Second,\nI want to drill down into some detail to answer some questions that have been\nasked. Out of necessity, this will be a bit \u201cdry\u201d however, I believe you will\nfind the information worthwhile. <\/p>\n\n\n\n
One of the\nquestions I\u2019ve been asked was, \u201cwhy do you think so much in healthcare will\nchange over the next 10 years? Especially\nconsidering how little it has changed in the past 10 years.\u201d<\/p>\n\n\n\n
The\nsecond question was, \u201cwhy do you believe that demographics are so central to\ninvesting, business opportunity and economics? Is it always about demographics with you?\u201d<\/p>\n\n\n\n
These\nquestions will be addressed in the next couple of blogs, as well as our upcoming\npodcast (Episode 2); however, I\u2019ll begin with a little history to set the\ncontext and help define some of the key driving forces behind the answers to\nthese questions.<\/p>\n\n\n\n
For the\nfirst time in recorded history, we have more people over the age of 65 than\nunder the age of 5, today.<\/p>\n\n\n\n
The\nmedian age by country: <\/p>\n\n\n\n
- Japan 47.3, <\/li>
- Germany 47.1, <\/li>
- Italy 45.5, <\/li>
- U.S. 38.1 <\/li>
- China is 37.4[1]<\/a><\/li><\/ul>\n\n\n\n
These\nstatic numbers make more sense when viewed historically with their associated trend\nlines. To answer both questions above, we\nare going to use Japan as the prediction of the future for the U.S., and maybe\neven a lesson for the European Union and China. <\/p>\n\n\n\n
Japan\nbecame a major industrial power by the mid-1970s fueled by a meteoric rise from\npost-World War II. I still remember the\niconic Sony Walkman released in 1979 \u2013 a point in history where Japanese\nindustries were impacting the world as never before. By the mid-1980s, Japan\u2019s gross exports and\ntrade policy had begun causing a serious trade deficit for the United States\nand then our trade policy changed. <\/p>\n\n\n\n
The\nfirst new car I bought was a 1982 Datsun (today Nissan) 280Z, and I was in love\nwith my car. It was fast, relatively\ncheap and was a compromise to the car I wanted, yet could not afford, the Chevrolet\nCorvette. <\/p>\n\n\n\n
Many of\nus remember news about the Japanese companies buying landmark U.S. properties, and\njust like that, everything changed. By\nthe 1990s, Japan had entered a challenging economic period that has lasted to\ntoday. Many issues have been attributed to\nthe slowdown, and at times, scary to near implosion of Japan. Since the late 1990s through today, the\nJapanese central bank has kept the lowest interest rates in the developed world. This double-edged sword benefits growth and investment\nin more easily funding means of production; however, it is a disincentive to personal\/private\nsaving. Even so, Japan still has one of\nthe highest private savings rates of any developed nation, even after\nadjustments for various accounting methods. The higher propensity to save\nprovides some fuel to the economy, and yet the Bank of Japan has still had to take\nthe extraordinary move on several occasions to buy equities in order to improve\nliquidity and resiliency in the economy.<\/p>\n\n\n\n
The\nJapanese problem is far more complex than this simple treatise and includes\nsome self-inflicted issues, yet we believe the \u201celephant in the room\u201d is mostly\ndemographics-driven; this is why.<\/p>\n\n\n\n
The\npopulation in Japan has been quickly aging, fertility rates have dropped, and\nrecently millions of Japanese have begun to retire. To provide some understanding of the internal\neconomic pressures this creates, let\u2019s discuss the term Age Dependency Ratio\n(ADP)[2]<\/a>,[3]<\/a><\/sup>.\n The ADP is quite simply the ratio\nbetween the \u201cnon-working\u201d and \u201cworking\u201d populations to measure the pressure on the \u201cproductive\npopulation.\u201d What we will concentrate on,\nfor the purpose of our discussion, will be the rapidly growing ratio, \u201cOld Age\nDependency Ratio\u201d and what we believe contributes most of the pressure on the productive\npopulation:<\/p>\n\n\n\n
The\nage dependency ratio expresses the relationship between three (3) age groups\nwithin a population: ages 0-15, 16-64 and 65-plus. Higher values indicate a\ngreater level of age-related dependency in the population. The “dependent population” is\ndefined as people ages 0-15 and 65-plus, while the “working age\npopulation” is defined as people between ages 16 and 64. This is consistent with the definition used by\nthe U.S. Bureau of Labor Statistics.<\/p>\n\n\n\n
There\nare three (3) types of age dependency ratio. The youth dependency ratio is the population\nages 0-15 divided by the population ages 16-64. The old-age dependency ratio is the population\nages 65-plus divided by the population ages 16-64. The total age dependency ratio is the sum of\nthe youth and old-age ratios divided by the working population. All three ratios are commonly multiplied by\n100 to obtain the \u201cpercentage.\u201d<\/p>\n\n\n\n
When you write this as a formula\nit looks like this:<\/p>\n\n\n\n
![\"\"](\"http:\/\/803.557.mywebsitetransfer.com\/wp-content\/uploads\/2019\/10\/age-dependency.jpg\")
<\/figure>\n\n\n\nI also\nhave also found the following video a good source if you would like to explore\nthis topic further: https:\/\/www.investopedia.com\/terms\/d\/dependencyratio.asp<\/a>.<\/p>\n\n\n\n
By graphing the Old\nAge Dependency Ratios for Japan, Europe and the U.S. over the last 70 years, there\nis a clear departure upward in the ratio for Japan indicating that there are\nfar more people turning 65 than entering the work force. This provides a much clearer picture of one\nkey contributor to the economic pressures that Japan has faced since the 1990s.\n The following graph depicts these\nnumbers and provides a forward looking (because of demographic trends) for the\nnext 50 years that show that the Old Age ADR for Japan continues to worsen much\nmore rapidly than the U.S. and Europe. <\/p>\n\n\n\n
![\"\"](\"http:\/\/803.557.mywebsitetransfer.com\/wp-content\/uploads\/2019\/10\/old-age-dependency.png\")
