Why we can’t make the old spend enough to save the UK economy

If you haven’t watched our video interview with demographics expert Paul Hodges yet, you probably should. That’s partly because it’s very interesting, and partly because everyone else has and the conversation about the effect of demographics on economies is one I think you will want to be a part of.

After our interview, Paul sent me the graph below to illustrate some of his points.

Ageing populations driving chart

It shows just how economic activity falls off as people age: as you can see in both the US and in Germany, the number of miles driven per person falls off pretty sharply from the mid-40s on.

The below chart shows the overall effect of this in an ageing population: you can see that the total number of miles driven in the US has been falling since 2004. And that it isn’t just about the oil price: the dips don’t seem to lead to more miles being driven (although it will of course be interesting to see the data after the recent falls in the oil price).

US vehicle miles driven chart

This week, Paul has looked at something different. You can read his thoughts here, but what he has done is to use Office for National Statistics data to point out that the majority of households in the UK are now headed by someone over 50 (14.6 million versus 12.3 million). That’s a trend clearly set to continue in the UK (since 2000, the number of households headed by someone over 75 has risen by a quarter!).

He goes on to note that households headed by the over 50s spend on average around £24,000 a year, while those headed by someone under 50 spend more like £30,000. The result is that the total spend of the larger number of households in the older age group was slightly less than that of those in the younger in 2013.

There are environments in which you wouldn’t need to see this as a problem. But if you live in – or feel yourself to be responsible for kick-starting – a country with a debt problem, an ageing population profile, and a dependence on consumption for two thirds of GDP, it is a very obvious problem.