SUMMARY: Marketers entering China will need to evaluate their portfolios very carefully. A mix of brands, targeted to different demographic groups, or those that work well in India or other less-developed nations may struggle in China. The one child policy—as well as other core changes in Chinese society—has radically altered the population demographic profile of China from what is expected in a country with a similar level of development.

Greater China today accounts for nearly one in five persons living on the face of Earth—that’s almost 1.4 billion people. Shanghai alone has more than 17 million people—that’s more than live in the U.S. cities of New York, Los Angeles, and Chicago combined. As a marketplace, the potential of China is unmatched. However, marketers who enter China must not make assumptions about the demographic makeup of the Chinese population based on what they see in other countries, for China is substantially different from other nations with similar levels of economic development.

Slow Population Growth
Global fertility rates (excluding China) have fallen by around 50%, but the fertility rate in China has dropped by over 70% (from 1950 to 2010). According to the Chinese government, the one child policy, instituted in 1979, reduced births between 1979 and 2000 by over 250 million. China has gone from a country with a population in line with the average for the less-developed world to one more aligned with the more-developed world. Current fertility rates in China are a bit below 1.8, while those in the more-developed world average just over 1.6.

Population growth in China has been arrested, from year-over-year percent increases of 3% in the 1960s, to falling below 1% per year by 1997 and estimated to fall below 0.5% per year by 2017. The United Nations estimates that China will stop growing entirely by around 2032, and will then begin to shrink. The more-developed countries in the world have been growing very slowly for some time, but China’s growth rate will fall below the average for the more-developed world in less than 20 years. By around 2028, India will surpass China in population and become the world’s largest country.

But make no mistake: China is still very, very large, and even a 1% growth rate is the same as adding another city the size of Beijing to the country in a year. However, the combination of an increasingly urban society, economic development, industrialization, and the one child policy has substantially lowered the amount China population will grow.

Accelerated Aging
One of the less obvious impacts of the one child policy has been to greatly accelerate the aging of the Chinese population. Less-developed countries are typically much younger than more developed ones. For example, the median age of all of Africa is less than 20 today, while the median of Western Europe is more than twice that.

At its youngest—around 1970—nearly 51% of the population of China was under 20 years of age. For comparison, even during the heights of the Baby Boom, the share under 20 in the United States never reached 40%. Two years from now, the share of the Chinese population under the age of 20 will fall below the same share in the U.S., and will continue to fall for the near future. Today, the median age for the U.S. is 36.6 and China is 34.2.

As the share of children falls, the share of older persons will rise. For China, population aging will hit much more quickly than even in parts of the more-developed world. The chart below compares the median age of the Chinese and U.S. populations. In around 15 years, the median age in China will be older than in the U.S.

Male / Female Ratio
Another impact of the one child policy is an ever increasing gender ratio favoring males. By 2020, there will be more than 24 million Chinese men who may not find a Chinese wife. Currently 119 boys are born for every 100 girls, though the ratio in some areas is much higher—around 130 to 100.

Implications for Marketers
Marketers entering China will need to evaluate their portfolios very carefully. A mix of brands, targeted to different demographic groups, or those that work well in India or other less-developed nations may struggle in China. Large families with children—typically the biggest market segment available in the less-developed world—are nonexistent in China. Very few households have more than two children and those with one greatly outnumber those with two. As the population ages and the gender ratio becomes more imbalanced, household sizes will continue to shrink and the share of households that have children will continue to fall. This means less variance in the buying rate for products that rely on use by multiple family members for volume. Gaining new users and the retention of current users will be far more important strategies than seeking to grow volume within existing users.

Lessons marketers learn in the more-developed world about targeting older consumers should pay dividends in China. By around 2038, there will be as many persons over the age of 65 in China as there are young persons under the age of 20. After 2038, older consumers will outnumber younger ones. Marketers who can tap these older generations could do very well.

The Future
The State Population and Family Planning Commission has recently said the one child policy will remain in force until 2015, but in prior announcements has suggested it could be at least five years longer. Regardless of when the policy might be altered, it will take decades of large increases in fertility and decades after that for the aging of China’s population to be reversed. This—as well as other core changes in Chinese society—has radically altered the population demographic profile of China from what is expected in a country with a similar level of development. China has reined in its population growth and that has contributed substantially to its economic growth over the past several decades. However, China is still a poor country, with average incomes around 14% of those in the U.S., and incomes vary greatly within the vastness that is China.

In some ways, particularly in the more westernized cities like Shanghai, the similarities between China and the U.S. seem stronger than ever. But despite some key demographic similarities to the more developed world, China is a very different place, with a unique culture and attitudes, and one marketers must carefully negotiate.

Sources:
United Nations Population Division World Population Prospects: The 2008 Revision
The Washington Post Looming population crisis forces China to revisit one-child policy (December 12, 2009)

SUMMARY: The recent recession has already wiped out a decade of growth in the U.S. The number of jobs in the country is almost the same as it was in 1999, and the S&P 500 index is in almost the exact place it was in 1999. Home ownership, which rose rapidly in the 2000s, is at about the same point today due to foreclosures. The numbers of Americans who have investments in stocks and bonds has also dropped. Incomes have been flat or have fallen in constant dollars for the majority of American households. Growth will be hard to come by both now and in the coming decades—successful marketers in 2010 will factor the U.S. shifting demographic profile into the marketing mix.

It all begins with aging. U.S. fertility rates have fallen by 44% since the peaks of the Baby Boom and are projected to continue to fall by another 12% over the next several decades. Falling fertility, combined with rising life expectancy and the large Baby Boom generation just nearing retirement age, equates to an aging population. By 2037, nearly one in three households in the U.S. will be headed by someone over the age of 65. Aging, however, is only the most obvious impact. There are five other key trends fostered by aging that will completely alter the marketplace for consumer products.

1. Growth is Found in Less-Developed World
   Worldwide there is still substantial, though slowing, population growth. By 2030, world population will have grown by around 20%. Only 3.2% of this growth will come from the more developed world. The less-developed regions will grow 31 times faster than the more developed ones. Some of the older countries in Europe as well as Japan will lose population. Marketers in the developed world will be locked into share wars while those able to compete in the less-developed world could see substantial growth.
2. The Share of Households With Children Decline
   The other side of the coin of an aging U.S. population is that the share of households that have children will continue to decline, as it has since the peaks of the Baby Boom in the late 1950s. Because fertility rates continue to fall, average family size will also fall, further impacting sales volume. By the middle 2020s, the share of U.S. households with children under 18 will fall below 30%. In Western Europe and Japan, the share will be much lower, making large families with children a niche market.
3. Immigration and Ethnic Familes Fuel Growth
   The majority of population growth in the U.S. will come from new immigrants and the children they have in this country. Since most immigrants are young, families with children will become more ethnic, more quickly, than the total population. By 2025, the majority of families with children in the U.S. will be multi-cultural (Hispanic, Black, Asian, etc.). Less than half of families with children will be native born non-Hispanic White. Multi-cultural marketing will be essential when selling to families with children.
4. Older Consumers Have New Needs
   The Baby Boom will seek to rewrite what it means to be old exactly as they have rewritten what it means to be children and adults. Marketers willing to reach out to the Baby Boom as they age can tap into a large marketplace. Those who are not willing to market to persons over the age of 65 will miss out on the first generation to grow up in a full blown consumer marketplace. Baby Boomers will not spend on the same categories as their parents did. For example, consumption of alcoholic beverages is much higher for Baby Boomers than for the current cohort of 65+ persons. Marketers who assume that the Baby Boom will start to behave like current older Americans, just because they reach the age of 65, do so at their peril.
5. CPG Spending Declines
   As population growth slows in the U.S., so will spending on consumer products. Household size will decline across the board, the largest families will be smaller and a large share of the population will live in one or two person households. Nielsen projections demonstrate that households closest to the poverty line will gain in share at the expense of all other households, but especially those in the middle and upper middle classes, who will shrink the share the most. The impacts of these two trends means that after 2020, Nielsen projections show per household spending on packaged goods will begin to fall. The current recession is already impacting spending in the short-term. Growth will be very hard to come by both now and in the coming decades.

