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Demographic Tumult is Creating a Sustainable Economy

Bill Roth | Thursday May 29th, 2014 | 0 Comments

6235421713_a6a6d948e5_zA demographic tumult is pushing America toward a sustainable economy. This demographic tumult is the nexus of an aging boomer generation, the emergence of the millennial generation as America’s economic powerhouse and the growing role of women. Each of these demographic groups has their own sustainability definition and focus. But with $10 trillion of combined annual buying power, these three demographic groups are collectively reshaping the American economy around sustainable best practices.

Demographic tumult

Who we are as a nation is undergoing tumultuous change. The boomer generation is downsizing past its previous role as the core of America’s economy. For example, because this generation overwhelmingly failed to save during their peak earning years, they must remain employed in often lower level job categories to maintain income levels beyond their limited social security payments. To make the most of their diminished earning potential, they are downsizing their homes, cars and expenditures.

The millennial generation is on the cusp of picking up the role once assumed by the boomer generation as one of the dominant economic forces in the world. In 2017, they will replace the boomer generation in terms of U.S. annual buying power. But unlike the boomer generation this generation is delaying the start of their families. In 1970 approximately 40 percent of American families were married couples with school-age children. Today that number is under 20 percent.

Women continue to grow in economic power. They influence 80 percent of household budgets. They have an estimated $8 trillion of annual buying power. Women are the majority in attendance and graduation from college. But women continue to confront economic and societal pressures. Approximately 40 percent of child births are to unmarried women. More than a quarter of working women who are unmarried with children have incomes below the poverty level. Women still make less money than men for comparable jobs. They continue to be underrepresented in upper management and in the boardroom.

How demographic tumult is creating a sustainable economy

America’s demographic tumult is driving our economy toward sustainability. For the downsizing boomer generation, the word “reduce” will drive their economic decisions for the rest of their lives. Their downsizing will reduce their outsized energy and emissions footprints. They will increasingly be focused on downsizing their consumption of industrial foods to extend their lives and reduce their medical cost exposure. “Supersize me” will lose its meaning as a marketing best practice for the boomer generation and our economy.

Reversing the actions of their boomer parents, the millennial generation has adopted America’s cities as their own. They seek to live in urban environments that offer diverse experiences plus high walkability and biking scores. Their college debts and the reality that they started their careers during the Great Recession has pushed them into renting or buying smaller housing units. This is a sharp change from the large environmental footprints of the boomer generation’s suburban homes. By aligning value with values, this generation has rebranded buying used goods as “repurposing” and cool. They are more likely to buy the next generation of smartphone or tablet than a car. And if they buy a car, fuel efficiency will be a major attribute in the vehicle they purchase. For the millennial generation sustainability is their future.

Women, especially moms, are driving our economy toward sustainable wellness solutions. They demand that these solutions fit into their constrained budgets. Their quest is to find goods and services that “cost less, mean more.” From food to cosmetics to fashion, women are using their online social networks to identify products that are affordable, promote the wellness of their loved ones and align with their values.

Business winners and losers

The demographic tumult that is pushing our economy toward sustainable solutions is already determining business winners and losers. The Coca Cola Co. confronts declining U.S. soda sales as moms and the millennial generation question the health impacts of drinking soda. Reduced soda sales can mean reduced stress on water systems facing increased drought due to climate change since it takes four units of water to produce one unit of soda. It can also mean a reduced waste stream of plastic bottles. The Coca-Cola Co. is responding in two ways. First they are investing hundreds of millions of dollars in renewed advertising to restore soda sales. More likely to succeed with moms and the millennial generation is their acquisition of potentially healthier beverage alternatives like Odwalla juices and Dasani water.

McDonald’s formula of cheap fast food now confronts stagnant store sales from the growing health awareness of boomers, millennials and women. The boomer generation upon which McDonalds designed their business model and that made the Big Mac a national food staple is now attempting to reduce their weight and consumption of salts, sugars and fats. The millennial generation’s commitment to eating healthy convenience foods rather than fast food is so strong that McDonald’s is not even in this generation’s list of top 10 restaurants. The concerns of moms over how McDonald’s food can impact the wellness of their loved ones are pushing them to search for alternatives to Happy Meals. In response McDonald’s has launched a major initiative around five sustainability goals for making their food healthier.

Businesses that can align with America’s demographic tumult are winning customers and sales. Chipotle is the most valued restaurant stock in America because it has won the millennial generation customer by offering tasty, sustainably-sourced food at competitive prices. The sale of rooftop solar in states that allow net metering is setting revenue growth records by selling to boomer generation homeowners looking to reduce their electric bills and lock-in attractive electricity prices for 20-plus years. Unilever, recognized as the world’s most sustainable brand, is growing sales of Dove soap (defined by Unilever as a ‘beauty bar’) through innovative YouTube videos like “ Real Beauty Sketches” that emotionally align with women values. Gas guzzling V-8’s, the boomer generation’s definition of cool, have fallen off the market share cliff. The auto industry is growing sales selling more fuel efficient cars that mitigate pump pain while still delivering fun-to-drive performance.

Demographic economics and climate change

Micro-economics could be considered a dismal science because it has a pretty pessimistic view of people. Micro-economics assumes people will make decisions around short run optimization. For example, they will buy value meals because they are cheap, fast and designed to be tasty through high concentrations of sugar, salt and fat. Only when years of short term decision-making creates long term costs like obesity and diabetes will consumers reevaluate their decision making. This type of American short run optimization decision-making has created the unsustainable economy we now face.

But demographic tumult is driving America toward a sustainable economy. The days of the boomer generation’s “Supersize me” consumption with its world-leading levels of emissions are coming to their unsustainable end. We still face their long term costs in the form of higher medical costs from a diet of fast food and sodas. We still face their long term costs in the form of higher commodity prices tied to the accelerated consumption of scare resources like water and oil. We still face their long term costs from climate change created by a boomer generation that viewed greenhouse gases as a political issue rather than a cost that is increasingly disrupting our economy, health and safety.

A sustainable economy is emerging as the boomer generation downsizes its footprint to sustain themselves. Rising to replace the boomer generation, the millennial generation views sustainability as their future. They have adopted reduce, reuse and repurpose as best practices for ensuring their economic success. They are driving adoption of the Internet of Things (IOT) that optimizes resource use. Moms are accelerating the shift toward sustainability from their demand for products that cost less and mean more in terms of the wellness of their loved ones. A sustainable economy is emerging at our cash registers, utility meters and fuel pumps. It being created from a demographic tumult that is reshaping America and our economy around sustainable best practices.

Image credit: Flickr/oregondot

Bill Roth is an economist and the Founder of Earth 2017. He coaches business owners and leaders on proven best practices in pricing, marketing and operations that make money and create a positive difference. His book, The Secret Green Sauce, profiles business case studies of pioneering best practices that are proven to win customers and grow product revenues. Follow him on Twitter: @earth2017


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