Peak Boomer

One of the features of contemporary society is that it is ageing. What this means in practice is that the percentage of older people as a proportion of the total population is rising. It is cited as the cause of the current pressure on health systems in Europe and North America. Adult social care is absorbing more and more resources in what appears to be a bottomless pit of open ended commitment. The unfunded pension promises made to the elderly population threaten to beggar public finances over the course of the next decade. This cannot continue indefinitely. At our spring retreat we decided to look at this issue a bit more closely.

Most of those people who are now entering the ranks of the elderly are those who were born in the 'Baby Boom' after 1945. They are a large and significant generational cohort and have been the subject of much analysis over the years. From a demographic perspective, they are reasonably easy to predict as much of their behaviour exhibits a shared experience. It helps being a 'Boomer' myself.

The growth of this cohort amongst the ranks of the elderly (which we have defined as aged 65+ - the old state retirement age) can be easily predicted from the existing demographic data. According to ONS data, the proportion of the population of the UK aged 65+ was 15.9% in 2004, rose to 17.7% in 2014, and will rise to 19.9% in 2024 and 23.3% in 2034. Age UK forecasts this group to be 24.2% in 2040. We have defined the point at which the growth of this cohort slows as being 'Peak Boomer', and, on current projections, we estimate it to be in the period 2035-40.

There are a number of factors that might blow this estimate off course. The most significant one is that the death rate has risen since 2015. This might be a temporary blip, but it could portend something far more significant. Social progress in the UK, as measured by a falling death rate, has advanced at a fairly steady since 1919. Signs of this changing were evident in 2010, when the death rate started to level out, and from 2015 it has risen.

The causes of the rising death rate are many, but the prime suspect is the political austerity imposed by the Coalition Government from 2010. Financial constraints hemmed in spending on the NHS, just at the point when the demands placed upon it started to rise. The reduction in local authority funding from 2010 has actually shrunk adult social care provision across England. The rise in demand for dementia and Alzheimer's care have outpaced the capacity deal with it. It has to be said that there are cross currents here. Cancer survival rates are at record highs. The Boomers, as a cohort, smoke less and exercise more than their parents, leading healthier lifestyles. It could be that the death rate starts to fall again, but this worsens the situation for care rather than eases it.

The estimate of Peak Boomer at 2035-40 has the right feel to it. If it is correct, then that would have a number of important consequences. To start with, the pinch upon public finances is set to last another generation. Pensions are still unfunded, social care is still inadequately financed, and the demand for services is set to rise for a further generation. Good news for care homes but bad news for taxpayers. There is very little incentive to introduce significant changes because the electorate - dominated by Boomers as voters - will punish those politicians who suggest doing so, as the recent fiasco over the 'Dementia Tax' demonstrates.

There are, however, far more subtle, and malign consequences of Peak Boomer. The August 2017 inflation report from the Bank of England highlights the historically low savings ratio (at 1.7%, it has not been this low since 1956). Part of this is explained by households protecting their living standards in the face of a fall in disposable income (inflation is increasing and wages stagnant), but part of this is explained in generational terms as Boomers use their savings to fund their lifestyle in elderhood and the Millennials find it hard to save owing to the squeeze on their living standards. This is a bit of a cartoon approach to stylise the situation, but it has more than a grain of truth.

The consequence of this is that the pool of savings to fund business investment, if not provided domestically, will have to be provided internationally. The corollary to the record trade deficit are record inflows on the capital account. More and more of the UK is owned abroad. Sadly, this money is being used to fund unproductive assets, such as high end property in London, rather than productive business assets to generate future growth.

And that is where we are today. There is little to suggest that the 'Age of Stagnation' will end in a hurry. In the absence of any systemic changes, our current malaise is likely to continue for some years to come.

Stephen Aguilar-Millan

© The European Futures Observatory 2017