Changing Demography and Your Future

Hartford Business Journal

Q&A with Demographer Ken Gronbach

By Keith Griffin

Q. Last year in an interview with the Hartford Business Journal http://www.hartfordbusiness.com/news15938.html, you said manufacturing is poised to make a comeback in Connecticut, not necessarily in a year or two, but in the future. You still holding to that belief?

Absolutely, there is more and more evidence that manufacturing is making a comeback in Connecticut. For example we have a shortage of skilled labor. You don’t have a shortage of skilled labor if they are not in demand.

Q. You talk about Generation Y becoming entrepreneurs. What does that mean for Connecticut? Is the population going to be in place to handle an uptick in manufacturing jobs?

Generation Y will become entrepreneurs out of necessity, the mother of invention. Generation Y is facing 50% unemployment as they enter the labor market. The ones that don’t get hired still have to eat and they won’t be able to live at home forever. In addition, decent paying manufacturing jobs are going unfilled. How long do you think it will be before Generation Y figures out the paradigm shift and gets the training necessary to land a good paying manufacturing job? Connecticut has an abundance of Generation Y kids. This bodes well for the state.   

Q. Your perception of Generation Y differs from the common-held beliefs. 2012 seems like a prime time for Gen Y to break out. What can Connecticut employers expect?

The big story will be the employer’s market. Connecticut employers will have their pick of the best and brightest young workers from the biggest selection in twenty years. The hungry Generation Y kids will bring a new dynamic to the workplace and put pressure on the small entitled Generation X, now 27 to 46 years olds. The message from Generation Y to Generation X is “perform or get out of the way.”  Boomers in the workplace will love and identify with the spunky Generation Y workers. Boomers are 47 to 66 years old.

Q. There's an interview with you on your blog where you say, "Generation X did not opt for the technical careers that the Boomers did, like factory work, electricians, plumbers." You predict factory work is coming back. What about the electrical and plumbing trades? Is Generation Y going into them in sufficient numbers?

Vacancies in the technical trades spell opportunity. The trades are dominated by Boomers who are thinking about retirement and leaving the workforce at the rate of about one every eight seconds. You will not be able to hide this opportunity from the huge Generation Y.

Q. That same interview has another interesting observation, " If you want to go experience Italy, you’ve got to go now, because in ten years you won’t be able to experience Italy. France is feeling it big time. The problem is that they forgot to have kids. Remember that people precipitate economics, not the other way around. Without people, you don’t have anything." What part of the world is populating itself correctly?

2.2 kids per couple is a magic number. It is called replacement level fertility. When you fall below this number you risk not having enough heavy lifters (taxpayers) to provide for the young and the elderly in forty to fifty years. The European Union, Eastern Europe and all of Asia are demographic time bombs because they fell below and stayed below replacement level fertility for over thirty years and counting. Africa, India and the Middle East all have their own demographic issues. The United States and most of the Americas are doing it right. Australia is a poster child for healthy demographics.

Q. Let's take more a micro-look. How is Connecticut handling its population growth? How are the Millenials going to do when it comes time to follow Gen Y? What's going right?

Connecticut has a shortage of Generation X. They went away to school and stayed there. Connecticut has an abundance of Generation Y. The average age we marry for the first time in the United States is 26 years old. Generation Y will start to marry with a vengeance and stay here in Connecticut. This will coincide with an improved housing market, a commensurate drop in unemployment and the return of a vibrant state-wide economy.

CHINA ECONOMY TO CRASH AND BURN

[This guest column is written by Ken Gronbach, a past PEMA® meeting speaker.  Mr. Gronbach’s views are presented as his and his only.]

I remember my first PEMA^® presentation a year and a half ago in Florida. Someone raised his hand and said “I go to Beijing all the time, looks fine to me.” It was an honest statement. But trust me Beijing is not fine. China cannot recover from what it has done to itself demographically with its “One Child Only Policy”. So what does this mean to PEMA^® members? Should you bail from China now? No, make money while you can but don’t make long term capital commitments. Lease, rent and keep both eyes open because the Chinese house of cards is going to crash and burn.

Many facts in this article are chilling, but you need to be aware of them. China’s economy is directly dependent on its demography. China has tampered with its demography to its own detriment.

