Going grey: consumption in the face of future demographic trends

June 27, 2017

leonardo.catani@prometeia.com

Education and technology are changing the consumer choices of people over the age of 64

 

Italy is the European country characterised by a greater incidence of elderly people (22%); the ageing of the population, according to recent estimates by Istat, will characterise our Country also in the long term, so much so that by 2050 one in three people will be over the age of 65.

With the transition to the retirement stage, income decrease and personal savings start declining; will an ageing society tend to consume less? And if so, how? A wealth of aspects should be considered starting from the assessment that tomorrow' s elders will not be like today's elders; people who are currently in their forties are characterised by preferences and lifestyles unlike those of their parents and such diversities shall affect their future consumption. 

 
Fig. 1 The average monthly expenditure per household typology from 2007 to 2015 - (2007=100)
Source: Prometeia processing ISTAT data
 

Since 2007 the levels of consumption of the older population have grown more than the average

In order to start reflecting on these issues we compared the spending behaviour of people over the age of 64 with that of the adult population group between the ages of 35 and 64.
Since 2007, the levels of consumption of the older population group have grown much more than the average, better withstanding the impact of the crisis.

In this period, the average monthly expenditure [1] at current values has dropped by 5.6% whereas that of singles and couples aged 65 years or more has risen by 18% and 10% respectively.
  The retirement of cohorts of workers with more qualified occupations and higher monthly allowances has contributed to increase the levels of average consumption of this population group.
Indeed, if in 2007 the average expenditure of a household with members over the age of 64 was lower by 26% compared to the average expenditure of a household with identical characteristics with members aged between 35 and 64, in 2015 this difference has fallen to 14%.

Thus, while improving, the absolute differential of expenditure remains negative and an ageing society will tend to consume less, all other conditions being equal.
In order to grasp the effects on the basket of purchased goods and services, we mapped for each category the differential level of expenditure across elderly persons and adults in 2015 and the delta as compared to 2007. The quadrant tags indicate whether the goods and services are favoured or not by the ageing of the population; in the top right hand corner, for instance, we find goods and services for which the elderly spend more than adults and to a greater extent compared to the past.

 
Fig. 2 - % ratio of expenditure of the elderly (over the age of 64) and expenditure of adults between the ages of 35 and 64 
Source: Prometeia processing ISTAT data
 

Rise in expenditure for health care services and culture

Expenditure for health care services, already higher on average, has grown more than that of adults, even if the years of life spent in good health after the age of 65 are ever-increasing as is also the practice of sports. The higher than average inflation of health care services and the reduction of the supply of public welfare are the elements underlying these dynamics. 

In the top left hand corner we find the categories most indicative of the change in lifestyle characterising people over the age of 65 as compared to their peers of a few years ago and that also reflect higher levels of education: in fact there has been a rise in expenditure for culture, especially for trips to exhibitions and museums and for communication, as evidence of a greater tendency towards the use of modern technologies.

Conversely, expenditure for “hotels and restaurants” and for transport do not appear to benefit from increased incomes and remain far removed from the levels of the adult population group. 
The analysis conducted suggests that even in future the greater level of education, the increased orientation towards an active life (sports, social meetings, ...) and technology diffusion will be relevant factors affecting the way in which the recomposition of the expenditure basket will take place in the older population; the order of magnitude of such changes, however, depends on a number of elements, first and foremost the entity of the future pension allowances issued via the contribution system. Nevertheless, primary needs (health, home and food) shall continue to be the primary budget items of persons over the age of 64. 

 

[1] Processing conducted on the Survey on household expenditure, Istat-single person aged 65 or more
-childless couple with reference member over the age of 65
-couple with two children
-total families