Baby Boomer Age Wave Theory

WHAT IS 'Baby Boomer Age Wave Theory '

Baby Boomer Age Wave Theory is an economic theory suggesting that the economy would peak in markets and consumer spending as the Baby Boom generation aged. Coined by economist Harry Dent, and based on his finding that consumer spending habits peak at age 50, this theory postulates that U.S. and European markets would peak between 2008 and 2012, as Baby Boomers reached age 50. 

BREAKING DOWN 'Baby Boomer Age Wave Theory '

Baby Boomer Age Wave Theory, first described by economist Harry Dent, suggests that an economic peak in U.S. and European markets would occur between 2008 and 2012, as the last members of the Baby Boom generation reached the age of 50. Baby Boomer Age Wave Theory relies on Dent’s finding that consumer spending habits peak at age 50.

While economists and cultural critics continue to debate the validity of Baby Boomer Age Wave Theory and its effects, the effects of the Baby Boom generation have had clear and significant impact on economic and cultural trends in the U.S. and around the world.

As the Baby Boom population continues to move into retirement age, economists expect to see a decrease in overall consumption and increase in demand for services such as caretaking and estate and retirement planning as well as products for the elderly. There are increased expectations that this shift will in turn impact interest rates, inflation, real estate and stock prices, and other economic factors. Some forecasts expect that the U.S. economy will continue to slow until the next generation, known as Generation X, reaches its spending peak around 2022.

Age Wave

The Age Wave concept was developed by psychologist and entrepreneur Ken Dychtwald and was the central thesis of his 1989 book Age Wave: The Challenges and Opportunities of an Aging America.

Age Wave is concerned with observing the cultural shifts caused by the convergence of three major demographic forces, including:

• The Baby Boom: An increase in fertility rates in the United States, Canada, Europe and Australia in the mid-20th century. While some analyses vary, the Baby Boom generation is generally identified as inclusive of those born between 1946 and 1964.
• Elongated longevity: Life expectancy increased significantly during the 20th century due to advances in medicine, nutrition and public health.
• The Birth Dearth: Following the Baby Boom, fertility rates dropped sharply, and many parts of the world are now experiencing sub-replacement fertility rates.  

This theory suggests that due to the size and tendencies of the Baby Boom generation, this population had the power to transform consumer trends and life stages. Significant market shifts across a range of industries have been associated with the Age Wave, including the impact on the manufacture and sales of suburban homes, fast food, gym equipment, toys, minivans and SUVs.   

In 2006, Dychtwald predicted a massive slowdown in workforce growth in the near term, predicting a tiny fraction of the workforce growth the Baby Boom generation provided.