I just stared at the photo of the idle young Chinese men. It bothered me. I was missing something. How could there be 30 million more Chinese men than women. Sonograms are illegal in China. How did the parents know they were males? The answer is simple. They determined they were males when they were born. And if they were baby girls, well, they were disposed of. The baby girls were not aborted, they were killed as infants. Infanticide. I don't have any place to file this information in my brain and apparantly the rest of the world doesn't either, because no one talks about it. Let's pretend it doesn't happen.

The Chinese approved press was volunteering the fact that there were 30,000,000 young Chinese men of marrying age that could not find wives. The reason given was the pervasive “One Child Only Policy” enforced by the Chinese high command for the last thirty one years. Males were obviously favored by Chinese parents under this rule because they were more likely to care for the parents in their old age according to Chinese tradition.  Having a girl baby was bad luck because she was likely to eventually marry and care for her husband’s parents.

China’s social security is family. There is no formal state sponsored financial safety net for the elderly. A typical symbol for a family is a pyramid. At the top you have a couple, and then you have a large number of children. Below them you have an even larger number of grandchildren and finally an even larger number of great grandchildren. Though this triangle may not always be played out in modern culture it has been the corner stone of societies through-out the ages. With their “One Child Only Policy” China has inverted the family pyramid. They call it “Four, Two, One”. Four grandparents are at the top, then two parents and finally one child. The child will have no brothers, sisters, aunts, uncles, nieces or nephews, no family.    Being elderly without family in China is going to be very difficult.

The thought of China rising to the position of the dominant economic world power and influencing world-wide public policy is frightening. From my perspective they have no moral compass.  I recently heard President Obama expressing the desire to have the United States re-establish itself as if we had fallen in some way and turned the baton over to China. We haven’t and they are not even close. The United States GDP is about $15 trillion. China’s GDP is about $5 trillion. Germany is about $4 trillion and Japan is about $3 trillion. We have a bigger GDP than our nearest three competitors combined. What do we need to re-establish? China produces but cannot consume because their vast 800,000,000 work force is not paid at a level that facilitates consumption. In order for the Chinese GDP to increase the United States would need to consume more. Also it is not likely that China will call in their loans to the United States any time soon because we are their best customer. They need us.

China officially boasts of preventing 400,000,000 live births in the last thirty-one years with its “One Child Only Policy.” In the short term this is an economic accelerant because China has not had to feed, clothe, educate or house the equivalent population of the United States and Mexico combined. In addition this afforded them substantial recognition at the Third International Conference on Climate and Water in Helsinki in 2007 for significantly reducing their carbon footprint. However from an economic perspective they have also significantly reduced their number of potential consumers, wage earners and tax-payers by 400,000,000. The full weight of this population reduction will play out over the next twenty to thirty years. Demographers worldwide believe the results will be economically catastrophic.

China has other problems albeit not as horrific as the “One Child Only Policy”. Their currency must be allowed to fluctuate according to world market and the pressure is on from many quarters including the United States. As it stands now the value of the Yuan is artificially suppressed by the Chinese government. They just keep printing more of it to keep the value down. If you want to see the net results of this just go shop at Wal-Mart. If the Yuan was allowed to fluctuate as other world currencies it would double in value and everything in Wal-Mart would double in price. The Yuan will increase in value. It is just a matter of time. This will be bad news for China and Wal-Mart.

Shipping costs are rising with the cost of oil. China produces lots of stuff but doesn’t consume much because they don’t pay their workers at Western levels. Shipping is critical to them because it is imperative to get their cheap goods to their consumers in the European Union and in the United States. As the price of shipping increases so will the price of their goods. Low price is the single biggest advantage that the Chinese producers have to offer. The Chinese will not go quietly. Watch for them to pull quality out of their products in an effort to preserve margins. Let’s hope they don’t capture too much of our food market before this really sets in or you can be sure they will have no reservations about poisoning us. If you think I am being too harsh in my forecasts, think again. The proof will be in the pudding. Sorry.

