Tuesday, March 08, 2016

It’s time to measure 21st Century ageing with 21st Century tools

You must read this excellent article about the tools we use to measure ageing and its impact.

In this case the 'tool' is the Dependency Ratio. Supposedly, the tools shows the way that the changing demographic makeup of a country will impact its ability to fund pensions and healthcare.

The formula most used to work this out is the one above.

The article, rightly, argues that it is nonsense since it doesn't take account of way that people work longer. If you run the numbers using the suggested modifications then things don't look so bleak.


Neither the old or the updated formula take any account of cohort effect. It is becoming pretty clear that the tax paid by younger people looks like it is going to be less than the previous age cohort. Why, well today's young entered the workforce (if they were lucky) during the recession and wages and hence taxes have been pretty much constant for the past 8-10 years. Secondly, many more of this cohort of young people work in the 'gig economy' where income and tax model is totally different to that of their parents.

Whilst I think the 'victim Millennial' stereotype is a bit of overdone there is some truth that their incomes have been suppressed.

The bottom line of this is that we are flying in the dark, without radar.

Think about it - what tools do you know that help companies evaluate the impact of ageing on their business? That is why Kim and I created the AF Tool that measures the way that physical ageing impacts all parts of the customer journey and experience.

Ageing is the most predictable of the mega trends that determines the way we work and live. But, policy makers and business people are running around using guesswork to make decisions about how they should respond. Crazy. Dick Stroud

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