2010 U.S. Outlook

Part 1: Cross Media

• Big Screen, Smart Screen, Small Screen: Top 5 Cross-Media Trends
• You Can Take It With You: Future Trends In Media

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Part 2: Consumer

• Winner Winner Chicken Dinner – Top 5 Consumer Goods Spending Trends
• Innovation Creates Opportunities for CPG Growth
• Aging Puts a Wrinkle in U.S. Marketplace

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Part 3: Advertising

• Talking Back – Top Five Advertising Trends
• Get Ready for the Audience-Centric Web
• What Would John Wanamaker Say Today?

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Part 4: Entertainment

• There’s No Business Like Show Business – Top Five Entertainment Trends
• Game On – The World is Watching More Than Ever
• Video Games in Play

SUMMARY: The European Union is a mega market with an economy larger than the United States. While Nielsen reports consumer confidence in the U.S. today is higher than in Europe, spending intentions tell a different story. The International Monetary Fund data shows that while the U.S. is initially experiencing a faster and stronger recovery from the current recession, the entire EU will move past the U.S. in growth by 2014.

Twenty years ago, the government of East Germany announced that travel restrictions between the east and west would be lifted. Over the next several weeks, sections of the Berlin wall were torn down, placing Germany on the path to a reunification made formal barely a year later in October of 1990. The fall of the wall and the subsequent division of the USSR has propelled the European Union (EU) from its original six members in 1957 to 27 today.

The EU is now a mega market with nearly 500 million inhabitants and an economy larger than the United States. Data from the Boston Consulting Group show that the new Europe has passed the U.S. in wealth and its GDP is nearly as large as the U.S. and China combined.

Growing consumer confidence
Latest findings from Nielsen’s Global Consumer Confidence Survey reveal that U.S. confidence today is higher than in Europe overall. And while Europe is more united today than ever in its history, there are still strong economic divisions within the EU and the European continent.

The latest International Monetary Fund (IMF) data show that while the U.S. is initially experiencing a faster and stronger recovery from the current recession, it also shows the entire EU moving past the U.S. in growth by 2014. For the sixteen Euro-based countries in the Eurozone, this translates to a per-capita growth rate more than twice what is expected in the U.S. Partially, this advantage comes from a lower level of government deficits. Government debt in the U.S. will likely reach 94% of GDP while the same measure for the EU will be around 79%.

Optimistic European outlook
Aligning with IMF projections, Nielsen reports that while 91% of Americans said that the U.S. was in a recession, only 85% of Europeans agreed. Northern Europeans in Finland, Norway and Sweden were the most bullish with only 61% agreeing that they were in a recession. This gap between Northern Europe and the rest of Europe appears throughout the consumer survey data. Northern Europeans are the most upbeat about the economy and the future followed by Western Europe and then by Eastern Europe.

Interestingly, despite IMF projections, Americans were much more confident about what the future might hold compared to Western or Eastern Europeans. Half of Americans think their personal finances will be Good or Excellent in the next year, whereas only about 40% of Eastern/Western Europeans believe the same. Northern Europeans are the exception, with over 60% thinking things were looking up for their personal finances. The U.S. and Northern Europe also agree about job prospects, while Eastern Europeans don’t see much relief on the horizon.

Spending intentions
Perhaps the reason economic projections post-recession favor Europe a bit over the United States is because there are stark spending differences between the two countries. While Europeans are much more likely to spend spare cash in the marketplace on clothes, entertainment, technology and vacations, Americans are much more likely to put their extra cash into the equity markets or to pay down their existing debt. More than one quarter of Americans (26%) reported that they simply do not have spare cash to spend—a level 56% higher than in Europe.

The recession has caused everyone to cut back on spending. But Europeans and Americans have cut back on different things as seen in the table below. Consumers in both countries have cut back spending similarly on vacations, clothing and major household appliances. And more than half of Europeans and Americans have switched to cheaper grocery brands.

When asked which of these expense-saving strategies they planned to continue even after the recession is over, both Europeans (42%) and Americans (61%) most frequently mentioned cutting back on gas and electricity. Second most frequently mentioned on both sides of the Atlantic was continuing to use less expensive grocery brands. While the first strategy has clear implications for the struggling U.S. automobile industry, the second has clear implications for consumer packaged goods. Private label has always tended to do better in recessions, but if consumers hold true to what they say, then branded products may have difficulties picking up sales lost during the recession.

Biggest future concerns
The economy led the list in both Europe and the U.S. among the biggest concerns over the next six months, though Americans were more than twice as likely to see the continuing recession as their biggest concern. Job security, debt, health and work/life balance were among the top concerns cited.

Big, strong and still growing
Europe today looks very different than it did when the first cracks of light shone through the Berlin Wall. The European Union is more united and stronger than at any time in the past. It is also better off economically, even after integrating many of the former Soviet countries. And it continues to grow—at least six new countries are seeking entry into the EU. However, even with its more regulated system of capitalism, the EU is not immune to the global recession. Because more of Europe’s economy is based on trade than in the U.S., it was hit harder by the recession.

For much of the period since World War II, the economy of the United States has led the world, in good times and bad. Today, though, the EU is bigger and still growing, and will challenge U.S. dominance on a global scale.

Doug Anderson, SVP, Research & Development, The Nielsen Company

SUMMARY: The U.S. added nearly 1.2 million persons of Hispanic origin to the population between 2007 and 2008, raising the Hispanic population from 15.1% to 15.4%. And new Hispanic immigrants are expected to continue to come in large numbers for the foreseeable future. Since a large share of the Hispanic population in the U.S. will continue to be new immigrants and their second generation children, the acculturation process may not happen has quickly or as thoroughly as with past immigrant groups. Marketers need to be acutely aware of both language and acculturation matters when crafting marketing strategies.

Marketers looking to tap into high-growth population segments should turn their attention to the U.S. Hispanic segment, which grew at a rate 3.4 times higher than the total population between 2007 and 2008 and nearly ten times higher than the non-Hispanic white population. Over half of all U.S. population growth during this time came from Hispanics, raising Hispanics to 15.4% of total U.S. population—a year-over-year growth rate of more than 2.6%.

Continued growth
In fact, that trend is expected to continue. Projections show the Hispanic population will reach nearly 20% by 2020 and over 30% by 2050—making Hispanics no longer a niche market, but a mainstream one. And unlike immigrant populations from the first part of the 20th century—when immigration laws stopped the inflow of people from countries such as Italy, Ireland and Poland—new Hispanic immigrants are expected to continue to come in large numbers for the foreseeable future, making the acculturation process much slower than it was for previous generations.

For marketers, careful attention around both language and acculturation are essential to success. While these concepts are closely related, they are quite different. Language may be necessary for acculturation, but even Hispanics with excellent English-language skills may still respond more favorably to advertising that is in the Spanish language or messaging that shows various aspects of Hispanic culture. Marketers must shift their focus from thinking about whether Hispanics can understand their advertising to creating campaigns that speak to the heart of the Hispanic consumer in the U.S.

