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Berenberg/HWWI study: "We have to actively shape demographic shift"

  • Germany the fastest-ageing country in the world after Japan
  • Population of Germany to fall by at least 16 million by the year 2060
  • Number of people in need of care to rise by nearly 50% by 2030 
  • Economic potential expected in the health market, sport and leisure sector, retirement care real estate and continuing professional development

Hamburg/Berlin. “Demographic shifts will bring long-term changes to many areas of life in Germany and on a number of levels. The German population is going to shrink, get older and – due to the increasing percentage of immigrants – become more and more diverse,” says Dr Jörn Quitzau, an economist at Berenberg Private Bank. A recent study by Berenberg and the Hamburg Institute of International Economics (HWWI) entitled “Strategy 2030 – Demographics” examines the impact that an ageing population will have and explains how future actions can play a key part in shaping the effects. “A fundamental question is whether we can manage to actively shape the changes already underway and develop innovative strategies for our economy and society as our population becomes smaller, older and more diverse so that we can maintain our standard of living,” says Prof. Thomas Straubhaar, Director of HWWI. 

The reasons behind the demographic shift
The demographic shift is due to three key factors: firstly, the increasing life expec-tancy; secondly, the continuing drop in birth rates; and thirdly, the cycles of high and low birth rates, which have historically been very pronounced in Germany. The first factor means that, overall, our society is ageing. In the year 2030, life expectancy for women will be almost 86 years, while for men it will be over 81 years. This will increase the percentage of over-60s to around 37% by 2030. When compared internationally, only Japan is ageing at a faster rate than Germany. The ageing process is being exacerbated by low birth rates, since the percentage of younger people in society is getting smaller and smaller. By 2030, Germany is expected to have 17% fewer children and young people than today. These two long-term trends are being exacerbated by the third factor: the baby boom of the 50s and 60s means that a significant percentage of our population is getting older and older. According to Straubhaar, “This particular demographic situation will present enormous challenges for Germany from 2020 onwards – when the baby-boomers reach retirement age – that will last for the following 35 to 40 years”. Between now and 2030, Germany’s population is forecast to decrease from 81 million to around 77 million, and fall by a further 12 million to 65 million by the year 2060. 

What does population ageing mean for individual people?
As the population gets older, the different phases of people’s lives will change. In ageing societies, people retire later and later, while the middle age period of their lives is subject to processes of continued change in terms of their employment situation and qualification requirements as well as their societal and family roles. In order for people to maintain and enhance their skills, life-long learning – in other words, continuing professional development and further training – is becoming increasingly important. “People have to update and expand – or even refocus – their knowledge and skills more and more. As society becomes more individualised and family ties weaken or people have fewer children, people are becoming increasingly self-reliant,” explains Straubhaar. At the same time, active life expectancy is rising. Senior citizens are now divided into two groups: those who are active and those who are mostly in need of assistance and care (aged 80 and over). The percentage of people in need of care is expected to increase by 47.4% between 2009 and 2030, from 2.3 million to 3.4 million. The topic of care will therefore become more important as the population ages. 

What does population ageing mean for the standard of living? 
The working-age population is set to fall sharply over the coming decades. At the same time, the labour force has to provide for the welfare of everyone who is not actively involved in the employment market – and this group will grow rapidly in the years ahead as the population ages. “This means that we will be unable to maintain our current standard of living and will fall behind countries that are ageing more slowly,” explains Straubhaar. “If we want to completely – or at least largely – counteract the effects of the ageing process, we will have to increase the length of time that people are in employment and raise our future productivity levels.” Possible solutions include bringing more young people into the labour market as early as possible. Greater acceptance of bachelor’s degrees among students and companies, for example, would also likely bring further gains. According to the study, the number of women in the labour force should also be increased. Thirdly, it should be made possible for older people to be available to work for longer. For example, the employment rate for people in their 60s rose by 25% among men and 51% among women between 2005 and 2011. People with a migration background represent a fourth important group whose employment potential could be improved. The arrival of young and well-qualified immigrants in Germany would help to alleviate the country’s demographic problems somewhat. At present, around 20% of the population has a migration background. It is estimated that the percentage of people in Germany with a migration background will increase to at least 25% by 2030. “Immigration is making Germany not just more diverse, but also comparatively younger than it would be without immigration,” says Straubhaar. Finally, another promising strategy aimed at boosting the potential of the labour force is to increase the macroeconomic work volume (number of people in employment multiplied by average annual working time).

Demographic change from a commercial and investment perspective
The sharp rise in the percentage of older people as a result of demographic change offers huge economic potential. The focus on senior citizens will create opportuni-ties for many new products and services, and therefore new investment opportuni-ties. As well as the health and nutrition industries, this will impact the leisure, tourism, sport, culture and education sectors. Health will no longer be just about preventing illness, but rather increasingly associated with a higher quality of life and well-being. Health and lifestyle will gradually merge into a new concept of “healthstyle”. This will give rise to new markets and business models. The main areas of this health market include wellness, anti-ageing, prevention, health tourism and functional and ecological food. Furthermore, the entire healthcare market is set to grow rapidly in the coming decades as a result of demographic change. Both healthcare services and retirement real estate will benefit from this. Industry experts predict that an additional 380,000 nursing home places will be needed by 2030. The facilities that are likely to succeed in the long term will be of a profitable size (around 100 residents), have a high occupancy rate and have up-to-date technical equipment. In addition to conventional nursing homes for older people, other forms of assisted living such as house and apartment-sharing, multi-generational houses and retirement communities are gaining in prominence. Designing homes that meet the specific needs of older people and help them to stay healthy will also play an increasingly important role in researchers’ scenarios for the future. “When people get older, they have different needs, and this will create considerable demand for new services and innovative IT solutions. Investors can participate in this trend too,” says Berenberg economist Jörn Quitzau. As well as individual investments, there is also the option of combining investments in care funds. For a more diversified portfolio, investment funds focused on the health sector provide an opportunity to participate in the demographic shift.

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