Managing Essentials

International The Baby Boomers worry

Across the Western industrialized world baby boomers reach retirement age and this generation, born between 1946 and 1964, in fact deserves its label. They are many and were born into a happy time. Also their countries economies boomed recovering and rebuilding after World War II. For the major part of their life, the GDP enjoyed sound growth and paychecks rose from year to year. Work was available in abundance, and many countries called upon foreign workers to fill the shopfloors. Life was pleasant, providing the fruits of small technological revolutions in plastics and electronics. Until today baby boomers cherish their cars, houses, and vacations travelling to foreign soil. However, they are worried. In 2008 Pew Research described how surveys revealed that US-American boomers were experiencing a gloomy mood. Like their counterparts in many industrialized countries they are at the peak of their earnings, but retirement is in sight and the festivity of this event is a special one in the history of generations. Many of them will invite their still living parents and it is not uncommon to find members of four generations sitting around the table at such an occasion. Longevity is, of course, a blessing. Around the world it expresses the advancement of hygiene, medical progress, economic stability, and that wars have been fought on a limited scale. A detailed World Health Organization analysis from 2005 shows that especially in developing countries life expectancy expanded. Life expectancy in these countries rose by approximately 24 years since 1950; where developed countries gained 10 years. In fact, the few countries not within this worldwide trend towards a longer lifetime are still fighting medical problems affecting the entire population, such as the AIDS epidemic in certain African countries, or are coping with severe structural economic incisures, like the countries having emerged out of the break-up of the former USSR. But the boomers have reasons to worry and their own parents exemplify the problems to come. Income in the form of pensions will be much lower, investments in property and financial markets may not pay off as well as expected, and inflation will drive up living costs along with increasing medical expenses. After some good years, for those who can afford it with travelling and cultivating of hobbies, for many a place in a home for the elderly will cost per month more than they earned in their best days. Around US$ 3.000 is in Europe the average monthly rate, medical services excluded. Pension systems differ considerably between countries, but the states will have to subsidize such costs for many in need of these services. Pensioners with tight budgets often have to find creative solutions to get along. First, and that is true for all, they consume less. Second, they often move into smaller apartments and some of them even to cheaper countries. European pensioners migrate to countries like Turkey and Thailand, at least as long as health care there is regarded as sufficient.

Managing Essentials
International
Consequently, in their quantity pensioners have become an economic burden for their societies and a political problem. The problem is felt the greatest in Japan, where about 25% of all citizens fall into this group. But also in regard to age younger societies like China have approximately 10% of the population which is beyond working life. With fertility rates worldwide converging around 1.7 births per woman, the situation will worsen, since a rate higher than 2.0 is needed to keep a population stable. Political and economical measures to cope with this problem will take a number of years to gain traction. Most European countries are slowly raising their retirement age from 65 to 68, but this official retirement age is only a theoretical one. In most countries, people retire on average significantly earlier with average retirement ages of currently 61 years in Europe. Many countries support privately funded provisions, which are, however hard to finance for lower bracket earners and up to fluctuations in their value over time. It might be this background which tempted a Japanese minister to call upon his elderly population to hurry up and die. This phrase also expresses some desperation, since the problem of the aging societies has been tackled late. There was no element in surprise in it, demographics do not change overnight, but politicians tend to think in election cycles with an eye on their electors. The introduction of a longer work-life and a more burdening pension system with long term stability are not the topics that win elections; especially since pensioners and those soon to join this group account for a large constituency with a common central interest. Observers like Francis Beckett from Britain state with some justification that Baby Boomers are selfish until they die by putting the burden of their retirement on the next generation, which will most probably have to retire under much less favorable conditions. Michael Winerip from the New York Times tries to counter the thesis of selfishness by stressing how much support the Millenials get from their families. However, the fact that they need so much support and often still live with their parents in their twenties shows how difficult it has become for them to stand on their own in a difficult job market and having to bear high costs of academic education. Perhaps they want to live a bit on their parents riches now since they feel what surveys confirm, namely that they will not inherit much as Brad Tuttle from Time Magazine concludes while presenting some sobering data. Many boomers intend or think they will have to spend their accumulated wealth in retirement. The economic crises since 2008 added considerably to this problem. Many Boomers and pensioners suffered direct hits to the value of their savings and properties. In addition, the big pension funds and insurers were hit considerably. Some of the losses will never be recovered. Additionally, for some countries the necessary state intervention shook financial stability in general. Cuts into the pensions were the first measures taken in Greece and in Cyprus. Some of these pensions may in fact have been generous, but those are normally not the ones paid out to the lower-level former state employee living next door.

Managing Essentials
International
In addition, the crises have had a dangerous demographic side-effect. Younger people leave the financially instable countries looking for jobs abroad. Young Greeks and Spaniards have discovered that Germany might be more hospitable than prejudice commanded, young Portuguese venture to Brazil and Mozambique. The Brazilian state Acre with its porous border to Ecuador declared an immigration emergency recently flooded by people who have travelled from as far as Senegal. If migrants will return one day and later pay into the social system of their former home countries remains an open question. Most likely not to return are the approximately 110.000 scientists, intellectuals and businesspeople which left Greece in the last year. The observation that the best go first holds true for companies as well as for countries. The countries of the developing world experience and suffer from this drain for decades. With a time perspective of up to three decades to come, Baby Boomers need to worry. For many of them the standard of living in these years will significantly fall behind what they enjoy now. The question of a fair sharing of financial burden between the generations focuses on their entitlements. The best is still to come? Not for all of them.
Baby Boomers: The Gloomiest Generation www.managing-essentials.com/3cs World Population Ageing: 1950-2050 (Analysis by the United Nations) www.managing-essentials.com/3ct Baby boomers: powerful and selfish (Francis Beckett) www.managing-essentials.com/3cu Hey Kids of Baby Boomers, Forget About Your Inheritance (Brad Tuttle) www.managing-essentials.com/3cv Boomers vs. Millennials: Whos Really Getting Robbed? Michael Winerip) www.managing-essentials.com/3cw Brazilian state of Acre in illegal immigration alert (BBC staff) www.managing-essentials.com/3cx