Language and acculturation
To accurately understand acculturation matters, language and acculturation need to be analyzed separately in ways that can be applied across categories and geographies so the purchasing behavior of both Hispanics and non-Hispanics can be compared and contrasted. Nielsen has created a measure of behavioral acculturation that tracks purchase data across nearly 700 different categories to determine how similar the purchases of Hispanic households are to the purchases of non-Hispanic households with the same overall demographic characteristics. Hispanic households are considered “behaviorally acculturated” when purchasing patterns match the behavior of non-Hispanic households.

The chart below shows the index of the behavioral acculturation measure for U.S. Hispanics with varying language preferences. A low index shows high acculturation—purchasing behavior is similar for Hispanic and non-Hispanic households. The higher the index, the more dissimilar Hispanic behavior is as compared to non-Hispanic behavior and the more behaviorally unacculturated the segment is. Not surprisingly, households that only speak Spanish are the least behaviorally acculturated.

Additionally, when U.S. Hispanic members of the Nielsen Homescan Hispanic Panel were asked to rate their personal level of acculturation, those who defined themselves as following only Hispanic or Latino culture purchased products very differently from demographically similar non-Hispanics. In this survey, the word “American” refers specifically to United States culture.

Other predictors of behavioral acculturation include:

• Length of time in the U.S.—recent immigrants are the least behaviorally acculturated, while those who have been in the U.S. for more than 20 years are just as behaviorally acculturated as those born in the U.S.
• Language at home—those who speak Spanish at home are less behaviorally acculturated than those who commonly speak English, but even those who prefer to use Spanish at home are more behaviorally acculturated than those who only speak Spanish. For many Hispanic households who speak English well, but still use Spanish at home, Spanish-language advertising may resonate better.
• Relationships—those whose friends are also Hispanic are less behaviorally acculturated than those with mainly or solely non-Hispanic friends.
• Education—those with higher levels of education are more behaviorally acculturated than those with lower levels.

Closing the gap
The income distribution of Hispanics compared to the non-Hispanic population of the U.S. is marked by large gaps at the top end of the income spectrum. While Hispanics are more concentrated in the lower annual income ranges below $50k, there is parity between Hispanic and non-Hispanic households in the $50-75k annual income range.

Levels of educational attainment also lag for Hispanics in the U.S., but there is evidence among younger Hispanics that these levels might change substantially in the future. According to the Pew Hispanic Center, 86% of Hispanics between the ages of 16 and 25 are either in school or in the labor force—both skill-building activities that will pay dividends in income further down the road. Overall, Hispanics are nearly four times more likely to have no high school (9th grade or less), and over two times more likely than average to have dropped out of high school.

And while the incidence of advanced college degrees for Hispanics is 60% below the national norm, this level has been on the increase for decades—driven substantially by changes in the behaviors of young Hispanic women. In 1980, 35% of Hispanic women between the ages of 16 and 25 were in school (with 40% of those in school and working). By 2007, this level had increased to 50%. There has also been a marked decline in early pregnancy among young Hispanic women—24% were not in school or the labor force and were mothers in 1970. By 2007, only 9% had the same status. Young Hispanic men have also seen increases in the percentage in school, but not nearly to the degree as for women.

When it comes to education, the intent of Hispanic youths is often sidetracked by economic realities. According to the Pew Hispanic Center, nearly 90% of Hispanics between the ages of 16 and 25 believe that a college education is important to success in life—versus 74% of the general public. That sentiment is echoed by parents with more than three-quarters agreeing that college is the most important thing to do after high school. However, just under half of Hispanics plan to get a college degree versus 60% of the total population in the same age ranges.

Much of this gap can be explained by differences between U.S.-born Hispanics and the foreign-born young Hispanics who make up around one-third of this age cohort. Less than half of foreign-born Hispanics plan to go to college—often citing the need to work to support family either in the U.S. or in their native countries. Nearly two-thirds of foreign-born Hispanics sent money to family in their native countries versus 21% for those born in the U.S. And a much higher share of foreign-born young Hispanic women are mothers—29% versus 17% for U.S.-born Hispanic women.

Seize the moment now
The pace of Hispanic acculturation in the U.S. will depend on many factors. However, it will likely never mirror the same assimilation patterns of immigrants from past generations. The ready availability of Spanish media (television, radio, newspapers, websites, etc.) and the easy ability to communicate with friends and family who have not come to the U.S. slows the pace of acculturation, as does the continuing influx of new immigrants who reinforce the native cultural experience in Hispanic communities. Unlike immigrants from earlier in the history of the U.S., Hispanics today can participate in society while still retaining strong aspects of their Latino culture—including a preference for speaking Spanish at home or with their families and friends.

While Hispanics will become more acculturated over time and over generations—particularly in their purchasing behavior—they are not likely to leave their Latino culture behind. Marketers who wait around for Hispanics to acculturate rather than actively reaching out to this growing market now will be left waiting.

Sources:
The Nielsen Company, Homescan Hispanic Panel
Pew Hispanic Center—Latinos and Education: Explaining the Attainment Gap (October, 2009)
Pew Hispanic Center—The Changing Pathways of Hispanic Youths Into Adulthood (October, 2009)
U.S. Census Bureau Current Population Survey Annual Social and Economic Supplement 2008 (released September 2009)

SUMMARY: Throughout the world, the economic power of women is growing. As education levels are rising, incomes are following. Broadly defined, the global middle class will at least double in the next two decades and much of that growth will be spurred by two-income families as women enter the labor force in greater numbers throughout the less-developed world. While women in the more developed world will continue to find opportunities, developing nations will have the largest impact.

Over the next five years, the Boston Consulting Group (BCG) estimates that the global incomes of women will grow from $13 trillion to $18 trillion. That incremental $5 trillion is nearly twice the growth in GDP expected from China ($4.4 to $6.6 trillion) and India ($1.2 trillion to $1.8 trillion) combined. Globally, women are the biggest emerging market ever seen. Overall, men earn nearly twice as much money as women today, but that gap will shrink as more women enter the labor force and at higher wages than ever before. The vast majority of new income growth over the next ten years will come from women.

In control
According to BCG estimates, women control or substantially influence 65% of the world’s annual consumer spending—about $12 trillion. As today’s younger women enter the labor force at higher rates, they bring with them higher levels of education than any generation of women who have come before them. As they advance in their careers, their share of spending will grow, making women an even more important target for consumer marketers.

Global surveys of women, however, show that women feel vastly underserved by marketers. “Despite the remarkable strides in market power and social position that they have made in the past century, they still appear undervalued in the marketplace and underestimated in the workplace. Few companies have responded to their need for time-saving solutions or for products and services designed specifically for them”, says Michael Silverstein and Kate Sayre in the Harvard Business Review. In many cases, rather than truly listening to their female consumers, marketers have opted for the “make it pink” strategy.

Future income states
The United States provides a good case study for how the growing influence of women will eventually play out across many countries in the developing world in the near future. Almost all income growth in the U.S. over the past 15 or 20 years has come from women—while men have seen flat or even declining incomes. By around 2028, the average woman is projected to earn more than the average man in the U.S. A study reported in the Gotham Gazette shows that in some large markets, younger women are already out-earning younger men.

The average wages of 20-29 year-old women are higher than same age men in New York, Los Angeles, Chicago, Boston, Dallas and Minneapolis. In New York, young women earn 17% more than young men and 20% more in Dallas. In 1970, New York women in their 20s made about $7,000 less per year than men in their 20s. This gap had closed to parity by 2000 and today, young women make $5,000 more on average. As women age and grow in their careers, the overall gap between women and men will continue to shrink.

