Printed with permission from TCI Management Consultants. A group of senior-level management consultants, offering strategic planning and marketing services to a wide range of public and private sector clients.

Boom, Bust and Echo - How to Profit From the Coming Demographic Shift
David K. Foot with Daniel Stoffman
Macfarlane, Walter and Ross, Toronto, 1996

'Two thirds of everything' - that's how David Foot describes the explanatory power of demographics in this recent and very interesting book. By this, he means that an understanding of basic demographic dynamics can explain most of the current patterns we observe in consumer behavior, economic trends, social mores and public policy. This position is predicated on a couple of undeniable facts: first, that every year each of us gets one year older, and that second, as we age, we move in and out of certain stages in the life cycle that govern our attitudes, desires, career situations and discretionary income availability.

To take a simple example: young adults typically have considerable time on their hands but little money. As a result, they typically are willing to shop around for the best price on consumer goods and services. In contrast, older adults in the prime of life are burdened with families, careers, and social obligations and are thus willing to pay more for convenience and service. Also, the two groups are interested in buying different things: younger adults join fitness clubs and drive sports cars while older adults buy cottages and RESPs for their children.

Foot's analysis tracks these trends according to age cohorts, which are groups of people born within the same period of time, whose destinies are shaped by common events and situations. (This includes the fact that other age cohorts may have preceded them along life's ladder, and thus influenced their career and economic prospects.) He identifies eight such cohorts in Canadian society today, from the pre-World War I group (born in 1914 or earlier) to the baby boom echo (born in 1980 and later). Most of the focus of the book is on the famous 'baby boom' generation (born from 1947 to 1966), which represents fully one-third of the Canadian population. He also analyses the cohorts that followed the boom: the 'baby bust' (a period from 1967 to 1979 when relatively few babies were born) and the 'baby boom echo' (from 1980 to the present - the children of the baby boomers).

To see a detailed chart with these cohorts outlined in terms of their defining ages, the size they represent in the Canadian population, and theirkey characteristics, click here.

The book analyzes several sectors of the Canadian economy in terms of how these various cohorts demand different products and services as they age. Separate chapters are devoted to the real estate industry, the stock market, retail, tourism and recreation, education, health care, as well as jobs and careers, urban growth, and family development.

Some of the more interesting and enlightening predictions are:

The real estate market will continue in its downturn, because the boomers have already largely acquired the houses and office space they need. The 'baby bust' generation which has followed the boomers does not contain nearly the same number of individuals, so demand will continue to be low compared to the early eighties.

The stock market will become even hotter as the baby boom generation realizes that, with continuing low interest rates (because they have passed the point where they need big loans for houses, which drove rates up) the equity markets represent the only real chance of developing a sufficient source of income for retirement that will grow at a rate greater than inflation.

While demographic theory would predict that the baby bust generation, now entering the workforce, would have better job prospects than their Generation X predecessors (because there are not as many of them to compete with one another), the reality is that Canada is in its fourth consecutive decade of rising unemployment. Global competition and labour-saving technology have had significant (non-demographic) impact. Jobs will continue to be scarce in the next decade, and the employment market of the future will be characterized by a more flexible workforce (i.e. more movement between jobs, more part-time careers, shorter work weeks, and more gradual retirement).

Regarding retailing: "In recent years, Canada has begun to undergo a major transformation, from a predominantly young to a predominantly middle-aged society. For that reason, retailing in Canada has entered a new era of quality and service." (p.81) Aging and affluent boomers, not willing to spend hours in comparison shopping like younger consumers, will increasingly be looking for quality merchandise and a high level of service in their shopping activity. This will herald what Foot calls a 'revival of Main Street', where individual specialty retailers will be well positioned to make a comeback. With respect to the markets for specific goods and services, Foot says the following:

Leisure time preferences will shift as society ages; specific predictions that Foot makes for certain activities are:

Demographics explains the different growth rates in types of crime over the past few decades. There was a large increase in the rate of growth of property crimes as the boom generation passed through what Foot terms the 'break and enter' years. A shift occurred in growth from property crimes to violent personal crimes as boomers entered their 20s and 30s. Now, as the boomers mature further, we are seeing increases in white collar crimes. However, as the echo generation enters their own break-and-enter phase, we should be preparing for increases again in property crimes.

In the transportation field, the baby boom generation has largely moved away from public transit and into their own private cars; that is why ridership for most public transit systems has been declining throughout the past decade. As the echo generation moves into its peak public transit-using years, some growth in ridership figures can be anticipated.

Canada does not have a health care crisis yet. However, according to Foot, the real crunch will come in twenty years' time when boomers are in their late 50s and 60s. A key challenge now is dealing with the rapidly growing number of elderly women born before 1919 (one of the fastest growing cohorts in Canada), many of whom are impoverished and yet in urgent need of health care.

The demand for daycare, so strong in the eighties when the echo generation was first coming on the scene, has subsided and will not again be a political issue for some time to come (despite the fact that daycare is probably one of the best investments that we as a society could make, says Foot).

In the late nineties, the baby busters will replace boomers as producers of children. Consequently, the birth rate will fall and a smaller percentage of taxpayers will have children in public schools. There will thus be tremendous pressure on identifying new and innovative ways of providing schooling rather than simply building new facilities.

Continuing education will be a strong priority for the boomer generation (either because it is forced upon them as a means to stay current in their jobs, or because they have the leisure time and resources to enjoy learning about new and different things).

Foot ends the book with a reminder that these demographic changes are neither good nor bad in and of themselves, but that they do pose differential problems and opportunities to society:

"Some of the changes wrought by the demographic phenomenon of population aging pose difficulties to society while others are beneficial. For example, an older society requires fewer goods, which hurt those in the business of manufacturing and selling goods. But an aging society requires many more services, and that means more business opportunities for other entrepreneurs. An aging population is more knowledgeable and experienced, but it is also more prone to health problems. In the final analysis, what is the balance between these pros and cons? Is the demographic shift good or bad? The answer is that it is neither. It is simply a fact of life, and the better we understand it, the better we can prepare for the changes before they occur and adjust to them once they have taken place."(p. 210)

At the end of the book are two appendices: one on the technique of demographic forecasting and the other on product and activity forecasting.

All in all, Boom, Bust and Echo is a very interesting book, well worth the read for its insights into the behavior of markets in Canada today (or, at least, two-thirds of that behavior).

The above summary has been provided to you compliments of TCI Management Consultants

As a limited offer, we are offering a 30% discount for our BusinessSummaries Pro subscription at only $69.95 - a clear $30 savings! Plus, you'll also receive our exclusive "Inside The Guru Mind" - a $49.95 value --- FREE! So Sign up Now!