After WW II, the economy did not shrink it expanded and many soldiers came back and started families. In their parent’s time an average family was 8 plus because some of the children died in infancy from a variety of childhood illness, medical advances slowed the number. During the expansion of children, the average family was about 5 and these children are called the baby boom generation. The sheer number caused expansion of schools and then post-secondary schools and the workplace. In present time, the baby boom is retiring and that is both good and bad news for the economy.
In an article by Ian McGugan, in 1981 there was 14 people between the ages of 60 and 64 in full time work for every 100 people aged 20 to 24. Now the people between the ages of 60 and 64 is 45 out of a hundred working people.
The number means when companies layoff people it is quite possible that the older people in the company take a buyout leading to retirement. The retirement means more opportunities for younger people. This is good news for the economy because if people are retired and receiving a pension, they have income which is good for the economy in general.
The tougher problem for the economy in the future will be health care costs which as people aged their bodies will break down to some degree. Older people in general need access to health care. The other issue is the ratio of people drawing from pensions to those paying into the pension system means there is an in balance which will need to be corrected with possible higher premiums for those working. Those problems will come as the baby boom generation continues to age.
For the time being, the prospect of a hard recession is a little lower because of the pensions of the baby boom generation. What happens is most people in their 60’s are not establishing households and the economy of households and the spending around the house helps generate growth in the economy. If those in the 60’s are staying put and not buying, there is less demand.
Linking to dividend paying stocks, for the next few years the worst aspects of the economy should be less because of the baby boom population retiring and eligible to receive both private and government pensions. There will be great opportunity to care for the seniors in the health care companies which means some of the companies can be bought and held for many years, just use your homework to find a good price to enter.
There are more questions than answers, till the next time – to raising questions.