Career paths
Although there is still much to be done, women have made many other strides in the U.S. For the decade ending 2007, women increased their share of many prominent career positions: lawyers from 25% to 30%, physicians from 22% to 29%, and university faculty from 32% to 39%. Women’s participation in the military during the same period also grew from 12% to 14%. While these shares are far from parity and women are still significantly underrepresented in senior jobs—as the chart below indicates—there is continued progress.

Growth in incomes and career levels in companies is driven at least partly by education and the continuing removal of gender-based barriers to employment. Globally, half of all college students are now women. And in the U.S. and in the European Union, the majority are women (57% in the U.S., 55% in the E.U.).

Fundamental right
Literacy rates for women overall lag those of men across much of the less-developed world by 15–30 points. However, younger women have much higher rates than all women as shown in the chart below. As literacy rates have continued to improve for women across the board, the gap between younger women and younger men is in the single digits across almost all countries. For many developing countries, enrollment at the primary and secondary school levels is nearly equal for girls and boys. The gap at university level is still larger, but should continue to shrink as today’s young children grow older and are better prepared for university when they leave secondary school.

Changes in influence and spending
The battle for equality in the labor force for women is far from over, and a few years of a repressive régime can undo decades of progress, as can be witnessed now in some parts of the less-developed world. However, even small gains in education and incomes can have significant impacts on the marketplace for consumer products. As the incomes of women grow, so does the influence in how families allocate spending. And the services and products that women choose to purchase are substantially different than those purchased by households where the woman has less economic impact.

A number of studies in the more developed world have shown that women’s decision making power within a household varies based on her share of total household earnings, in particular her lifetime earnings. Women are more likely to purchase for the household and for the children, including food, healthcare, clothing, education, and personal care products. In households where men dominate the spending decisions, much higher shares are spent on alcohol, tobacco, and high status consumer goods. As women’s share of assets increases, the share of the family budget spent on alcohol, tobacco, and recreation tends to fall. The table below shows who controls spending for certain categories in the United Kingdom.

Increases in income in a family, whether coming from a man or a woman, tend to help the children, but the benefits are greater when a larger share of the increase comes from women. Children tend to enter school at an earlier age, especially girls. Nutrition improves and access to, and the quality of, healthcare increases. Savings rates also increase. All of this serves to better prepare the next generation, which reinforces economic growth.

In the developing world, Goldman Sachs’ The Power of the Purse: Gender Equality and Middle-Class Spending outlines a number of key categories that will see incremental growth from increases in spending autonomy for women—growth beyond what would be expected just given the size of their income increase. These include food (particularly higher quality and protein intensive foods), healthcare, financial products, education, childcare and consumer durables. As spending grows in these areas, growth in other categories—such as alcohol and tobacco—will be negatively impacted. Marketers who listen to their female consumers and create products that really meet their needs within these key categories will be able to reap substantial rewards.

Sources:

• The Real Emerging Market by Rana Foroohar and Susan H. Greenberg in Newsweek September 12, 2009
• The Female Economy by Michael J. Silverstein and Kate Sayre (Boston Consulting Group) in the Harvard Business Review September 2009
• No Quick Riches for New York’s Twentysomethings by Andrew Beveridge in the Gotham Gazette June 19, 2007
• The Power of the Purse: Gender Equality and Middle-Class Spending by Sandra Lawson and Douglas B. Gilman, The Goldman Sachs Group, Inc., August 5, 2009

Doug Anderson, SVP, Research & Development, The Nielsen Company

SUMMARY: Population growth in the United States is slowing. Projections from the Nielsen Company, the Pew Research Center, and the Census Bureau all agree that year over year population growth will struggle to reach 1% for decades to come. In these projections the vast majority of population growth is slated to come from new immigrants who have yet to arrive and from children they have yet to conceive. New data show that the number of immigrants entering the U.S. has been substantially downwardly impacted by the recession. If growth from immigration remains suppressed, then the U.S. will certainly grow even more slowly, and in some near future years, may actually drop in population.

From the heights of the Baby Boom, growth rates have declined with the exception of the period from 1990 to 2000, when there was unprecedented growth among persons of Hispanic ancestry. Current 2009 and projected 2010 data show that this trend has not continued and future projections show an ever declining growth rate. However, these projections are based on assumptions about immigration and fertility rates formed before the current recession. If those assumptions are shown to be false over the long term, then the growth rates will decline even more.

The Pew Research Center projections show that 82% of all U.S. population growth from now until 2050 will come from new immigrants. Since immigrants tend to be younger and to have higher fertility rates than the native U.S. population, they account for a disproportionately large share of growth among children and families. Without a continuing influx of new immigrants at the rates projected before the recession, there will be no growth in the numbers of children and families. In fact, these key market segments will decline in absolute numbers from year to year, and will cause the U.S. population overall to age even faster than has been projected.

Declining birth rates
Birth rates have historically been impacted by tough economic times. Drops in the birth rate were recorded after the 1973–1975 and the 1980–1982 recessions in the U.S. Similar drops have been seen throughout the more developed world during periods of uncertainly about the economy. For most of the 2000s, the U.S. saw record numbers of births—a trend broken by provisional data recently released by the CDC showing a near 2% decline in 2008. Hard hit states like Florida, California, and Arizona have large drops in the number of births.

If birth rates continue to drop into 2009, the impact on long-term population growth in the U.S. could be substantial. “It is certainly too early to tell if this economic crisis will result in a sharp drop in the birth rate, but all the measures and indicators are much worse than in the 1970s”, says Carl Haub, a senior demographer for the Population Reference Bureau.

Downturn in immigration rates
Immigration also tends to slow during bad economic periods. Since new immigrants are so important to U.S. population growth, any downturn in immigration rates is a clear warning sign for long-term growth. The current recession has hit particularly hard in the Southwest, as construction—particularly of housing—has almost completely dried up. The areas and occupations most hard hit are also those with a high concentration of immigrant workers—in particular, foreign born workers from Mexico. The unemployment rate for both native-born and foreign-born Hispanics in the U.S. increased 45% faster from the fourth quarter of 2007 to the fourth quarter of 2008 than did the rate for all workers.

A drop in Mexican immigration
Failing job prospects have had a dampening effect on the movement of workers from Mexico to the U.S., according to a recent report issued by the Pew Hispanic Center and several other sources. Since Mexico is the largest source for immigrants entering the U.S. by a big margin, a downturn will have a strong impact on population growth driven by new immigrants. Since many Mexican workers are unauthorized to enter the U.S., tracking this population using standard government data sources is difficult. However, the preponderance of evidence shows a clear fall in the number of Mexican immigrants—particularly unauthorized ones.

• Data from the Mexican government (ENOE) shows a strong decline in the numbers of persons leaving Mexico: from 547,000 for the year ending February of 2007, to 374,000 for the same period ending in 2008, and 203,000 for 2009. Since the U.S. is the primary destination for Mexicans who leave their country, the 63% decline from 2007 to 2009 should have a similar impact in the U.S.
• Data from the U.S. Census Bureau’s Current Population Survey estimates there were 175,000 immigrants from Mexico in the period from March 2008 to March 2009—lower than any other year in the 2000s, and nearly 37% lower than the average year from 2002 to 2008.
• Data from the Department of Homeland Security (Border Patrol) show a strong decline in the number of persons trying to enter the U.S. illegally—the lowest level since 1973. The 2008 rate was 40% lower than in 2004. Recent higher levels of border enforcement may also discourage people from trying to cross at all. A more difficult crossing plus the difficulty in finding work due to the recession are both clearing slowing unauthorized immigration.

