Shifting Demography and the Senior Living Market Plays Out
2011
Page 2 Senior Living Business May 2011
By Jane Zarem, Editor
Best Practices Q&A:
Kenneth W. Gronbach, Principal
KGC Direct, LLC
Ken Gronbach, Principal at KGC Direct, LLC
Haddam, Connecticut, and author of "The Age Curve"
is a demographer, futurist, and generational marketer.
A nationally recognized expert who regularly counsels
businesses across the country on marketing and societal
phenomena, his ability to accurately forecast which markets
are growing and which are slowing has made him a fixture
on the speaker circuit. We talked with him specifically about
the shifting demographics of the senior care market and
what those demographics portend for providers.
• How would you describe the shifting demographics
of the senior care market?
According to the The United States Census Bureau's National Center for
Health Statistics, the number of births for the GI Generation
(born 1905-25) was 56.6 million; Silent Generation, 52.5
million (born 1925-1945); Baby Boomers, 78.2 million
(born 1945-65); Generation X, 69.5 million (born 1965-85);
and Generation Y, 91 million (born 1985-2004).
As those figures indicate, the GI Generation was
huge—more than 70 million when you add nearly 20
million European immigrants into that age group. Then
came the Silent Generation. Fertility dropped like a stone
due to The Depression and World War II, and immigration
became a negative figure. In terms of population, the
Silent Generation is the smallest generation of the last 100
years—and, unfortunately, it is also the market for senior
living for the next 15 years.
• Why, then, do we hear so much about the “graying
of America”?
The graying of America is a myth—at least until the first
Baby Boomers start entering senior care facilities. That
won’t happen for 15-20 years, with the peak occurring in
about 30 years. Until then, who will populate senior care
facilities? That is a major challenge for providers.
From my perspective, the existing business model—
with its core customer being an 82-year-old woman who will reside in
the facility for four or five years—will not work when half
the market disappears. The industry will have to redefine
itself, repurpose buildings, or consolidate. Some facilities
will likely shut down. At the very least, they will have to
bring in a different type of customer to survive within the
existing infrastructure.
• Who are those new customers?
A new market might be younger individuals needing short-term rehabilitative care. For example, Baby Boomers (currently 47-66 years old) are a disproportionately obese generation with attendant health problems. In the near term, they are a likely source of short-term care or rehabilitation patients. Another possibility is the “Over-55 Residential Living” market, which is one of the hottest markets right now. It’s huge. Developers in the South can’t build these communities fast enough, and they’re most popular as rental units. So if senior living communities can figure out how to plug into that market—invite in younger, healthier people who just want to plan for the rest of their lives and put home ownership behind them—they could attract Baby Boomers who will absolutely need graduated services eventually. Initially, though, Baby Boomers are mainly interested in three things: Help me save time, make my life easy, and don’t rip me off. That’s really all they ask. • What’s in store for providers regarding the labor force? That’s the good news. Generation Y (born 1985-2004), the largest generation in the history of our nation, has completely changed the employment paradigm. They’re just beginning to enter the labor force and, in many categories, are facing up to 50% unemployment. The “employee’s market” of the last 20 years, characterized by a shortage of entry-level and quality labor, is finished. The huge mass of Gen Y people that are currently begging for jobs will be good employees. They will show up on time and work hard, because that will be a condition of employment. So labor—skilled, managerial, and younger entry-level workers—will not be an issue going forward. Senior living providers will have all the workers they need...guaranteed. • Any other good news? China is in big trouble, which is good news for American manufacturers. As an industrialized powerhouse, China has peaked, primarily because of its one-child policy—the biggest demographic blunder in the history of the world. The one-child policy was precipitated, ironically, by Henry Kissinger, who warned China that the West wouldn’t take it seriously unless it got control of its population growth. As a result, the country today has an insufficient source of labor under age 30. Back in the 1970s, China produced 40 million babies a year; today, the fertility rate is down to 10 million babies per year. Over 40 years, China eliminated a population equivalent to that of the United States and Mexico. You can’t cut the fertility rate by 75% without creating a hole in the population. Young people do the heavy lifting when it comes to caring for the nation, and China just doesn’t have the critical mass of workers it will need going forward. Therefore, manufacturing in the United States will begin to prosper dramatically. The industry will see jobs return from China for a variety reasons, including shipping and quality issues. More importantly, China will have to pay more for labor as a result of eliminating much of its workforce, so pricing for Chinese-made goods will have to increase. That will eliminate any advantage U.S. companies have gained by manufacturing in China. So economically speaking, our best days lie ahead. • How will that affect senior living? In a bad economy, it’s difficult to sell homes. And people certainly don’t want to sell their homes below value. Once our economy improves sufficiently, the housing market should also recover. At that point, why would elderly people want to burden themselves with, say, a two-level home that’s difficult to maintain? With an attractive senior living community as a viable alternative, they would move in a heartbeat. Mom and Dad want their independence; but if that involves worrying about the plumbing, they really don’t need that grief.
Kenneth W. Gronbach
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