Individual consumption and the aging population : a study of Nova Scotia, Canada

Abstract

It is difficult to anticipate future consumption trends for large, diverse groups, but the preferences of an individual change predictably as a person ages. The preferences of youth are different from those of the elderly, but young consumers today have spending habits that are very similar to young people from generations ago. For this reason, a better understanding of aggregate consumption is gained from studying anticipated demographic trends. The population of younger Nova Scotians is expected to decrease over the next two decades, but the number of retirement aged Nova Scotians is expected to rise, which will increase the average age more dramatically than in other parts of Canada. Therefore, the pronounced aging demographic provides a more predictable consumer base for businesses in this province. This paper will examine the behaviour of an aging individual from an economic perspective. The preferences of an aging population will be discussed by comparing budget allocation trends of Canadian consumers. Because the Baby Boomers, the largest generational cohort in Canada, are at the end of their careers, this paper will focus on the spending habits of individuals who are transitioning into retirement and away from the peak earning years of middle age. Studies of aging Canadian consumers have found that consumption rates remain constant after retirement, but spending habits change significantly. Before retirement, expenditures centre on the daily routine of working. After retirement, a large portion of the budget is shifted toward low impact activities and improvements to personal residences and properties. For this reason, it is believed that companies offering luxury goods, such as clothing and cars, will experience a downturn as the population ages. It is recommended that entrepreneurs in Nova Scotia focus on the development of products and services that promote activity around the house.