Baby boomers on a spending spree

The progeny of the post-war years are turning 50 and their tastes will have a profound effect on the economy, says Diane Coyle

There is a secret ingredient to the success of old rockers like Mick Jagger and Eric Clapton: their age.

Their marketing genius is a product of their membership of the baby boom, the bulge in births in the 15 years after the war. Boomers stay loyal to their early idols. ''Some of the preferences formed in youth last all the way through life,'' explains Professor Doug McWilliams of the Centre for Economics and Business Research, a business consultancy.

This month members of the baby boom started to turn 50. The middle-aged have become the fastest-growing section of the population. In the next decade there will be an extra 1.3 million people aged 45-60, and half a million fewer under 30. It is a demographic shift that will prove to be a milestone for business and the economy.

One sign that the middle-aged are starting to exercise their growing weight is the public airing of the problem of age discrimination. Last week the personnel magazine People Management said it would no longer accept job advertisements bearing maximum age restrictions. David Winnick, the Labour MP for Walsall North, plans a Private Member's Bill to outlaw the use of age limits in recruitment advertisements. At present, a third to a half of all advertisements for non-manual jobs in the private sector specify an age restriction.

The unique values of the baby boom generation, forged in the heady days of the Sixties, will alter the nation's spending habits. Whatever the disadvantages of middle age, it is a time when most people have attained their peak earnings. They have money in their bank accounts and will spend it on a different mix of goods and services from the shrinking cohort of under-thirties.

In a recent report published by Paribas, an investment bank, the author Rafael de la Fuente said of the Woodstock generation: ''Almost certainly some 'hippy' values will make themselves felt.'' He cites the initial wave of green consumerism as an example of the influence of the "hippy" pound.

The combination of growing old and Sixties values in the fastest-growing group of consumers will favour products and services that emphasise convenience (leaving time for the more important things in life), health and individuality. For example, one survey found that a fifth of women aged 45 to 64 said they had no time to eat proper meals. Short queues at the supermarket checkout and pre-prepared foods were high priorities for them.

Some experts have identified a likely nostalgia effect in spending patterns. ''People will satisfy their youthful fantasies now that they have the money. They will buy those Sixties Ferraris or a Harley Davidson,'' says Professor McWilliams. Indeed, sales of Harleys trebled between 1987 and 1994.

The values and lifestyle of the newly middle-aged will also favour home communications, including telephone services, broadcasting and computers. The information superhighway, with its baby-boomer cheerleaders such as the US Vice-President, Al Gore, and Newt Gingrich, Speaker of the House of Representatives, is a classic example of the generation's preoccupations. Services ranging from entertainment and shopping to routine medical supervision are increasingly likely to be provided down the line.

Health and fitness will be another growth area as the boomers come face to face with the physical frailties of latter middle age. Apart from the straightforward pressure of numbers on conventional medical services, demand for alternative and herbal medicines, chiropractors, acupuncture and the like will increase - the hippy effect again.

The market research company Mintel recently discovered that members of the 45-64 age group were far more likely than other groups to spend money on the home and household items. They were less likely to spend on the fripperies of youth: clothes, meals out, the cinema, new cars.

However, it is financial services that will enjoy the biggest sales boom. The clearest conclusion of all the research is that the boomers are starting to save substantially more as they plan for old age.

There is a threefold reason why the over-fifties have started to build up a substantial financial reserve - which will be big enough to raise the whole economy's ratio of savings to income. First, people build up a financial reserve during their peak earning years in the decade or so before retirement. Now that there are many more people reaching this stage of their life, total savings will pick up.

The second explanation is the gap between the growing pensions and health bill next century, as the population ages, and government's ability and willingness to pay it. The amount of money held in private pension funds would have to rise from 70 per cent to 100 per cent of GDP in order to finance likely pension commitments alone, according to Paribas. That would imply extra savings of about pounds 200bn.

In addition, the need to put aside money for other services currently mainly provided by government, such as health and long-term care for the elderly, could require billions more in precautionary savings.

The third aspect of the impending boom in boomers' saving is their insecurity, on top of the known need to finance their old age. Mintel found a third of all 45- to 54-year olds - and half the men - were worried that they would lose their jobs during the next five years. The survey also found that many in this age group were concerned about caring for their elderly parents and shouldering the financial burden of children unable to find work.

''The 50-plus group were originally seen as the marketing man's dream, but the evidence is that they feel squeezed from all sides,'' says Angela Hughes, Mintel's research manager.

If the prudence of the fiftysomethings does turn Britain into a nation of savers, it will do the economy a favour. Although in the short-term there will be slower growth in consumer spending, in the long run investment and growth will rise. Britain has a lower savings rate than most other industrial countries, and most economists reckon this is part of the explanation for our perpetually disappointing economic performance.

An increase is also likely to lead to a profound change in the national attitude to inflation. If there is one thing that savers hate, it is seeing the value of their wealth eroded by inflation.

Those 50-year-olds still rocking along to the Rolling Stones have become, it seems, financially prudent homebodies. Their cultural adventurousness is limited to a foray on to the Internet from their home computer, and their social conscience is manifested in buying free-range chickens.

Meanwhile, the economic strength of the over-fifties is likely to translate into growing political muscle. Mr Winnick's Bill prohibiting age limits in job adverts is opposed by the Government, which argues that more regulation is not the answer. But Mr Winnick believes that age discrimination will eventually be outlawed: ''When it comes to race or gender, we have had legislation outlawing discrimination for some time. Indeed, I campaigned for it in the Sixties,'' he says. The country's fastest-growing minority will not be lightly dismissed.