Economy General

Demographic Clarity for Businesses

Big Shift Lead

By Chris Porter and John Burns

Demographic shifts create exciting op­portunities for the business leaders who act on them. Those who do not react can quickly fall behind. With change occurring more rapidly to­day than ever before, we recognize the need for more clarity on the demographic trends shaping the US today.

There are plenty of anecdotes floating around about how consumer behavior var­ies by generation. These are often informed by one’s personal experience with their own parents, peers, or children. Business leaders need real facts to help them make informed decisions and adjust their strategies when unanticipated events shift prevailing trends.

Our search for clarity resulted in a book called Big Shifts Ahead: Demographic Clarity for Businesses. We wanted to make demographics easier to understand and anticipate by giving readers the tools and framework to recognize the shifts that will affect nearly every business.

Demographic

At a high level, here are some of the shifts coming that businesses need to be aware of:

  • 38% more people over the age of 65. Most of growth in the population 65 or older, which will reach 66 million peo­ple by 2025, will be young baby boom­ers born in the 1950s. They are 7% more likely to work than their predecessors, which means 25% will be working full-time. Demand for higher-density, lower-maintenance living among this generation has already surged. We coined the term “surban” to describe urban living in sub­urban environments. These active retir­ees will keep their cars but don’t want to spend much time in them. They want to live near their kids, too. More than ever, we expect they will be providing down payments to the kids to keep them living nearby.
  • 8 million more working women. Wom­en now earn 58% of all college degrees. They also earn more than their spouse or partner 38% of the time—a stat that has been rising 0.4% per year for at least the last 30 years. Men and women, particu­larly those born in the 1970s, are willing to trade a large house for a home closer to work so they can be near their kids. While the percentage of 20–64-year-old women choosing to work has fallen 3% since 2001, the percentage of men has fallen 5%. The real estate needs of these 78 mil­lion women will vary. The one common thread will be how busy they are.
  • 8 million increasingly affluent immi­grants. Clearly, elected officials can af­fect this trend dramatically. For example, three immigration laws in the 1980s gave rise to more immigration over the subse­quent 20 years than the prior 60 years. Today’s immigrant tends to arrive on an airplane from China, Brazil, and other countries where the economies have been booming. While most expect some slow­ing in those economies, the pent-up de­mand to move to the US remains large.
  • 8 million newly formed households. 13.3 million of these households will re­place a relative who passes away or moves to an assisted living facility. The net gain will be 12.5 million households, which is an 86% increase over the paltry growth from 2005 to 2010. The record number of deaths recently is one big reason that net household formation has been slow. Nonetheless, these 25.8 million want to live differently than prior generations and will fill their homes with all sorts of tech­nology. While more people than usual have been living urban, three times as many live suburban.
  • 62% of the growth heading south, where 42% of America currently lives. Plenty of jobs, affordable housing and warm weather will make Texas, Arizona, Nevada, Florida, Georgia, North Caro­lina, and surrounding states the growth engine.
  • Renting taking market share. 80% of the people passing away own their home, making it very difficult to prevent home-ownership from falling. With mortgage interest and property taxes on most homes already less than the standard deduction, the tax benefits of homeownership have been greatly reduced. The foreclosure scars of the last recession have not faded either. People want to own their own home but are going to proceed more cautiously. They will wait until they are confident in their job and savings before taking on a mortgage. We estimate that homeowner­ship will fall to 60.8% in 2025.

Below are just some of the highlights from the book, which includes 100 color charts and two tools for making demographic anal­ysis much easier:

  • Define each generation by decade born. We decided to make every generation 10 years long. The math becomes easy: those born in 1980 turn 37 this year. Gen­erations divided by decade have far more in common than previous generational definitions, which can be up to 20 years long. Our method makes it easier for you to understand people’s backgrounds and attitudes, something we summarize in the book. We give each generation a name based on the shift they led in society:
    • 1930s Savers
    • 1940 Achievers
    • 1950s Innovators
    • 1960s Equalers
    • 1970s Balancers
    • 1980s Sharers
    • 1990s Connectors
    • 2000s Globals
    • Apply the 4-5-6 Rule. We group all the external factors that influence demo­graphic characteristics into four main categories (which we call the Big 4 Influ­encers):
    • Government policies
    • Economic cycles
    • New technologies
    • Societal shifts

We describe how different policies, cycles, technologies, and societal shifts have af­fected groups, depending on where they were in the 5 Life Stages that we outline. This framework will help you adjust your strategy when one of the Big 4 Influencers changes unexpectedly. You will also be bet­ter able to answer the 6 who, what, when, where, why, and how questions you are ask­ing about your business.

We live in an exciting time when American businesses can capitalize on rapidly chang­ing demographics. These changes will im­pact the types of homes, offices, retail, and storage spaces America needs and where America needs them. Group the generations by decade born and use the 4-5-6 framework to quickly make better-informed decisions.