[2016-10] The Current Consumption Patterns of the Elderly and Their Implications

Consumption Exceeding Pension Measures Growth Trend Participating
Research Department

  With the recent low growth trend lasting, the elderly are actively participating in job-seeking and consumption activities. Against this backdrop, the influence of the elderly on the national economy is increasing. This paper looks into the consumption patterns of the elderly from multiple perspectives and suggests relevant policy measures.  


  For the past five years, aggregate consumption growth for people aged 60 or older (based on the household head's age), stood at an annual average of 7.1%, far exceeding 2.3% for young and middle-aged populations. This increase in consumption by the elderly is attributable to a rise in the employment rate and an increase in the number of public pension recipients. However, the increase in precautionary savings in line with longer life expectancies, low interest rates and the weakening of the wealth effect, as well as the insufficient securitization of assets held by the elderly have worked as factors limiting consumption.


  Consumption by the elderly is likely to continue to show a high growth trend going forward. Annual aggregate consumption growth by the elderly is expected to average around the mid-8% range during 2016~20. With growth in the number of households headed by the elderly gathering pace due to the baby boomer generation joining the elderly population, income per household will maintain a relatively high growth trend, boosted by increased economic activities and a larger number of private pension recipients. In addition, the trend of decline in the propensity to consume, which has constrained consumption so far, is likely to moderate gradually, thanks to growth in pension incomes and a slower increase in life expectancies. Accordingly, the share of consumption by the elderly in total consumption is expected to rise from 18.8% in 2015 to around 24% in 2020, with their contribution to consumption growth increasing from 38.5% during 2011~2015 to the 60% range during 2016~2020.


  In response to these trends, overall conditions should be improved to establish the elderly as the center of the national economy. It is necessary to expand job training and placement services for the elderly and to promote more active use of reverse mortgage loans to allow the elderly to make up for their weak income security. In addition, concerns about the receipt of pensions should be addressed by strengthening the mid- to long-term financial soundness and transparency of various pensions for old age, including the National Pension and private pensions. In addition, infrastructure that supports the various consumption activities of the elderly should be expanded, through for instance the development of elderly-friendly industries.


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