After WWII, the boom in childbirths created lasting effects that the US is starting to realize. Welcome to the price of the Baby Boomers. For each trader out there, we wanted to highlight the Healthcare Industry.
First we provide a high-level overview; then examine where a trader may find opportunity in an industry that services the aging, but is hardly aging itself.
So What is it?
The healthcare industry has always been one of the most controversial sectors of our economy and we still lack a sustainable system. The healthcare industry will only become larger. This means they will become increasingly important in shaping, supporting, or potentially devastating our country’s economy .
The baby boomer generation is categorized by people born between 1946 and 1964. They are the primary reason for this increase in the aging population. This population increase helped support jobs nationwide for the past several decades. They were the core of the workforce.
Now they’re entering their retirement ages. The economy is paying the price and a healthcare trader could be poised to reap huge returns. With Baby Boomers leaving their hard-working jobs for the comforts of retirement, our economy is already undergoing drastic change.
Changing Life Expectancies
Baby Boomers are living longer than previous generations. According to the Census Bureau, male life expectancy is supposed to grow from 77 years to 82 by 2050. Female life expectancy is supposed to grow from 82 years to 86 in the same period.
This aging population and increasing proportion of retirees will have a transformative effect on industries nationwide. The most affected industries include healthcare, insurance, and medical-technology.
But by how much, you ask?
Trader & Industry Numbers, Please
More elderly persons are in need of healthcare today than ever before. The Bureau of Labor Statistics, by 2026, the group of workers aged 55 years and older will grow to 24.8%. This is up from 22.4% in 2016 and more than double the 11.9% in 1996.
With a historic number of people transitioning into retirement, we face a double-edged sword. One side: we lose industry-leader healthcare workers to retirement. Simultaneously, we face rising demand for professions that have seen a decline such as nurses & physical nursing homes. To provide perspective, Alliance for Aging Research estimates that 33,000 geriatricians will be needed by 2030. Currently, we have only 8,800 certified practitioners.
We are supposed to add 12 million total jobs over the next decade. The healthcare industry accounting for one-third of that number.
According to the Bureau of Labor Statistics, healthcare jobs are supposed to increase by 19% by 2026. Specifically, healthcare support occupations are expected to grow by 23.6% while healthcare practitioner jobs are expected to grow by 15.3%. In a country so focused on creating more jobs, look no further than the healthcare industry which seems poised for an imminent boom in the coming years.
So How Will This Affect Traders?
The aging population is forcing many industries to adapt or fully change in order to combat the increase in demand for healthcare and geriatric services. One major change has come in the form of technological advancements.
With the ratio of doctors to patients tipping heavily towards the latter, there is an increased necessity for more remote doctor-patient care systems. The current generation entering into retirement age will be the first forced to adapt to more advanced tele-medical processes and devices. From 2014 to 2015, home health monitoring systems increased by more than 50%!
But how exactly will our market be affected? Let’s take a deeper look as we strive towards achieving financial fluency.
So How will it affect our economy?
The increase in the aging population will have far-reaching impacts on our economy. The government will increase spending on healthcare and pensions. The tax revenue decrease from a shrinking workforce causes concern for any developed country. This is especially true in the US already laden with rising debt concerns. Currently, US healthcare expenditure is marginally over 20% of GDP. Pension spending is hovering around 4%.
Another issue with an aging population is an increase in the dependency ratio. This ratio dives the number of dependents aged 0-14 and 65 and over by the total population of working-class citizens. As the aging population increases, the dependency ratio will continue to increase. More dependents overwhelm the shrinking population of working-class citizens.
So How can the government combat the aging population?
The government has several options it is currently weighing and every healthcare trader is watching. The simplest would be to raise the retirement age. The retirement age to enact Social Security increased from 65 to 67 for those born after 1960. Trump is discussing raising it to 70. By linking retirement age to life expectancy, we directly adapt to the increase in medical services. This allows us to provide better healthcare without tipping the scales of our GDP too much in favor of pensions.
Trump has discussed an increase in the importance of the private sector. He believes we can increase the importance of the private sector in providing pensions and other healthcare related services. This inevitably leads to further inequality amongst individuals’ need healthcare coverage.
THE BOTTOM LINE:
Regardless of our government’s plan, the truth is obvious. We need to act. And as a trader, that means looking at the inevitable.
The aging population continues to grow. The dependency ratio continues to tip in favor of the dependents. The ratio of healthcare and pension funds to total GDP is increasing dramatically. The baby boomer group is getting older. Our workforce is slowly handing in their working papers for TV remotes and retirement’s pleasures.
The healthcare industry will change drastically soon. Greater technological advancements are coming to handle the geriatrician shortage. Benefits programs and the entire structure of Social Security starting with retirement age is being reevaluated. This is in an attempt to combat the aging population, which is only worsening with time.
Meanwhile, healthcare stocks are on the rise and every trader should take note.
In case you missed it, check out our recent post about the G20 and if global leaders (and investors) are chasing an elusive dream
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