Supertrends. Pushing for change. - REDIRECT Anxious societies

Affordability

Times are tight

In January 2020, poverty and social inequality, as well as unemployment topped the list of people’s worries, followed by crime and violence, financial/political corruption and healthcare, according to Ipsos Public Affairs. The coronavirus pandemic is likely to have shifted up public health and job security as the world struggles with containment of the virus and its broad-based economic implications. The core of the anxiety of middle-class families lies in the rising cost of living. In the most recent Credit Suisse Progress Barometer, which surveyed more than 16,000 people in 16 countries, 71% of the surveyed participants agreed that only a small minority gets richer while the majority does not benefit.

According to the Credit Suisse Anxiety Index, which tracks whether the level of societal discontent is rising or falling, popular discontent continues on average to rise in the six countries included in the index, especially in Germany and China, and more recently in France. The index reflects changes in specific socioeconomic, equally weighted indicators that are often the target of protests and rage when popular anxieties are not addressed. These include the crime rate, corruption, housing prices, healthcare costs, inequality (measured by gross domestic product [GDP] per capita), as well as social progress (measured by life expectancy at birth). Macroeconomic policies will continue to support the economy through fiscal and monetary tools, as we have seen in the economic crisis triggered by the measures to contain the coronavirus pandemic. However, elected governments will also likely focus on providing solutions through a mix of public and private efforts. As high levels of public debt may constrain government spending, investors will play an increasingly important role in such efforts. Key areas include solutions that make housing, education and healthcare more affordable, that ensure individual old-age funding, and that enable employment amid a fast-changing labor market.

Housing becomes a burden

According to the Organization for Economic Co-operation and Development (OECD), a couple today with two children and a median income must pay 10.2 yearsʼ worth of their annual income to buy a 60 square-meter flat in a capital or financial center, compared to 6.8 years in 1985. Increasing housing costs are becoming an ever bigger burden for many households. 

A recent World Economic Forum (WEF) Insight Report, Making Affordable Housing a Reality in Cities, summarized various measures to lower housing costs, including land-use strategies such as transit-oriented development or measures to fund affordable housing, such as tax incentives or governmentguaranteed bonds. Innovation in construction techniques such as 3D-printed homes or digital tools such as building information modeling (BIM) could also lower costs.

Taming healthcare costs

Healthcare coverage and costs will become an even bigger focus than before. According to the World Health Organization (WHO), global health spending reached 10% of GDP in 2017. With growth of 3.9% in real terms, according to WHO, health spending is exceeding global GDP growth. 

There are various possible approaches to lower healthcare costs. One is the use of cheaper alternatives of innovative products such as generics or biosimilars. According to the US Food & Drug Administration (FDA), generic drugs cost, on average, 80%–85% less in the USA than brand-name products. Technology also offers opportunities to reduce healthcare costs. According to a McKinsey & Company report in 2019, innovation in technology could enable USD 350–410 billion in annual value by 2025. We believe this will be catalyzed by the current public health crisis.

Pensions under pressure

The risk to future pension benefits is another area of concern. An aging population and lower interest rates are putting many public and private pension schemes under pressure. According to a G30 report, Fixing the Pensions Crisis, the global lifetime financial security gap is forecast to widen to USD 15.8 trillion by 2050 from USD 1.1 trillion in 2017. The pension issue must be solved – the sooner, the better. The most acute problem is funding retirees without excessively penalizing younger generations. A mix of measures that amount to nothing short of a complete rethinking of the lifecycle as we know it will be necessary to respond to these challenges. This will likely include prolonging workers’ time in the active workforce through more individual work-life models, reforming the pension system by attributing greater weight to individual savings, and potentially more widespread individual management of retirement funds.

Employment

A fit workforce

The world of work is changing rapidly. Technological progress and climate change are going to render millions of jobs obsolete while simultaneously creating new opportunities, albeit with a radically different skill set, while pandemics require increased work flexibility. According to a McKinsey & Company report from 2017, automation could displace between 400 million and 800 million people by 2030, forcing them to look for new jobs. Similarly, the International Labour Organization (ILO) estimates that while efforts to achieve energy sustainability will lead to the loss of 6 million jobs, another 24 million jobs will be created. According to the ILO, increased investment in people’s capabilities is one of the “three pillars of action,” which in combination would drive growth, equity and sustainability for future generations. A crucial step in that direction is the endorsement of lifelong learning, with a focus on skilling, reskilling and upskilling amid the so-called Fourth Industrial Revolution. In addition, the coronavirus pandemic may have long-lasting effects on labor markets.

Personal security

Displaced populations and pandemics

The geopolitical landscape remains unstable. Conflicts and political and economic unrest have displaced some 70.8 million people worldwide, according to the United Nations Refugee Agency. While geopolitical risks should not be underestimated, everyday challenges pose greater pain points for people. For example, a pandemic risk was not in the public eye until the recent outbreak of the novel coronavirus in China and its subsequent spread around the world. Disease amplifiers such as population growth, urbanization, or increased international travel increase the global risk, according to the 2019 report of the Global Preparedness Monitoring Board (GPMB). The GPMB suggests various actions to improve preparedness, such as investments in innovative vaccine technology and therapeutics.

Within the security subtheme, cyber security remains our key topic. After public outrage about data breaches and the misuse of data, governments are beginning to take action. The California Consumer Privacy Act (CCPA), which contains new consumer rights related to the access, deletion and sharing of personal information, became effective at the beginning of this year. Despite such regulatory efforts, the number of data breaches continues to increase, offering a lot of potential for companies selling end-to-end solutions, as well as specialized next-generation security software companies.