<\/figure>\n\n\n\nAs\nshown, the Old Age Dependency Ratio in Japan began accelerating upward by the\nmid-1980s and continued to accelerate into 2050. Also note, that Europe is accelerating faster\nthan the U.S., yet the numbers cannot be ignored as the pressure on the\nproductive work force continues to increase annually.<\/p>\n\n\n\n
Some\nhave begun to call this the \u201cJapanification\u201d of the developed world. The fact is, Japan\u2019s working age population\nhas contracted (or more accurately failed to replace those entering retirement)\nby 12% since 1990. Some expect this to\ndrop another 8% by 2045; meaning a full contraction of over 20% for the period!\n The outlook for Europe and the U.S. is\nbetter, but not by a great deal in the long run:<\/p>\n\n\n\n
- Europe\nis on a slower upward trajectory and experts expect a contraction of working\nage adults of 15% by 2048 in Europe. The\ngreatest pressure, statistically, is on Italy, Germany and Spain in that order.<\/li>
- The\nU.S. is presently in the best shape between Japan and Europe, and yet between\n2014 and 2045 the U.S. population aged over 65 will climb from 15% to over 20%,\nwhile the \u201cOld Age\u201d ADR will go from 28% to 36% owing to the ongoing retirement\nof the Baby Boomer at a rate of 10,000 per day. It could be argued that one of the reasons the\nU.S. unemployment rate is so low is in part demographics. Even though the Millennial generation in the\nUnited States has passed the Baby Boomer generation as the largest generation\nin the United States.<\/li>
- Note,\nthese statistics do not include future immigrant populations in Europe and the\nU.S. that are typically in the 0-15 and 16-64 age groups which would provide\nsome skewing of these statistics; \u201chowever, migration alone will almost certainly not reverse the ongoing trend of\npopulation aging experienced in many parts of the EU[4]<\/a>.\u201d We suspect that may likely be true\nfor the U.S. as well. The greater\nquestion, and we will leave this part of the discussion, is what is the ADR for\nthe immigrant population given the wide skills and needs gap in the\n\u201cdestination country\u2019s\u201d labor force? This\nonly applies for Europe and the U.S. as Japan has historically resisted \u201copen\u201d\nimmigration.<\/li><\/ul>\n\n\n\n
This is a\nlong blog however, it provides a sound basis to our assertion that the best <\/em>market segment for investment,\nemployment and startups\/business is clearly in healthcare (we are partial to\ntechnology) and healthcare-related services. From our view, healthcare that provides a positive\nchange to reduce the impact to the \u201cworking population\u201d from the \u201cOld Age ADR\u201d\ndynamic we have reviewed, will be in the areas of cost management\/reduction,\ntransparency and value-based care. These\ncompanies should see the fastest and most consistent growth through 2050, as\nthe aging statistics are sound.<\/p>\n\n\n\n
In the U.S., we see major drivers of innovation will become the better use of technology. In fact, we see technology-infused care<\/em><\/strong>, not just technologies used in healthcare. It is clear that everything from 5G, IoT, AI, predictive analytics, telemedicine combined with a healthy dose of price and physician-patient relation transparency, and a huge acceleration of managed-care (in Medicare Advantage) are the tools that have arrived at the right place at the right time, and at the most important industry in the world today where their impact can drive a profound and lasting positive change.<\/p>\n\n\n\n
-Noel J. Guillama, President
<\/p>\n\n\n\n
\n\n\n\n[1]<\/a>\nChina is trailing and moving\nto catch<\/em> up fast<\/strong> (subject of future blog)<\/p>\n\n\n\n
[2]<\/a> https:\/\/en.wikipedia.org\/wiki\/Dependency_ratio<\/a><\/p>\n\n\n\n
[4]<\/a> https:\/\/ec.europa.eu\/eurostat\/statistics-explained\/index.php\/Migration_and_migrant_population_statistics<\/a><\/p>\n\n\n\n
[3]<\/a> https:\/\/www.investopedia.com\/terms\/d\/<\/a>dependencyratio.asp<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"
Our last blog, Healthcare 2030 (Part 3), we discussed demographics and what we expect will be an accelerated demand for healthcare as Baby Boomers age. As we continue this series, we will elaborate more on this discussion and provide our reasons why we believe things are different this time. First, we have expanded our Company\u2019s news releases and have added on a new project, podcasting. If you haven\u2019t heard our first episode yet, be sure to head over to our partner site, OXIOHealth.io and sign up for our free podcast […]<\/p>\n","protected":false},"author":6,"featured_media":4047,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-4044","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"https:\/\/pwer.com\/wp-content\/uploads\/2019\/10\/AdobeStock_136095668.jpeg","_links":{"self":[{"href":"https:\/\/pwer.com\/index.php?rest_route=\/wp\/v2\/posts\/4044","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pwer.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/pwer.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/pwer.com\/index.php?rest_route=\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/pwer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4044"}],"version-history":[{"count":5,"href":"https:\/\/pwer.com\/index.php?rest_route=\/wp\/v2\/posts\/4044\/revisions"}],"predecessor-version":[{"id":4056,"href":"https:\/\/pwer.com\/index.php?rest_route=\/wp\/v2\/posts\/4044\/revisions\/4056"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/pwer.com\/index.php?rest_route=\/wp\/v2\/media\/4047"}],"wp:attachment":[{"href":"https:\/\/pwer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4044"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/pwer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4044"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/pwer.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4044"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}