8 minute read
THE SILVER ECONOMY
AN OPPORTUNITY FOR BAJA CALIFORNIA?
BY DR. FLAVIO OLIVIERI
Advertisement
According to the Interamerican Development Bank, the Silver Economy is the segment of the global economy linked to the changing demographics caused by aging populations and focuses on providing the services and products demanded by the elderly. The consumers of the “silver economy” are all people aged 50 or more with unique needs and wants related to their age as they grow older. The opportunity of this economic segment stands on the capacity of regions and territories to offer the products and services these consumers demand generating trust and safety for them.
The proportion of elderly in populations is growing due to the progress in medicine and quality of life in conjunction with a decreasing birth rate. At the beginning of the 90s life expectancy worldwide was 65 years on average, and in 2020 it reached 73 years according to the World Bank. Today in Europe life expectancy is 80 years and it is expected that by 2025 the proportion of the population 50 years or older will be over 44%. In 2020, according to a study by Georgetown University, consumer spending of people over 60 years exceeded 1.5 billion dollars.
In the United States life expectancy is 77 years and the proportion of the population 65 years or older will be 22% by 2030, when the youngest of the Baby Boomers will reach 65, a generation estimated at 73 million people. By 2034 the proportion of older adults will be greater than that of children for the first time in US history. In California, by 2025 the 65 and older population will represent 17%, with an estimated of 7 million, the same population that will increase to 10 million by 2030.
The diversity of products and services that this population segment demands is very broad and changing as people get older. From recreational and entertainment activities for those in the younger brackets including specialized housing and vacation centers such as the 55+ Senior Living complexes. Those in the higher age brackets require more specialized and integrated services such as Assisted Living and Nursing care. This category of consumers is where the new opportunity for Baja California is emerging, a region already preferred by many American retirees.
According to the National Center for Health Statistics (NCHS) 22% of the population 65 and older reported having difficulties with daily life functions. Mobility and hearing being the most common challenges. With aging difficulties increasing, according to the same NCHS studies, 46% of people over 85 years reported impediments with daily life functions. In 2015 7.5% of people over 65 were detected with some level of dementia, this population increases to 24% by 85 years of age. The cost of health services for persons suffering from Alzheimer’s is expected to reach 1 billion dollars by 2050.
An estimated 5 million family caregivers in California support their parents or spouses that require assistance in their own homes. Of this population, approximately 1.7 million take care of a person with Alzheimer or dementia, normally with little training or professional support. This unpaid work is estimated to reach over 4 billion hours and represents an annual cost of over $63 billion. Paid caregivers are essential as they provide care in private homes, collective residences, and other centers.
By 2026 in California caregivers will be the single occupation with the largest demand, with an estimated shortage of 3.2 million caregivers. This deficit of workers threatens significant cost increases and quality shortcomings in services for the older population of the state, which is estimated to double in the next 10 years. Considering cost of living in California, with average monthly rents of $1,600 for a single bedroom apartment and that at least a fourth of people 65 or older depend on their Social Security income at an average of $1,500 monthly, many will not have the income to pay for caregiving or other personal assistance services.
By 2030 the number of older adults with self-care deficiencies will increase by 88%, generating an increase of 54% in the demand of caregiving services. In 2020 there were 800,000 jobs in Assisted Living centers in California, which will increase to 1.2 million by 20230. The deficit of workers in assistance services of older adults will increase even more by 2050, when 50% of the state’s population will have 50 years or more, a threefold increase in the age dependency ratio, as a gradual decrease in younger populations entering the workforce and an increasing aging population, the dependency ratio will increase from 35% in 2030 to 48% by 2050.
These demographic pressures have a significant impact on the cost of assistance services for older adults. Since 2004 the costs of Assisted Living (AL) have increased annually, with an added cost increase in 2021 caused by measures taken to manage COVID-19 impacts. The main factor impacting costs is the increase in demand. Between 2021 and until 2030, more than 10,000 Baby Boomers reach 56 years of age daily, and 7 of every 10 is expected to require assistance services at some point. The average cost of elder care in their own home increased from $45,000 annually on average in 2015, to more than $62,000 in 2021. The average cost of Assisted Living centers in San Diego, California in 2021 was $5,475 monthly, and it is estimated to increase over $7,400 by 2031, according to the firm Genworth.
The demand of assistance services for older adults in California has driven higher demand for Residential Care Facilities for the Elderly (RCFEs). These centers provide assistance with activities of daily life in a residential environment 24 hours a day, not including continuous nursing care services. Some of these centers provide specialized services for residents with dementia or Alzheimer’s. By 2030 the number of residents in RCFEs in the United States is expected to reach 2.3 million.
According to the Department of Social Services (DSS) of the State of California, currently 7,400 RCFEs are licensed to operate and provide residential care services to over 185,000 residents, approximately 205 of the total population of 85 years or more. In California 17% of RCFEs are licensed for 16 residents or more, and represent about 79% of total residents. 83% are licensed for 15 residents or less and represent the remaining 21% of residents. According to DSS, since 2007 RCFEs have added capacity for only 20,000 residents. The number of RCFEs licensed for 15 or less has decreased about 12%, in contrast the RCFEs licensed for 16 or more has increased by 7%. Out of the total RCFEs only 600 belong to the California Assisted Living Association (CALA), but represent about 30% of the total residents capacity. This association works to improve quality and safety for consumers of assistance services for older adults.
Based on the facts presented previously we can conclude that the Silver Economy does represent an opportunity for Baja California due to its geographic proximity to a growing market with insufficient competitive supply. This opportunity is conditioned on the ability of that region to create the proper conditions that generate trust, certainty and safety for older adults and their families. We have determined that demand for assistance services for an aging population will continue to grow rapidly, outpacing the capacity of supply. We also determined that the State of California will suffer a crisis of caregiver workers prompting an escalation of costs and inhibiting investment. We can see how RCFEs continue to increase capacity, but not at the rate that is required, where the population of 85 and older will double by 2030 and will reach 2.5 million by 2050, compared to only 600,000 in 2010. In contrast, growth in RCFEs capacity was only 7% in the last 15 years, leaving a significant demand unsatisfied, increasing even more the cost of services, a service that is usually paid out of pocket by families of the residents.
NOW THE QUESTION TO ANSWER IS:
In part 2 of this article, we will explore some of the strategies that are in play and how some companies have achieved the levels of quality required at much more affordable rates.