Additionally, an analysis of government data by the Associated Press shows a huge decline in the number of green card applications over the past two years. The government has received about half as many employer sponsored applications in 2008 and 2009 than in previous years. As firms have shed jobs throughout the recession, it has become easier to find citizens who have the specialized skills that, in the past, might have justified sponsoring an immigrant for a green card.  This is likely an early indicator that immigration from India, China, and other countries, who have supplied highly skilled workers to the U.S. market, may also begin to fall.

Clear warning sign for long-term growth
If immigration continues to remain suppressed and fertility rates continue to fall (and note that there is a clear connection between the two as immigrants tend to have much higher fertility rates than the native population), then the demographic outlook for the U.S. could begin to shift.

• Population growth rates, already projected to be at historic lows, will fall lower. Many countries in the more developed world expect to see population declines owing to aging populations and low fertility rates over the coming decades. Without new immigrants and the children they will have, the U.S. could see little or no population growth in the near future.
• New, young immigrants both increase the share of the population that is younger, and of course often have children themselves. Fewer immigrants will accelerate the aging of the U.S. population and exacerbate the economic strains that will come from paying for Social Security and Medicare/caid.
• Fewer immigrants also mean slowing growth in ethnic populations (Hispanics, Asians, etc.) in the U.S.
• Finally, the share of households with children—already projected to decline to below 30% over the coming decades—will fall more rapidly and to lower levels.

It may be too early to call an end to the current recession in the U.S., but many economic indicators suggest a corner may have been turned. The stock markets have recovered some of their losses, the rate of increase in unemployment has slowed, and even the housing market has begun to show some signs of life. It will take at least another year or two of government data to determine if immigration and fertility rates remain below recent levels. If both fail to recover, the impacts to the U.S. marketplace—both in terms of growth and composition—will be substantial.

Sources:

• Centers for Disease Control and Prevention—National Vital Statistics Report Volume 57 Number 19—Births, Marriages, Divorces, and Deaths:  Provisional Data for 2008
• Pew Hispanic Center—Mexican Immigrants: How Many Come?  How Many Leave? (July 22, 2009)
• Pew Hispanic Center—Unemployment Rises Sharply Among Latino Immigrants in 2008 (February 12, 2009)
• Population Reference Bureau—Will the Economic Downturn Lower Birth Rates? (January 8, 2009)
• U.S. Census Current Population Survey—tabulations by the Pew Hispanic Center
• Instituto Nacional de Estadistica y Geografia (INEGI)—Encuesta Nacional de Ocupacion y Empleo (National Survey of Occupation and Employment – ENOE)
• The Nielsen Company—Population and Household Projections
• The Nielsen Company—The Low Income Consumer in Mexico
• MSNBC / Associated Press—Petitions for U.S. Worker Green Cards Plunge (August 6, 2009 / www.msnbc.com)

SUMMARY: A likely future for the U.S. in the year 2020 and beyond is a country split between the aging Baby Boom still with substantial political, economic, and social power, and a young, fast-growing multi-cultural population with far less political and economic clout. Beyond the clear demographic trends, the starting points for this divide can be seen in the growing generation gap that can be measured in the attitudes and behavior of Americans today.

In 1969, a Gallup poll found 74% of Americans thought there was a generation gap. That gap manifested itself throughout U.S. society in the social and political upheavals of the 1960s and early 1970s. Things

settled after that and 10 years later in a CBS/New York Times poll, only 60% saw a generation gap. Today, 30 years on, a Pew Research Center poll finds that 79% of Americans think there is a generation gap. While the 1969 gap was driven by widely varying points of view between younger and older Americans about the war in Vietnam, race relations, and women’s rights, today’s gap is centered around a different set of issues.

The Pew poll finds that Americans of all ages believe that differences in values make up most of the generation gap. Differences in morality, ethics, politics and beliefs/religion are frequently mentioned by younger people, while older folks are much more likely to say there are big differences around a sense of entitlement—that younger people want everything handed to them. Interestingly, only 8% of 18–29 year-olds and 5% of all other ages, mention differing levels of reliance on technology as being divisive, despite the fact that adoption and use of technology wildly varies across generations.

You’re old when…
Did you ever wonder what life would be like when you grow old? While the perception of “old” varies by age group—18–29 year olds think you’re old when you turn 60!—the generation gap of 2009 is focused primarily on the ability of younger persons to understand the large group of aging Baby Boomers.

Younger people exaggerate both the challenges of growing old and the benefits. For example, 57% of younger persons expect to have some memory loss after the age of 65, while only 25% of those aged 65+ actually experience memory loss. Likewise, 87% of 18–64 year olds feel that older people have more time for hobbies and other interests, while only 65% of persons over the age of 65 actually find that extra time in their lives.

Secular states
Religion plays a more central role in people’s lives as they age—and is a clear dividing issue between younger and older Americans today. Less than half of those aged 18–29 (44%) say religion is an important part of their lives, but that percentage escalates by about 10 points with each increasing age increment—54% of 30–49 year olds agree, 61% of those aged 50–74 feel the same, and 70% of persons 75+ believe.

Similar patterns of church attendance can be seen in the Catholic faith. Many younger Catholics consider religion important, but attendance at Mass falls off substantially compared to older persons. There is, however, a slight increase in weekly Mass attendance for Millennials born after 1981 compared to those born between 1961 and 1981. Around one-third of U.S. Catholics are Hispanic, with many of them concentrated in the younger ages—the up-tick may be due to the influx of younger Hispanics into the church.

The gloom of the boom
For three decades, data from the General Social Survey, conducted by the National Opinion Research Center at the University of Chicago, have shown the Baby Boom generation to have experienced less happiness than other age cohorts—new data from Pew show this is still the case. Their consistent gloomy attitudes have separated them from both preceding and subsequent generations of Americans.

Baby Boomer’s rate their overall quality of life lower than other age cohorts—they worry that incomes won’t keep up with inflation, that it is harder to get ahead today than it was 10 years ago, and that their standards of living don’t exceed that of their parents at the same age. Fewer Boomers expect to be able to live comfortably in retirement than members of other age cohorts.

These findings are surprising considering the fact that Boomers have the highest incomes of any age cohort, the highest home values, and the highest net worth. In today’s recession, however, they also have the most to lose and have been hit the hardest by the collapse of the housing and equity markets. Many are financially stretched still supporting children, their parents, or both.

Why are the Boomers the gloomiest generation? One possible explanation is supported by published sociologist, Yang Yang. Her work suggests that the roots of the issue may lie in the size of the Baby Boom generation. Because of the unexpectedly large size of their cohort, Baby Boomers have had to compete with each other for admission to schools, for jobs, etc., and this added level of competition has increased the level of stress in their lives and lowered their overall levels of happiness.

Technology and media
Whether young people feel it differentiates them from older persons or not, adoption of technology and use of both traditional and new media varies substantially between older Americans and new emerging youth

markets.

Average monthly television viewing time varies strongly by age. Although younger persons still watch a substantial amount of television—over 150 hours per month for persons age 25–34—their viewing is dwarfed by that of older viewers. Persons over the age of 65 watch 38% more TV hours per month than those aged 25–34.

