. In December are competent and knowledgeable, many Also, the deployment of technology and
2011, the UK crossed the threshold of one are reluctant to embrace new ideas, are new work models enable flexible and
million unemployed young people, while in uncomfortable with making changes, arent remote work arrangements that might
Spain approximately 52 percent of 15-to well motivated, and find early retirement be more appealing to older workers.
24-year-olds are unemployed.10 With so increasingly enticing. Consequently, MITRE Corporation, a US research and
many young people struggling to gain a productivity is lower than in a workplace development enterprise, was concerned
foothold in the workforce, many observers dominated by younger workers. about losing its expertise in fields such
believe that retaining older workers will as radar. It launched the Reserves at the
simply worsen the crisis. This view, dubbed In reality, productivity rises with age all Ready program to bring back retirees on a
the lump of labor fallacy by economists, the way up to retirement, according to a part-time, on-call basis.17
assumes that the number of jobs in an study of German production line workers
economy is fixed, which in turn results in a in a Mercedes-Benz truck factory.13
misguided focus on protecting existing jobs. The authors concluded that although Myth #5: The entrepreneurial spirit
deteriorating physical ability meant older tends to decline with age
The US National Bureau of Economic employees made more minor mistakes,
Research has found little evidence that older these were outweighed by the positive Reality #5: Older people are more likely
workers take jobs away from younger ones effects, such as the ability to cope when to set up a new business, and theyre less
in the United States. In some cases, such as things go wrong.14 likely to fail
in France and Canada, the researchers also
found that greater workforce participation A recent Swedish study examined Setting up a new business is normally
among older people was associated with productivity in nearly 9,000 manufacturing considered the preserve of the young.
greater participation among young people, plants. Controlling for plant-level effects, Witness the wave of young technology-
because of the increase in the overall the researchers found that plants with a company founders consistently featured
economic pie.11 Civic Ventures Encore high proportion of older adults were more on magazine covers. Governments tend
program is a powerful example of offering likely to have higher productivity than to focus their entrepreneurship policies
second careers to older HP and Intel were plants with a high proportion of and objectives on the young. New funds
executives in the non-profit sector.12 young people.15 are set up to help young entrepreneurs,
such as the 20 Under 20 Thiel
To spur overall economic growth, business By adopting new work models, Fellowship announced in 2011. There
leaders and policymakers should devise organizations can engage people who have even been claims that for some
incentives and training programs that arent able or interested to work full sectors, like technology, the peak age for
will enable older workers to stay in the time. Small adjustments in the physical entrepreneurship is similar to that for top
workforce, rather than push them out to environment can address changes in athletes, at 25 years old.18
make room for younger workers. employees physical strength and stamina,
which tend to decline with age.

BMW, for example, implemented 70

changes to a production line where the
(older) employee profile reflected the

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The Seven Myths of Population Aging

