Demographics aren't sexy.

Demographics will drive new business processes (not technology)!

As a founding partner in a cutting edge technology consultancy, I should NOT start out an editorial with a title that questions the primacy of all things technical. However, it is easy to see that technology is sexy and demographics are not.

But, truthiness according to Stephen Colbert suggests most of us will quietly admit that demographics are becoming more important now. The lucky thing about my opening statement is that amazing numbers and very bright commentators can back me up.

My favorite author Malcolm Gladwell wrote a long piece for the New Yorker that described a term, dependency ratios, which I believe defines the primary driver of business process innovation for the rest of my life.

This relation between the number of people who aren't of working age and the number of people who are is captured in the dependency ratio.



The following seems to be the most relevant excerpt.

" In Ireland during the sixties, when contraception was illegal, there were ten people who were too old or too young to work for every fourteen people in a position to earn a paycheck. That meant that the country was spending a large percentage of its resources on caring for the young and the old. Last year, Ireland's dependency ratio hit an all-time low: for every ten dependents, it had twenty-two people of working age. That change coincides precisely with the country's extraordinary economic surge.
Demographers estimate that declines in dependency ratios are responsible for about a third of the East Asian economic miracle of the postwar era; this is a part of the world that, in the course of twenty-five years, saw its dependency ratio decline thirty-five per cent. Dependency ratios may also help answer the much-debated question of whether India or China has a brighter economic future. Right now, China is in the midst of what Joseph Chamie, the former director of the United Nations' population division, calls the "sweet spot." In the nineteen-sixties, China brought down its birth rate dramatically; those children are now grown up and in the workforce, and there is no similarly sized class of dependents behind them. India, on the other hand, reduced its birth rate much more slowly and has yet to hit the sweet spot. Its best years are ahead.

The logic of dependency ratios, of course, works equally powerfully in reverse. If your economy benefits by having a big bulge of working-age people, then your economy will have a harder time of it when that bulge generation retires, and there are relatively few workers to take their place. For China, the next few decades will be more difficult. "China will peak with a 1-to-2.6 dependency ratio between 2010 and 2015," Bloom says.
"But then it's back to a little over 1-to-1.5 by 2050. That's a pretty dramatic change. Thirty per cent of the Chinese population will be over sixty by 2050. That's four hundred and thirty-two million people." Demographers sometimes say that China is in a race to get rich before it gets old.
Economists have long paid attention to population growth, making the argument that the number of people in a country is either a good thing (spurring innovation) or a bad thing (depleting scarce resources). But an analysis of dependency ratios tells us that what's critical is not just the growth of a population but its structure. "The introduction of demographics has reduced the need for the argument that there was something exceptional about East Asia or idiosyncratic to Africa," Bloom and Canning write, in their study of the Irish economic miracle. "Once age-structure dynamics are introduced into an economic growth model, these regions are much closer to obeying common principles of economic growth."

That's enough with the academic economic speak. Bottomline, as I looked around my Boston College 20th reunion party last weekend, it is obvious that we are getting old and there are plenty of older folks in the workforce ahead of us. This fact is true in all of the "rich" countries in the world. Thanks to advances in healthcare few of us actually drop dead anymore but we all tend to slowly rust away over many years.

So, my point, there is a huge business requirement to deal with this dependency ratio at so many levels. Never before in the history of the world has demographic change at such a massive level been seen. Given the hugely discussed wave of baby boom retirements this requirement to improve business processes is hitting the US over the next decade. It is estimated there will be a net loss of 30 million workers in the US alone.

To bring the challenge down to a granular level,by the time every 6 year old in the US gets to be a vital member of the work force they will need to become 100% more productive than every 40 year old currently in the workforce.

How we go about changing business processes to deal with this challenge becomes a very interesting question. The cool thing is that technically most of the pieces of the solutions including light weight programming methods,customizable communications tools, and Web 2.0 perspectives, are already available to us. We just need to be creative in how we put those pieces together. Innovation that solves the challenges presented by our rapidly evolving dependency ratios will be in high demand and maybe even considered sexy.