While time-shifted television programming via a DVR accounts for a relatively small share of viewing, the highest levels of adoption are among 25–44 year olds, who watch time-shifted programming 24% more than 45–64 year olds and over four times more than persons aged 65+.

The Internet is a more ubiquitous medium with persons over the age of 35—averaging more than 40 minutes a day from home. Younger persons spend somewhat lower amounts of time online from home in an average day, but are the strongest adopters of other forms of technology—such as the mobile telephone. In 2008, the average teenager sent or received over 35,000 text messages a year—about one message every 15 minutes, 24 hours a day, 365 days a year. That’s 163 times more than the average person aged 65+.

Young persons are also much more likely to have abandoned their land lines in favor of an all mobile life. The chart below shows the distribution of persons by age based on how they make use of land and mobile telephone lines.

The U.S. in 2020 will be a very different marketplace from 2009, and the roots of that change are everywhere. The aging of the Baby Boom is inevitable. And in much the same way as they have redefined what it means to be young and to be middle aged, they will also redefine what it means to be old.

Other demographic trends that will shape the future are also present today—growth in Hispanic and Asian populations, with the highest shares among younger people, and falling fertility rates and falling family sizes. Beyond demographics, the gap between the generations, while clearly defined in differing usage of media and technology, has deeper roots too—in values, outlooks, and political perspectives.

Sources:
Center for Applied Research in the Apostolate (Frequently Requested Catholic Church Statistics) – Georgetown University

Baby Boomers: The Gloomiest Generation (Pew Research Center – Pew Social & Demographic Trends Project June 25, 2008)

Yang Yang—Social Inequalities in Happiness in the United States, 1972-2004: An Age-Period-Cohort Analysis—American Sociological Review April 2009

Growing Old in America: Expectations vs. Reality (Pew Research Center—Social & Demographic Trends Report June 29, 2009)

How Teens Use Media —The Nielsen Company, June 2009

A2/M2 Three Screen Report—The Nielsen Company, 1st Quarter 2009

Doug Anderson, SVP, Research & Development, The Nielsen Company

SUMMARY: While the World is struggling with the economic hard times of late, the future poses a new set of challenges that do not stem from arcane financial investments, but from simple demographics. An aging population, a declining birth rate, and growing ethnic diversity will change the face and the spending behavior of consumers in the U.S. Gaining share among population groups that most marketers do not reach today—older and ethnic consumers—will require shifts in focus, tactics, and products.

The recession of 2007–2009 has placed a great deal of strain on marketers and retailers of consumer products. Price and value have become more and more important, challenging marketers to rethink product and distribution. Everyone just wants things to get back to normal, but will they? While discretionary spending will return to moderate levels as markets rebound, the economy of the United States—as well as the rest of the more developed World—is well on the road to longer-term difficult times. The economic hard times to come do not stem from the misuse of arcane investment instruments that can take a degree in calculus to understand, but rather from simple demographics. The emerging marketplace will be very different than today, and filled with wide-ranging challenges.

Tectonic demographic shifts

Since the early 1970s, birth rates in the United States have been at least 40% lower than at the heights of the Baby Boom. When a falling birth rate is combined with a very large generation like the Baby Boom, the effect is a gradual aging of the population. The median age of the population increases as the large group grows older because there aren’t enough babies being added to balance them out. For much of the large group’s life cycle, they are typically a boon to the economy—especially when they reach their prime economic productivity years (usually from the early 40s into the middle 50s). However, as this large group continues to age, they stop being an economic asset and begin to become a burden—as the Baby Boom generation will become over the next several decades.

Aging populations place stress on an economy in two ways. First, if the generation is sufficiently large, retirement can lower the size of the labor force—particularly its most skilled and most experienced component—lowering overall economic productivity. Starting in the next two years until 2030, the number of persons who reach the retirement age of 66 will increase by over 100,000 each year throughout the Baby Boom retirement years. For many of the early years in that period, the number of persons who reach the age of 19 and enter the labor force will actually decline by more than 40,000 per year for the next decade.

The second impact of an aging population is perhaps larger—the costs incurred by society to care for a large number of retirees. Social Security will begin to run at a deficit in about eight years and will deplete its trust fund by 2041 unless changes are made now. At that point, money coming into the program would only cover about 70% of the money paid out each year. Medicare and Medicaid will deplete their trust funds in only about ten years and will be the largest component of all U.S. government spending by 2030.

Additionally, many private pension plans are currently under-funded, and given the current economic difficulties, may not have time to recover adding more people to the public dole. The Baby Boom generation has suffered a disproportionate share of the $11 trillion in lost market equity and $3 trillion in lost real estate value from the current recession and they will find it near impossible to retire and sustain their current standard of living—particularly the 38% who will be eligible to retire in the next ten years.

Future impacts

Nielsen created a set of long-term demographic and economic projections that model the potential impacts of the aging U.S. population. The projections make use of five groups of households (Struggling, Lower Mid, Upper Mid, Affluent and Wealthy), each accounting for 20% of total, using an income-to-poverty ratio.

Households in the Struggling group have incomes that are no more than 1.5 times the poverty threshold. For a single-person household under the age of 65, this equates to having a yearly income less than $15,732. For a six-person family with four children, this means having a yearly income less than $40,407. All together, the Struggling group has a median income of $12,201.

From now until 2020, the projections show that the Struggling and Lower Mid groups will be the only ones to gain share, with the Struggling group growing by over 10%. The lower affluence groups will grow at the expense of all other groups. By 2050, the projections show that the Struggling group will have grown in size by nearly 70%, pulling households from all other affluence groups—particularly those in the middle.

For families with children, the growth in Struggling households will be even stronger. By 2050, nearly one-third of all families are expected to fall within the Struggling group. In the same timeframe, nearly 40% of all households whose household head is over the age of 65 are expected to fall into the Struggling group.

A shrinking pie

As the Baby Boom ages, and birth rates remain low, household sizes will decrease. Many aging Boomers will live alone or with one other person. The number of children per family will get smaller. Add in growth in the most economically-disadvantaged market segments, and pressures on per capita spending will be like nothing the U.S. has experienced in modern times. Between now and 2020, the U.S. will experience very minor growth in per household spending. But after that, spending on consumer products is expected to fall—and will continue to fall throughout the projection period in constant dollars.

Marketers in the U.S. and throughout the World are not accustomed to a shrinking pie, but rather are used to thriving marketplaces with robust spending growth. Broad marketplace growth enabled brands and categories to grow organically without increasing penetration or buying rate. In the near future— and for decades to come—this growth gravy train will be off the tracks. Growth will only come from increasing share against competition. The new consumer marketplace of the U.S. will bring new relevance to the phrase “share wars”.

Opportunity knocks

Over the next four decades, the old U.S. consumer mass marketplace will continue to split into distinct groups with very different product needs. By 2037, nearly one in three households will be headed by a person over the age of 65. Of these households, nearly three-quarters will be non-Hispanic white, nearly half will be single persons, and the majority of persons in the 65+ age range will be women. Despite their economic woes, the Baby Boom will still be a strong consumer market and will provide substantial opportunity for marketers willing to design and market products to an older consumer franchise.

On the other side of the divide will be America’s new families. Because birth rates are low, these new families will be smaller on average than those who have come before. However, their most distinguishing characteristic will be their ethnic and racial makeup. In only a few short years, by at least 2025, over half of all families with children will be multi-cultural. Less than half will be native born non-Hispanic white. Within this multicultural marketplace, Hispanics will be the largest group, but Asians, African and Caribbean blacks, and others will make up significant shares. Though also beset by economic woes, this group will provide substantial opportunity, but only for marketers who can navigate diverse cultures, tastes, and languages.