But recent research has found that age up a new business. Yet many older people younger adults by approximately $1 trillion
is not the pre-eminent factor influencing confront age limits for financial products in 2010.28 In the same year, baby boomers
entrepreneurship, and that factors such as and higher interest rates for loans, or are in the US were reportedly the dominant
educational background and professional excluded from insurance products. spenders in 1,023 out of 1,083 consumer
networks are more likely to play a role.19 packaged goods categories.29 In the United
In fact, many people decide to set up Kingdom, baby boomers hold around 80
a business in later life. In the United Myth #6: Older consumers are an percent of all financial assets.30 In Europe,
Kingdom, entrepreneurs aged 50 to 65 unattractive demographic for marketers the over-65 age group is estimated to be
created 27 percent of successful start- worth more than 300 billion.31
up companies20 between 2001 and 2005, Reality #6: Older consumers have vast
equivalent to 93,500 companies. During purchasing power, making them an Clearly, companies have not invested
that period, this age group accounted for untapped opportunity for marketers sufficient time, money and resources in
18 percent of the UK population.21 understanding the untapped opportunity
Many marketers dont get excited about offered by older consumers. Companies
A recent survey in Finland of 839 small targeting products to older consumers. They should start by adopting more inclusive
firms22 established in the country between arent big spenders, the argument goes, product development strategies and
2000 and 2006, found that 16 percent because they have less disposable income marketing approaches that include
were set up by those aged 50 to 64.23 And and often prefer to keep money in the bank consumers of all ages. Some companies
in the United States between 2005 and rather than spend it. Whats more, theyre have already expanded their product
2010, entrepreneurial activity among those less mobile and have established brand range to cater to older consumers. For
aged 45 and above increased during the preferences, so its harder to convince them example, Harley Davidsonrecognizing
recession, while it declined among the 18 to try new products, the skeptics believe. that the average age of its customer
to 44 year olds.24 has increased from 38 to 46 years old in
Research reveals that these skeptics hold the last two decadesis designing new
Older people are also more likely to sway. A recent survey found that only motorcycles to appeal to consumers in
succeed in their new business ventures, 37 percent of companies find it fairly their sixties and beyond.32
with surveys finding that ventures started important to take into account the needs
by those aged 50 and over had the and preferences of older consumers when Marketing for silver consumers however
lowest failure rates.25 Entrepreneurship developing products for them.26 Most has to fit hand in glove with brand
among older people could potentially be companies take great care in distinguishing perception. A good example is Unilevers
even higher if age-related barriers were between 20 or 40 year olds, but lump 50 Dove soap campaign that featured women
removed. For instance, access to seed and 70 year olds into the same category. from everyday life and captions like
capital and funding is crucial in setting This skepticism is also reflected in Why arent women glad to be gray? The
marketing practices, as research shows that campaign helped the company substantially
only about 30 percent of TV advertisements boost sales around the worldno mean
include someone over 50. Not surprisingly, feat for the static soap category.
70 percent of people over 55 believe that
advertising does not speak to their needs.27

In reality, what the skeptics fail to

understand is that older consumers have
vast purchasing power. In the United States,
consumers aged 50 and above outspent

6 | Accenture Institute for High Performance | Copyright 2012 Accenture. All rights reserved.
The Seven Myths of Population Aging

Myth #7: Older consumers are less likely of today will comprise an equally tech- Are tax and pension systems aligned
to adopt new technology savvy cohort of seniors in the coming to encourage older people to stay in
decades. One product that has managed the workforce?
Reality #7: The digital divide isnt to transcend age barriers is Apples iPad:
inherently age-based, and it will close from design to marketing the product is Do our digital policies sufficiently address
over time age-inclusive, contributing to its wide the needs of an aging population?
appeal. For example, the powerful zoom,
There is a common misperception that intelligent keyboard and voice functions Are we stimulating and leading
older people are slow to engage with new such as Auto-text mean that its very discussions among researchers, business
technologies. Older people cant keep up easy to use and accessible. Likewise, the leaders and policymakers on the issues
with the latest technological developments, advertising campaign shows people of all arising from an aging population?
and arent early adopters or trend-setters. ages engaging with the product.
You cant teach an old dog new tricks, Are we addressing the barrierssuch
these sceptics believe. as access to capital, or regulationthat
Discarding myths, realizing opportunities frequently stymie the entrepreneurial
Research shows that although this might potential of the older population?
have been true in the past, the story is now Both business leaders and policymakers
changing. Its true that there is a digital must recognize that now is the time to
divide between the old and the young in address population aging. As a starting Demography is destiny,
many countries. In Germany, for instance, point, business leaders can assess their
the sociologist Auguste
only 31 percent of those aged 65 and over companys preparedness on key dimensions,
used the Internet in 2010, compared with by asking the following questions: Comte stated almost two
an average of more than 75 percent for the hundred years ago. This may
overall population.33 Have we quantified the opportunities
arising from population aging?
well be true, but that destiny
But this is due to lack of experience is not immutable. Just as
rather than ageit reflects a generational Do we offer flexible, tailored work aging individuals must adjust
difference rather than an inherent models that support the changing
relationship between age and technology needs of older workers? life styles to maintain
adoption. Many of the younger baby personal vitality, societies
boomers were in the workforce during Do we have programs and incentives that
the evolution of computers, email and the encourage the exchange of knowledge
with aging populations must
Internet, and were the first to understand between generations? adjust business practices
the value of technology. and policies to boost their
Do we have detailed customer profiles
In Germany, 75 percent of those aged 45 to and market intelligence on consumers economic vigor.
64 in 2010 regularly used the Internet, in aged 55 and over?
line with figures for the overall population.
Nearly 80 percent of US baby boomers use Do we have an innovation strategy
the Internet for social media, downloading focused on the needs and preferences of
music and movies, financial transactions older consumers?
and gaming.34 The tech-savvy middle-aged
Policymakers can make a start by focusing
on the following questions:

Does our education policy include

a strategy for supporting lifetime
skill formation?