By 2016, the huge 800,000,000 Chinese labor force will begin shrinking. Less labor means higher wages. The Chinese are already experiencing labor shortages in isolated areas. When you compete for labor the employer’s market disappears and the employee’s market emerges. This should be fun to watch.  China is very used to abusing their labor. Workers have been expendable for decades. That’s over. Labor costs should spike and tensions will increase. The price for Chinese made goods will increase and their desirability will decrease. The paper tiger will begin to unravel.

China has polluted its water in its rush to economic prominence. So China has an acute shortage of potable water and an acute shortage of women. Russia has both. Russia should be concerned.

The United States has 5 percent of the world’s population but we produce 25 percent of the world’s economy. We are the best place on earth and our best days are ahead not behind us! The best and brightest people from all over the world are going to pour into our country because the rest of the world, the European Union, Eastern Europe, the Middle East, Sub-Sahara Africa and all of Asia are going to be difficult places to live and because they want to be part of the success of the Americas. 

Count on it!

 I had an experience in a supermarket checkout line recently that sent a chill up my spine. It wasn’t the cost of food although that was staggering enough. It was a comment by the young woman who was checking me through the line at light speed. I estimated that she was in her late teens, born in the mid nineties, a perfect Generation Y example. She looked at my wrist watch and said “you don’t see many of those anymore.” I thought this was a really cool comment because it is rare that anyone recognizes the fact that I wear an antique Rolex. I thought to myself that this young woman was surprisingly savvy. I told her that it was a 1974 Stainless Rolex Precision that actually needed to be wound. Her response was a blank stare, not what I expected. I knew there was a communication disconnect. Then she said:        “Most people don’t wear watches anymore.” It was my turn for the blank stare and then the chill. Watches are out dated. I am old.

I have two Generation Y daughters, one sixteen and one nineteen. When I got home with the food I relayed my experience in the checkout line. Their expressions essentially said, “Where have you been?” My oldest said, “Haven’t you noticed that we don’t wear watches?”  I guess I hadn’t. My youngest then dropped the real bomb, “Dad, you wear an analog watch. I have friends that cannot tell time that way.” Was she kidding? No, she was not kidding. Is this what Bob Dylan meant by the lyrics “The Times They are a Changin…” I need to lie down, maybe get counseling.

My first fear was that what I was experiencing was early onset Alzheimer’s, a truly chilling fear. Clearly it was not. The times were changing, profoundly changing. Who would have thought that people, younger generations, would begin to view time differently? Seriously, time. What else do they view differently? Nothing is sacred or off limits. What else have we taken for granted? Food? Marriage? Families? Cars? Education? Friendship? Clothing? Entertainment? Jobs? Vacations? Life from the new perspective had to be reviewed and taken into account or you would be left behind. I refuse to be left behind.

My daughters are willing to help me understand Generation Y; after all it is in their best interests. So let’s examine a small cross section of how thinking is changing and what’s in store for us. For the record Generation Y was born 1985 to 2004. There are about eighty-two million of them, three million more than the Baby Boomers. They are voracious consumers who have not come close to hitting their consumption stride. That comes later when they earn their own money. We are the only contemporary Western civilization and the only industrialized nation that has a substantial Generation Y. They will be the biggest and best labor force our Nation has ever enjoyed. As they seek entry level jobs they face unemployment as high as fifty percent. The paradigm has shifted from an employees’ market of the last twenty years to and employers’ market. The best and brightest will get jobs and the rest will open their own businesses out of necessity just like the Boomers did in the seventies.

For the last thirty years the European Union, Eastern Europe and all of Asia have reduced their fertility to below replacement level decimating their future labor forces and guaranteeing that manufacturing will once again flourish in the United States. (Babies become adults. What were they thinking?) The future is very bright for the United States and Generation Y is why.

Generation Y does not see color, race, ethnic origin or religion as a barrier to relationships. It is not because they are tolerant, it’s because it never enters their minds. The concept of racial bigotry is an oddity and a curiosity to them. They will fall in love and marry without prejudice. The average skin tone in the United States thirty years from now will be decidedly darker. Red heads will be extremely rare and very valuable.