The future of the U.S. is a challenging one for marketers and retailers of consumer products. Gaining share among population groups that most marketers do not reach today will require shifts in focus, tactics, and products. Successfully reaching new markets like multi-cultural families offers a new set of opportunities. The breakdown of the mass market and the mass media that once served it, combined with certain economic difficulties, will make for challenging new times ahead.

Doug Anderson, SVP, Research & Development, The Nielsen Company

SUMMARY: Bankruptcies, declining readership, falling ad dollars and the suburbanization of America have all contributed to the slow death of the great American newspaper. Hope for a resurgence of the printed newspaper seems like a pipe dream. However, with the Internet, there is an opportunity to reclaim immediate coverage of breaking stories. Can the technology that has so hurt them also come to the rescue of the big city newspaper?

Newspaper closings have become so commonplace in the first quarter of 2009 that it’s difficult even to compile a full list. The Rocky Mountain News closed entirely two months before its 150 year anniversary. The Seattle Post-Intelligencer and the Christian Science Monitor moved entirely online. Others, like the Detroit News and the Detroit Free Press, have begun new distribution models that do not offer home delivery four days of each week. And many others are already in bankruptcy or are sitting at the door, including the Los Angeles Times, the Chicago Tribune, the Baltimore Sun, the Minneapolis Star Tribune, the Philadelphia Inquirer and Philadelphia Daily News, and the San Francisco Chronicle.

For the larger conglomerates, the pattern is the same. When it declared bankruptcy at the end of 2008, the Tribune Company had assets of some $7.6 billion, but debts—most stemming from when the company was purchased through a leveraged buyout and taken private a year earlier—of around $13 billion. Star Tribune Holdings, the Journal Register Company, and Philadelphia Newspapers LLC have all struggled and failed to get out from under leveraged buyouts by individuals and venture capital consortiums and are in bankruptcy today.

In 1950, nearly every adult in the United States read a daily newspaper. By 1976, newspaper circulation was around 60 million, but spread across 73 million households. Prior to the latest round of newspaper closings, total circulation was down a few million from the 1976 level, but the household count of the U.S. had grown to over 118 million. Readership penetration has been below 50% for more than a decade and continues to fall.

Hope for a resurgence of the printed newspaper seems like a pipe dream. Readership is lowest for younger adults and increases with age. As these younger adults age, newspaper reading will soon fall to unsustainable levels. To make matters worse, the youngest age ranges are those for which readership levels fell the most from 2003 to 2008. Total daily newspaper audiences fell by 12% from 2003 to 2008, but readership levels in the 18–24 age range fell by over 20%. On the other end of the distribution, 62% of those over the age of 75 still read a daily newspaper.

Declines in audience have led to pressures on the advertising dollars that make newspaper publication possible (subscriptions and single copy prices cover only a fraction of the cost of production—about 18% of revenues on average, while advertising makes up the other 82%). After a couple of years of moderate growth, advertising dollars for national newspapers have fallen for two consecutive years and are currently below 2004 levels. Advertising revenues dropped by nearly 10% from 2007 to 2008 according to Nielsen.

Where have all the newspapers gone?

Besides the emergence of the Internet, probably the biggest shift in the newspaper business since 1950 has been in the form of ownership. In the 1950s, the vast majority of newspapers were local, family-owned businesses. Even the larger newspapers were privately held by giants of the industry like Hearst, McCormick, Pulitzer, and Knight, who have long since passed into legend.

When newspapers flourished and began to run with record profits, they attracted the attention of the IRS. New tax rules changed the way in which newspapers were valued for tax purposes. Many families had to sell in order to get out from under the new tax burdens and the era of the newspaper conglomerate was born, as smaller papers were snapped up into large groups like Gannett, Knight-Ridder, and the Tribune Company.

With public ownership, new pressures came from Wall Street, most notably the need to show strong and sustained profit growth—something the newspaper business had never been good at. Demands for growth led to round after round of cost cutting, particularly within the editorial staffs, which, arguably, led to a poorer quality product with less universal relevance, leading to more declines in readership, to further declines in ad revenues, and more cost cutting.

Advertising redefined

The marketplace in which newspapers compete has radically changed. The share of advertising revenues coming from classified advertising grew substantially from 1950 to 2000, from 18% to 40%. National advertisers—never a huge part of revenues—lowered their investment in newspapers. Consolidations and the closing of many of the large department store chains also forced revenues down. Walmart—which has filled some of the gap left by the decline of the large department store chains in the marketplace—has never been a particularly strong newspaper advertiser.

Unfortunately, the 1990s and 2000s proved to be exactly the wrong time for newspapers to increase their reliance on classified advertising. The three pillars of the classifieds—job, autos, and real estate—have been areas of tremendous growth on the Internet. Craigslist, Monster, and a long list of other Internet sites that have become household names that redefined the classified ad and stripped revenues from newspapers. Spending on coupons has continued to grow (up 17% from 2000 to 2005), but has not nearly been enough to offset the loss of classified advertising.

The suburbanization of America

Long-term demographic factors have also greatly contributed to the decline of newspapers in the U.S., perhaps none so much as the suburbanization of America that began after World War II. The largest and most powerful newspapers were the big city dailies. They had large staffs of reporters and editors all focused on what was going on in the city. As households moved from the cities to the suburbs, the editorial focus of the newspaper didn’t follow them. For example, the Philadelphia Inquirer was a city paper, but today has two-thirds of its readers in the suburbs. Most coverage is still concentrated in the city and the newspaper struggles to put enough feet on the ground to cover a far-ranging suburban sprawl with scores of municipalities (and many competing suburban newspapers).

The future of newspapers

The day of the printed newspaper may be almost gone. Readership levels among younger persons would have to more than double to provide enough audience to sustain the big papers, and that would require reversing a declining trend that has been ongoing for decades.

Newspapers have been described as delivering “What happened today that didn’t happen yesterday, dressed up and delivered tomorrow”. For many years, getting a summary of what happened yesterday today was good enough. Today, news is what happened ten minutes ago and is still going on. With the large scale adoption of radio in the middle of the 20th century, newspapers lost their claim to immediacy. With the Internet, though, they have the opportunity to reclaim immediate coverage of breaking stories. But can the technology that has so hurt them also come to the rescue of the big city newspaper?

Most large newspapers have extensive Internet websites providing much if not all of the content found in the printed editions. Many are free but some are experimenting with a pay service. Many sites are doing quite well, both in terms of readership and advertising revenues. The table below shows newspaper websites with unique audience levels above four million in March 2009. Advertising revenues for newspaper websites have been growing by over 30% per year for some papers in recent years, but they are still a small fraction of the revenues from the printed editions.

Mobile web access may ultimately save at least some newspapers. Amazon just released the Kindle DX, a larger format version of the popular Kindle which offers daily downloads of the entire printed edition of many newspapers. Others—including some of the newspaper groups themselves—are looking into building their own hardware and selling directly to readers. How it all shakes out is anyone’s guess, but for the first time in quite some time, there is at least some hope that the great American newspaper will have a life long after paper versions have disappeared.

Sources:

-30-:The Collapse of the Great American Newspaper, Charles Madigan Editor

Mediamark Research & Intelligence

The Nielsen Company: Nielsen Online, Nielsen Media Research

SUMMARY: Nearly 39% of U.S. households—some 44 million—are headed by a Baby Boomer. Nearly 77 million Americans fall into the cohort born between 1946 and 1964. In a couple of years, that generation will begin to reach the traditional retirement age. Given all that has happened in the economy in the last eighteen months, will they be able to afford to retire?

