Birth, and
copulation, and death.
That’s
all the facts when you come to brass tacks.
T. S. Eliot
Note that the Australian births forecasts discussed here have been updated by foreseechange and are available by subscription. Click here to find out more.
Throughout the developed world, including Australia and New Zealand, birth rates are falling below replacement fertility. In fact, ACNielsen is forecasting falling numbers of births in Australia and New Zealand over the next decade.
While falling numbers of births is bad news for marketers of products and services related to young children, these trends have much wider ramifications.
Changes in fertility by age of woman over the past few years, and predicted for the next decade, have important implications for marketing to parents of children and teenagers. These trends also change the way young adults should be communicated with.
More broadly, an increase in the average age of the population in developed countries has profound economic and social implications.
Fertility rates falling below zero mean that the average age of the population will increase and the rate of population growth will fall. Florida in USA, a popular retirement state, has 19% of its population over the age of 65. In Italy, 19% of the population will be over 65 by 2003 and this mark will be reached by Japan in 2005 and Germany in 2006. Other developed countries such as France, Britain, USA, and Canada will achieve the mark by around 2020. In Australia, the percentage of the population over 65 years will increase from 12% at present to 19% by 2025.
This prospect in many developed countries suggests some interesting changes. For example, the retirement age will have to rise - in part to increase the size of the workforce relative to retirees and in part to reduce the cost to taxpayers of funding retirees who have no savings.
Hamish McRae, in his book “The World in 2020” (Harper Collins 1994) suggests
several ways in which older societies will differ from younger ones:
· Low inflation (elderly voters will dominate the polls and are likely to be particularly hostile to having their savings whittled away by inflation);
· Low unemployment (because of the fall in the proportion of people of normal working age);
· Low crime (the young commit most offences, while the old probably have lower tolerance of crime);
· Low tolerance (or at least lower tolerance) of disorder, anti-social or even unconventional behaviour, and with this:
· Greater acceptance of authority in controlling such behaviour.
We don’t agree with all of these views because it is important to account for differences between generations, as well as differences between age groups. For example, the baby boomers may be either more or less tolerant than their parents were at a comparable age.
There will, of course, be some age effects such as increased concern for the environment. For example, ACNielsen’s Panorama shows that 33% of people aged 55 plus agree strongly that they try to buy non-polluting household products, compared with 25% for people aged 25 to 39.
In Australia, the drop in the number of births in the 1970’s has had a number of “echo” effects as that generation (sometimes dubbed Generation X) reached their teens and twenties. For example, the drop in the road toll has probably been in part caused by a drop in the number of inexperienced drivers on the road. Clothing retailers and the housing industry have been experiencing the effects of the 1970’s “baby bust” in the form of low demand.
We discuss below three possible impacts of falling birth rates and of the rapid increase in the proportion of older people in developed countries.
Less babies now means less demand for baby clothes, baby food, cots, pushers, and baby health services. In the longer term it means less demand for schools and teachers and then less demand for housing the smaller generation. This will tend to slow Australia's domestic economy and reduce growth for some of our exports (food, for example).
Of course a reduction in economic growth rates does not have to mean falling average incomes per head. And there will be increased demand for many products and services (eg optometry) to partly offset the economic impact.
As the average age of the population increases and the ratio of retirees to workers increases, some countries (especially those with unfunded pension schemes) will have to raise taxes to pay retirement benefits. Note that the increased proportion of the voting population that is retired will be a powerful electoral force. These countries may decide to import young adult migrants to increase the demand, productive capacity, and tax base of the economy.
Australia could find increased competition for migrants, from Japan, Italy, and other very low fertility countries, and may not find it easy to boost migration, even if it decides to.
Retired people tend to be dis-savers. They run down their own savings, if they have any and they run down government savings if they do not. The prime ages for saving tend to be the young adult years and pre-retirement years.
The rapid increase in the proportion of the global population over 65 years old will lead to a reduction in the amount of capital per head of population, especially after the baby boomers retire. This capital shortage will drive up interest rates.
Many retired people, those with their own savings, prefer higher interest rates anyway because that provides a higher income for a given size of capital.
In fact, developed countries are in a state of transition in respect of how interest rates affect consumer spending. In past decades, higher interest rates led to lower consumer spending because of the relatively high proportion of the population paying off a home mortgage. As that concentration moves to pre and post-retirement they receive more interest on savings than they pay on debts. Thus, higher interest rates will lead to higher, not lower, consumer spending. Indeed, virtually zero interest rates in Japan is a major cause of that country's collapse in consumer spending - people in or near retirement (42% of Japans population is over 45, compared with 33% in Australia) are minimising spending in order to preserve capital.
Marketing
Implications
The average age of giving birth in Australia has been increasing and is now 30. This will continue to increase and by 2010, 60% of newborn children will have a mother over 30 – compared with 20% in 1975. Similarly , 50% of 10 year-olds will have a mother over 40. Marketers have traditionally targeted the 18 to 39 age group to reach mothers of families – but this is now too young. The focus should be on 25 to 45. Older mothers have different attitudes to the young mothers of the 1970’s and 1980’s so different communications and products will be needed. Also portraying people in their 20’s as having a family will miss the mark – this is now the exception rather than the norm. If current trends persist, 25% of women will remain childless – up from less than 10% a couple of generations ago.
View Full Report