Generation Y is turned off by their parent’s 6,000 square foot starter castes. My daughters tell me that if I wanted to see the future Generation Y living quarters just go to IKEA. Research shows that Generation Y will favor 1,500 square foot homes that are self sustaining with cement walls, plastic window casings, tile roofs and geo-thermal heating and cooling. My daughters will of course condescend to stay in our starter caste until they can afford their smaller greener homes. Some things never change.

My daughters have never fully understood where the meat in a McDonald’s Big Mac comes from or have even come to grips with the fact that it is meat… from an animal… that had to die. This is the original “Don’t ask, don’t tell.”

Are super markets in for a wake up call? Big time. Say goodbye to meat counters. Say hello to prepared foods. My wife cooks, very well. We sit at a table and eat breakfast, lunch and dinner as a family. My daughters remind us that we are an anomaly, an anachronism. “We’re the only family that does this, you know.” What does the word dinner mean to Generation Y? I have been in homes where Mom announces dinner and the family comes from all over the house to get a plate of food and then return to where they came from. This is dinner?

 Will Generation Y change our labor force? I think yes. I was working on a story on my antique laptop when suddenly my document went into hieroglyphic mode. It became a jumble of foreign looking symbols. When I checked all my other documents the same was true for them. Sweat began to pour off my face because I have saved nothing. My life was over. Just then my oldest daughter walked behind my chair texting on her phone and listening to her iPod. She saw my problem reached over my shoulder and with a couple of key strokes solved the issue totally. She then sat down at her desktop and pulled up Facebook and then someone in Skype. Then she turned on the TV. I just stared at her and said, “Work for me.” Boomers are immigrants in the cyber world and speak with a thick accent. Generation X is bi-lingual. Generation Y speaks cyber naturally as a first language. They will bring a dimension of efficiency to the labor force that we have never seen before, ever.

The movie "Fast and Furious 2009" broke box office records. No surprise there. I forecast this in 2003 in my book "Common Census" when the leading edge of Generation Y was just starting to drive. I covered the subject in detail in my 2008 book "Age Curve". I stated that Detroit had missed an obvious cue spelled out in the overwhelming popularity of "Fast and Furious 2001".  The huge new market for cars, Generation Y, is not going to buy the latest mutation of the SUV. What are they going to buy? Small light weight rocket fast Asian cars. Watch both movies. The continuity is on the money. I know because I spent the better part of the Summer of 2007 filming Generation Y hot-rodders. Japanese automobile sales are going to continue to spike. If Detroit can get their act together and build what Generation Y wants they could have powered out of this crisis without a crippling bailout.

There is more, a lot more. Really more than I can cover here. Generation Y is about to overwhelm the US highways driving the fastest cars ever made. The AAA tells us that the chance of dying in an accident in a small car are twice that of an SUV.  In addition, as the Baby Boomer Harley riders begin to fade into oblivion, there will be a sea of male Generation Y Sport Bike enthusiasts trying to kill themselves on machines capable of 200 mph (not a typo). In short we have a huge young high accident risk population/generation headed right at us and no is talking about it. Public Safety/police need to start preparing now because believe me they are not going to catch these kids with their anachronistic Ford Crown Victorias or existing technology. Hospitals, trauma centers and emergency workers are going to get caught flat footed by a dramatic increase in traffic accident victims. People needing organ transplants will see a surge in availability. Car insurance rates that have been stable for the last twenty years because of the small number of young drivers (Generation X) could double and triple. The United States healthcare crisis is about to be sucker punched. Auto body shops franchises like Maaco and parts stores like Pep Boys should see a surge in business.

I speak all over the United States to a broad spectrum of audiences about shifting demography, everyone from associations of funeral directors to manufacturers to financial institutions. I warn them about the perils of misunderstanding Generation Y. I tell banks to get Generation Y representation on their boards of directors or they risk having their industry become a buggy whip. Generation Y banks on their iPhones. Generation Y will make the arrangements when their Boomer parents die. What will they do? Don’t count on anything traditional.

The mandate is clear. We need to embrace Generation Y and really understand how they think now because clearly, right on their heels, is Generation Z, born 2005 to 2024 and they are a whole new ball game.

Remember, it’s a fact. We age. You can’t speed it up and you can’t slow it down. But that doesn’t mean you let life pass you by.

2011