Some of the parents and almost all of the grandparents of the post World War II Baby Boom lived through the Great Depression. Many, if not most, Baby Boomers grew up with their stories of hard times. And while those stories were always in the back of their minds, most Baby Boomers came of age in a world so full of promise that the idea of hard times coming to their front door was simply not conceivable. Sure, the earliest Boomers struggled along with everyone else during the recession of the early 1970s, but they were young enough to recover, and the great wealth creation decades of the 1980s and 1990s gave them a sense of invincibility.

The worst possible time
Today, many Boomers are feeling far from invincible. The drop in the housing market has removed three trillion dollars in home equity from the pockets of Americans. On average, that is nearly $40,000 in lost equity for each U.S. homeowner. Since Boomers have the highest rates of home ownership as well as the highest home values, they have lost much more than the average. Likewise, the current economic downturn has taken $11 trillion dollars in stock market wealth away. That’s nearly $100,000 in lost assets for every household in the country. And since Boomers are much more likely to have their money tied up in stocks, they have suffered a disproportionately large share of the losses—for many, at the worst possible time.

Unemployment, traditionally the bane of younger and more downscale workers and not something that strongly impacts those at the peak of their careers, has over the second half of 2008 and into 2009 begun to hit the Baby Boom hard. The rate of increase of unemployment nearly doubled for those aged 45-54 in the second half of 2008 versus the first, and increased far faster for those over 55. In past years, most older and longer tenured workers who lost jobs from downsizing could rely on early retirement packages and other benefits from their former employers. Today, those packages are going away as companies seek to cut headcount without incurring substantial severance charges.

Time is not on their side
Assuming a retirement age of 66, the oldest Boomers have only three years left to recoup lost money they took decades to save. The collapsing stock and real estate markets of 2008 alone wiped out four years of gains in the net worth of Americans, and 2009 has taken more. The youngest cohorts of the Baby Boom may still have time to recover, assuming a substantial long-term upswing in the economy, which is by no means guaranteed, but for the oldest Boomers, time may have run out.

New economic difficulties
Even without this current economic downturn, the U.S. economy would be on the verge of some serious difficulties caused by the aging and retirement of the Baby Boom. The Baby Boom is still the largest generation of Americans and their removal from the labor force and the costs of paying for their support—particularly for healthcare—over the next several decades will place enormous stress on the U.S economy.

Starting now, and continuing for more than 25 years, the number of persons who reach the retirement age of 66 each year will substantially outnumber the number of persons who turn 19 and are entering the labor force. In fact, beginning in a couple of years, shrinking generation sizes will mean that the number of persons who reach the age of 19 is smaller each year than the year before. The number of 19 year olds will continue to shrink until at least 2019. During that period, millions of Baby Boomers will retire and leave the labor force, lowering economic productivity.

The well is drying up
The real burden of the Baby Boom on the economy will be in paying for pensions and healthcare. Projections from the Office of Management and Budget (OMB) show that Social Security will have a shortfall by 2017—only about six years into the retirement phase of the Boomers—with the majority still to come. The fund remains solvent for much longer though, all the way out to 2041, when the reserve trust fund runs out. At that point, with current standards of funding and payments, money coming into the Social Security system from payroll deductions will cover only about 70% of the cost of benefits.

Medicare and Medicaid, however, are much different stories. Because they are much younger programs, neither has as large a reserve fund as Social Security. And even though the cost of living has been going up steadily, the costs of healthcare have gone up much, much more. Medicare will require incremental sources of funding by 2019 when the Boomers have 12 more years to retire, and much longer to live.

The golden years?
As many as 60% of persons living beyond the age of 65 will need some form of long-term care, either at home, in a nursing home, or in an assisted living facility. Costs for a year of care average $57,000 today (much higher in metro areas), and are increasing faster than the rate of inflation, and are expected to be around $100,000 in the middle of the Baby Boom retirement years. Since few Boomers have long-term care insurance—and Medicaid coverage is only for the very poor—paying for long-term care will quickly deplete the savings of many households.

Empty nest syndrome delayed
Nearly two-thirds of the very youngest Boomers still have children under the age of 24 living at home. And nearly 20% will still have children under the age of 25 for at least ten more years. And while the children of the Baby Boom will be the best educated generation of Americans ever, getting them out on their own is taking longer—the age of 24 has become the new 18. Expect to see more multi-generational households as the parents of Boomers live longer and need more support. Many Boomers may have full households at the time when earlier generations were living on their own.

On the other hand, nearly one-quarter of all Boomer households today are single adults living alone. This grows to nearly one-third for the oldest Boomers, and will increase rapidly as the generation ages. The share of those singles who are women will also grow rapidly as the longevity advantage that women have over men plays out. Over the next decade, two new types of Boomer households will emerge, elderly Boomers caring for their parents, and single Boomers—predominantly female in the older ages—living alone. New household structures may also emerge with more unrelated individuals living together, as Boomers band together to share costs and company.

Financial assets of the Baby Boom
In terms of income, the Baby Boom is at the top of the chart. Boomers are in their peak earning years with a median income of nearly $64,000—much higher than either the generations who came before (median of $32,000) or those who followed (median of $50,000). The Baby Boom is above average for all income ranges in excess of $65,000 and peaks at the very top.

Click to image to enlarge.

However, the Baby Boomers have not been particularly good savers. The table below shows the average market value of all financial assets excluding real estate based on the 2006 Consumer Expenditure Survey (i.e., before the recent economic downturn).

While older Boomers have certainly saved the most, they also have a higher share of their assets in securities—over 70% for the two groups closest to retirement versus around 60% for those farther away—and would have been hit by the current stock market woes more heavily.  The younger Boomers are saving more, averaging over $7,000 per year going into insurance and pensions versus only $4,200 for those closest to retirement.

Real estate makes up a disproportionate share of the net worth of most households, but years of moving for jobs and trading up in competitive housing markets as well as taking equity out for home improvements or college funds have placed the Boomers in the position of still paying for their homes at ages when their parents were long done. More Boomers rent (24%) than own their home free and clear (17%). Those who own their home outright increase with age, but around 45% of households with a head aged 63 or 64 still owe at least something on the mortgage for their primary residence.

Can the Baby Boom afford to retire?

While some can, the majority will struggle and have to make substantial compromises to the plans they once had. Some smaller, but still significant share, will simply have to continue to work in whatever jobs they can find for as long as they can, or else take very large cuts to their standard of living. Those fortunate enough to have sufficient insurance coverage will be able to weather most of the healthcare issues they may face, while those without coverage will see their nest eggs quickly diminish. Many will end up relying on Medicaid and other government programs.

Over the next several decades, many of the service jobs once held by teens and younger workers will be held by older ones. As the number of younger people continues to fall, there will be many older workers ready to take their places. Marketers will be required to rethink their portfolios to ensure they have products able to meet the needs of an ever growing numbers of older Americans. The key question that only time will answer is this: Even if marketers can restructure portfolios to meet the needs of the changing U.S. population, will there be enough consumers who can afford what there is to sell?

Sources:

Alzheimer’s Association—2009 Alzheimer’s Disease Facts and Figures
Bureau of Labor Statistics—2006 Consumer Expenditure Survey
Census Bureau—2007 American Community Survey
The Nielsen Company
The Washington Post—Stocks soar, but dismal signs remain (March 3, 2009)
MSNBC—Boomers face stark choices in bleak economy (March 11, 2009)