7 | Accenture Institute for High Performance | Copyright 2012 Accenture. All rights reserved.
About the authors About the Accenture Institute for Notes
1 United Nations Population Division, 2011.
High Performance 2 Office of National Statistics, 2011.
Julika Erfurt (julika.erfurt@accenture. 3 Goldman Sachs Asset Management, BRIC fund,
com) is a manager in Accentures Strategy The Accenture Institute for High October 31, 2011.
4 United Nations Population Division, 2011.
practice. Athena Peppes (athena.peppes@ Performance creates strategic insights
5 United Nations Population Division, 2012
accenture.com) is a senior research into key management issues and 6 OECD, Paying for the past, providing for the future:
specialist with the Accenture Institute macroeconomic and political trends intergenerational solidarity, May 2011.
for High Performance. Mark Purdy (mark. through original research and analysis. 7 Personnel Today, Government confirms abolition of
Default Retirement Age, January 13, 2011.
purdy@accenture.com) is Accentures chief Its management researchers combine 8 OECD, Society at a Glance, 2009.
economist and senior executive research world-class reputations with Accentures 9 DWP, The macroeconomic impact from extending
fellow at the Accenture Institute for High extensive consulting, technology and working lives, 2011.
10 OECD 2012.
Performance. All three are based in London. outsourcing experience to conduct 11 Baker, Gruber and Milligan, The interaction of youth
innovative research and analysis into how and elderly labor markets in Canada, NBER, 2010.
organizations become and remain high- 12 Encore Careers corporate website.
13 Brsch-Supan, Axel and Matthias Weiss, Productivity
performance businesses.
and Age: Evidence from Work Team at the Assembly
Line, 2011.
14 Ibid.
About Accenture 15 Malmberg B. et al, Productivity consequences of work-
force aging: stagnation or Horndal effect? Population
and Development Review, Vol 34, 2008.
Accenture is a global management 16 Bauer N. and Mauermann H., How BMW is defusing
consulting, technology services and the demographic time bomb, Harvard Business Review,
March 2010.
outsourcing company, with more 17 Business Week, Old. Smart. Productive, June 27,
than 244,000 people serving clients 2005.
in more than 120 countries. Combining 18 Arrington Michael, Internet entrepreneurs are like
professional athletes, they peak around 25, April 30,
unparalleled experience, comprehensive
2011, TechCrunch.com.
capabilities across all industries and 19 Kaufman Foundation, Anatomy of an entrepreneur,
business functions, and extensive research 2009.
on the worlds most successful companies, 20 NESTA, The grey economy: third age entrepreneurs
critical to growth, 2009.
Accenture collaborates with clients to help 21 Office for National Statistics.
them become high-performance businesses 22 NB: Small companies are those with fewer than 50
and governments. The company generated employees.
23 Kautonen, Understanding the older entrepreneur:
net revenues of US$25.5 billion for the Comparing third age and prime age entrepreneurs in
fiscal year ended Aug. 31, 2011. Its home Finland, 2008.
page is www.accenture.com. 24 Global Entrepreneurship Monitor, United States,
2010.
25 Barclays, Third age entrepreneur: profiting from expe-
rience, April 2011.
26 CSR Europe.
27 Metz, D. and Underwood M., Older, Richer, Fitter:
Identifying the customer needs of Britains ageing
population, 2005, p.151f.
28 US Census Bureau 2010.
29 NielsenWire, Why marketers cant afford to ignore
baby boomers, July 19, 2010.
30 Willets D., The Pinch: how the baby boomers took
their childrens future and why they should give it
back, 2010.
31 Europes Information Society portal.
32 Harley Davidson corporate website.
33 DeStatis, In the spotlight: older people in Germany
and the EU, December 2011.
34 AARP website.
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