Pension plan sponsors pay too much attention to predictions and not enough to demographic data, according to Darrell Bricker, chief executive officer of Ipsos Public Affairs and a senior fellow at the Munk School of Global Affairs and Policy.
“Demographics . . . is like a glacier,” he said during a session at the Canadian Investment Review‘s 2021 Investment Innovation Conference. “You can see it coming from a long way away and it transforms everything that it contacts. We are over-emphasizing the wildfire that is COVID-19, but the glacier is continuing to grind onward.”
Read: Older Canadians coping better than younger demographics in pandemic: study
While Bricker expects the coronavirus pandemic to cause long-term challenges, he doesn’t believe anyone has enough information to predict these changes with any degree of accuracy. “Late night comics, pop psychologists and sociological experts all thought that, with people stuck at home, we were going to have lots of kids. They thought that, when people ran out of things to read or watch, couples would do what they do best.”
However, instead of a pandemic baby boom, there was a baby bust. Recent U.S. figures showed 300,000 fewer people were born in 2020 than had been predicted. Predictions about deaths have also fuelled Bricker’s skepticism. “[The coronavirus] has killed five million people. That number was supposed to be 200 million.”
He has more faith in demographic data because it’s drawn from reliable statistics based on human decisions that have already been made. He also highlighted the importance of looking at past behaviour and human decisions to understand future political and economic problems. “The decisions that I’m going to talk about today have already been made: your parents made them; you’ve already made them, for the most part; and your kids are now making them today. . . . In a way, they’re pretty much locked in. That’s what makes them projectable.”
Read: Shifting demographics key catalyst to changing pension plan design
One of the most incontrovertible conclusions Bricker draws from demographic data is that the human population is likely to peak before the middle of the 21st century. It will then suddenly decline. “In the 2040s, when every single baby boomer will be in the last decade of their life, we are going to experience a mass extinction event. Why? Because that’s how long human beings live.”
Beyond aging, humanity will also have to wrestle with issues related to fertility and urbanization, he said. “The biggest migration in human history is happening today. It has been happening since 1960, when people began moving from the countryside to the city. This is happening everywhere. . . . The [United Nations] tells us that, by 2050, 68 per cent of the population of the world is going to live in an urban environment. Back in 1960, it was only 34 per cent. . . . Today, it’s 57 per cent.”
In Canada, which saw its urban population outsize its rural population in the 1920s, there’s also a considerable flow of people from smaller urban centres to metropolises. Today, about 40 per cent of the country’s population lives in or around its four largest cities — Vancouver, Calgary, Toronto and Montreal.
Read: CPPIB looks to cash in on ‘disruption’ and shifts in technology, demographics
“When I’m thinking about investments, I think about urban infrastructure. How are we going to accommodate all these people? How are we going to deal with all of this? Because this trend isn’t reversing. . . . Ninety per cent of Canada’s population growth over the space of the last 20 years has been in car-commuting suburbs, which is why we shouldn’t be getting excited about bike lanes. . . . We’ve got to come up with some sort of solution. It’s probably rail or something else.”
The issues caused by suburban expansion may be exacerbated by declining fertility rates around the world. “Back in 1960, the global fertility rate was 5.2. In Canada, it peaked in 1959, when the average person had four children. Today, it’s down to 2.4 around the world, according to the U.N.’s numbers. . . . Canada’s fertility rate last year was 1.4, the lowest in our history.”
With the population of suburban areas expanding, Bricker is concerned about the usefulness of large, single-family homes. In Canada, more homes are occupied by individuals than couples with children, he noted, adding one reason is that women tend to outlive their husbands.
“Who thinks about housing for older women? Who thinks about transportation for older women? There’s more and more and more of them every day. And old folks are hoarders. They’re savers. . . . We completely ignore them and they have all the money and all the best real estate.”
Read more coverage of the 2021 Investment Innovation Conference.