Amlan Roy: Demography matters in our lives

Demographics isn’t just about the elderly. It concerns us all. Demographics expert Amlan Roy discusses why we ignore it at our peril

“Demographics are the single most important factor that nobody pays attention to, and when they do pay attention, they miss the point,” management guru Peter Drucker once stated in Fortune magazine.

It’s a saying that Amlan Roy is prone to quote. Roy, managing director and head of Global Demographics and Pensions Research for the investment banking division of Credit Suisse in London, is well aware of people’s ignorance when it comes to demographics. In his view, we either overlook the effects of aging societies or get them blatantly wrong.

Contrary to misconceptions, demographics, Roy stresses, is multifaceted and encompasses the world’s total population. “Somewhere down the line, demographics has become associated with aging. But it is not only about an aging society. It is about all the 7.2 billion people in the world (figure taken from the Revision of the World Population Prospects), not just the old people.” And the study of demographics is a crucial megatrend precisely because it is all about people. The word itself spells it out: “demos” refers to people, “graphos” to characteristics.

The most important characteristic of people is that we are consumers from the day we are born, and workers for a large part of our lives, Roy declares. “We create the GDP and consume the GDP.” And that is why demographics relates to how the lives of consumers and workers are changing. Just think back a decade: the ubiquitous iPad wasn’t even on the market, and home-working and being able to access emails from anywhere in the world were unheard of.

NOT JUST A WARNING FOR THE FUTURE

People commonly make a second mistake regarding demographics by thinking it is simply about long-term projections. In fact, its effects are evident in the here and now. Demographics impact a nation’s economic, financial and social variables in the short, medium and long term, including GDP growth, inflation and monetary policy, Roy says.

Probably the biggest misconception regarding demographics, however, is considering it to be a predictive, simplistic tool. The financial industry in particular is guilty of treating retirees as a homogenous group, when “it is blatantly obvious that retirees are a very heterogeneous group,” Roy says. “The 90-year-old Japanese is different from the 80-year-old Japanese is different from the 75-year-old, and so on.”

A DIVERSE POPULATION NEEDS A DIVERSE APPROACH

Instead of viewing the old-age population as a homogenous group of people aged over 65, we should recognize that the fastest growing population in the world is actually more than 80 years old. Globally, the number of those aged 80-plus has increased from 0.6% of the world population in to 1.6% of the world population and is set to rise to 4% by, according to World Economic Forum statistics. The way to cope with a population where an 80-year-old is very different to today’s concept of an 80-year-old will be to abolish mandatory retirement ages, Roy believes; he also advocates increasing the number of women in the workforce, introducing selective immigration and pursuing outsourcing and offshoring.

The financial industry notably needs to adapt to the new reality instead of referring to out-dated economic models when dealing with the older population, Roy says. “We need far more market research to understand the diverse consumer group of people over 65 before we can provide them with custom-tailored investment and retirement plans.”

Roy points to household size to make his point. “Some 74% of the population in Denmark, 75% of the Finns and 68% of US residents live in single or two-member households. Yet all the micro models being used in the financial industry don’t take that into consideration.”

Changing demographics could provide equal opportunities for the unemployed, for female workers and for the young, who can spend more time in higher education before they start work. Tomorrow’s society will be very different, but that’s not a necessarily bad thing – provided we change our ways accordingly.

Amlan Roy: Demography matters in our lives

Demographics isn’t just about the elderly. It concerns us all. Demographics expert Amlan Roy discusses why we ignore it at our peril

Amlan Roy: Demography matters in our lives

Demographics isn’t just about the elderly. It concerns us all. Demographics expert Amlan Roy discusses why we ignore it at our peril

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