Florian Kohlbacher, PhD

Florian Kohlbacher, PhD

Business leaders in developed countries have their eyes on the “silver market”—members of the Baby Boom generation now entering retirement—because many have accumulated significant wealth and will soon have a lot of time on their hands. Most companies pitch their silver market strategies to the segment of the elderly population who are rich and young at heart, generally neglecting those who are poor and weak of limb. That’s a mistake, because in the silver market of the future, those who are old, poor, and sick will likely be the majority.

The United States, according to a 2011 survey of American demographic trends by the Congressional Research Service, “has been in the midst of a profound demographic change: rapid population aging.” By 2050, the research service reports, one in five Americans will be 65 or older. Also by 2050, the country’s most populous age group, accounting for 7.4 percent of the population, will be “the oldest-old”: age 80 and above. Moreover, the report says, the numbers of older people in poor health “are almost certain to rise.”

Japan is the world’s most rapidly graying nation. It’s good place to look for a preview of what’s to come in the United States and other countries, and what these changes mean for businesses.

The age at which physical decay often starts to accelerate dramatically is 75. In Japan, those who are 75 and older already make up more than 10 percent of the population—a share that is increasing. Social stratification—kakusa shakai—creates economic disparities that put this age group at a unique disadvantage. As a result, although a third of the Japanese population is employed, a high ratio of nonregular employees—those without permanent, full-time jobs—do not or cannot pay for health insurance or pensions.

Although Japan’s Baby Boom generation are famously affluent consumers who live and work on the bright side of the silver market, economic inequality and poverty are increasing among the elderly. In an article for the journal Japan Close-up a few years ago, Andrea Weihrauch and I attribute the change to “the effect of the aging of society itself” as Japan “struggles to cope with the exploding costs of its aging population and tries to cut back on its safety net of universal health care, pensions, and welfare benefits for seniors.” The result is a demographic time bomb that ticks louder every day.

In Japan, as in the United States and other countries (developing as well as developed), businesses must prepare today for the realities of the silver market of tomorrow, in order to leverage the looming demographic crisis as an opportunity.

Social responsibility is economic wisdom

Do corporations have a social responsibility to provide transgenerational and age-friendly products and services to support the daily lives of older people? Against the backdrop of these demographic trends, the question takes on new urgency. Supporting seniors in their everyday lives and enabling them to grow old in a humane way are not simply matters of corporate philanthropy. Given the right business model, socially and ethically responsible action can also yield economically responsible profits, not to mention positive public relations.

The late management guru C.K. Prahalad has shown how this works for markets in developing countries in his seminal book, The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits. The title refers to consumers and potential entrepreneurs at the bottom of the income and wealth pyramid. This concept can be applied to the silver market of the future, in which those at the top of the age pyramid will be at the bottom of the income/wealth pyramid.

The same economies of scale that Prahalad says can be achieved by marketing to the large, poor populations of developing countries can be achieved by marketing to large, poor, elderly populations everywhere. Products with adapted functionalities, foods packaged in smaller servings, and packages or products specifically addressing the needs and means of poor, elderly people are just some examples. Population size ensures that profits can be gained even from sales with narrow margins to poor, elderly consumers, because the group’s combined total fortune is substantial—and growing. Most important, elderly consumers will benefit, as their standard of living, quality of life, and subjective well-being improve.


Florian Kohlbacher, PhD
Head of the Business & Economics Section
German Institute for Japanese Studies (DIJ), Tokyo
Research Fellow
Sloan Center on Aging & Work, Boston College
Email: kohlbacher@dijtokyo.org