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Friday, Mar 29, 2024

The Valley’s Future: Aging but Wealthy

The United States hasn’t won a lot of wars since World War II. For the big ones, we either tied, as in Korea; lost, Vietnam; or failed to effect any serious change, Iraq I & II and Afghanistan. We did unequivocally win against Grenada, which is a bit like USC beating the Granada Hills Middle School at football. We might have won the Cold War, but those gains seem to be slipping. We haven’t done well in what you might call social wars either. We’ve lost the War on Drugs and we’ve, at best, tied the War on Poverty. Poverty was declining rapidly in the years preceding the “War on Poverty” declared by President Lyndon Johnson that resulted in the Economic Opportunity Act passed on Aug. 20, 1964. In 1964, 19 percent of Americans lived in poverty. As of 2012, 15 percent of Americans lived in poverty. However all of those gains and more were made before 1969, when the poverty rate was only 12.1 percent. That’s right. The U.S. poverty rate climbed 20 percent between 1969 and 2012. It also appears that the War on Poverty programs had little if anything to do with the decline to 1969. That decline appears to be a continuation of an existing trend, with no signs of a 1964 break. The figures are worse for children. Twenty-three percent of U.S. children under 18 lived in poverty in 1964. It dropped to 14 percent in 1969. In 2012, it was 21.8 percent. People in prime working ages haven’t done so well either. Poverty for 18- to 64-year-olds has climbed from 10.5 percent in 1966 (nearest year for data) to 13.7 percent in 2012. It bottomed out at 8.3 percent in 1973. The War on Poverty has had one group of winners, old people. In 1966, a whopping 28.5 percent of people 65 and over lived in poverty. Today, only 9.1 percent of them (soon to be us) live in poverty, and that has huge economic impacts for the San Fernando Valley. In 1964, real per-capita GDP was $19,456. In 2013, it was about 2.5 times the 1964 number, $49,643. That’s a significant increase, and a lot of that increase has accrued to the old folks. They will spend it. A lot of them will spend it in California. Migrating retirees will dominate much of California’s economy over the next couple of decades. They may have made their money someplace else, but they move to places such as California and Florida to enjoy the so-called Golden Years. Some of the wealthiest may move to Monterey, Marin County or Santa Barbara. Many of those wealthiest and those with less wealth will move to the Valley, accelerating the transition to a post-industrial economy. These people move to consume, not to produce. Their income is independent of the local economy. So they create consumption economies. They resist new industrial development. Every one of them wants to lock the gate behind them. Eventually, their numbers are enough to dominate. That’s when the gate is locked and industrial growth stops. That may not be all bad. As it is, California’s regulatory environment makes it extremely difficult to start, expand or run an industrial business. Consequently, vigorous industrial growth is unlikely under any circumstances. Enter our migrating retirees. They come to consume, and they will consume more than just our weather, housing and stuff. They consume lots of services. Medical services. restaurants and golf courses are obvious, but there are more. A well-managed yoga studio on Ventura Boulevard is a slam dunk. Businesses where physical trainers come to your house and bark at you while you do pushups are growing. It turns out that many migrating retirees do very little for themselves. So we see booming landscape and housekeeping businesses. Driving and home delivery services are strong. A dog droppings pick-up service was unimaginable just a few years ago. Now, it’s a growing business. Who would have imagined doggy day care, complete with Internet video, so you can see your happy puppy playing with his pals? Someone did, and their net worth is probably pretty high now. Selling goods and services to aging Boomers is big business, and opportunities abound. Some of those opportunities are beyond my imagination, but some bright entrepreneurs will get rich from them. Bill Watkins is director of the Cal Lutheran Center for Economic Research and Forecasting and participated in the Southern California Association of Governments poverty summit on Aug. 20.

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