Transition Canada: The Role Of Demographics

Below are two graphs. The first shows the percentage of the U.S. economy driven by consumer spending. The second shows how spending changes by age.

Baby boomers represent 30% or more of the population of any G8 economy and 60% of its wealth. They are the largest and richest generation in history. Their cohort reached a tipping point in 2010; the first of them reached age 65. In the next ten years the majority of them will retire.

Since all recent efforts to stimulate the economy centre around getting consumers to increase spending, this factor and its timing (unmentioned in any related news articles) will clearly be a significant part of the equation.

How Spending Changes By Age

The recesion happened to coincide with the majority of boomers going over the peak in the above bar chart and the economic downturn certainly would have reinforced the trend of spending less. The bottom line is that NO stimulus package is ever going to get these particular folks to spend again the way they did for the last 30 years.

Here’s another way to look at it, since real estate is used so often as an economic indicator. 

In the bar chart above, the sudden increase in size of the incremental steps after 2010 also indicates the Boomers exiting the labour market and the consumer driven portion of the economy. The post 2010 trend above is a reflection of the live birth rate trend from 1965 – 1985 shown below. The G8 economic engines, which all have virtually identical birthrate patterns, are not going to start again for at least two decades. By that time Peak Oil and a couple of other horsemen will have arrived in a major way.

We need to get on with relocalization and building resilience now.

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