The world’s retirement home

The world’s retirement home

Both opponents and foes of outsourcing can agree on outsourcing’s next wave: the elderly.

Medicare and social security costs threaten to bankrupt the US over the coming decade. The Indian outsourcing explosion began with call centres and medical records. Then it spread to software. Now, even hospital patients are being flown in from Europe. So, what will be the next Western product shipped to India for sound and affordable care?

The elderly.

Europe is ageing. The experience of Germany is fairly typical: by the middle of this century, some 12% of its population will be more than 80 years old and a significant portion will be have crossed 65—staggering proportions that threaten its generous social welfare system with bankruptcy in the near future. Western Europe had two workers per retiree in the second half of the past century; the ratio will soon be halved, with each worker obliged not only to support a family but also one pensioner, in addition to supporting other welfare recipients, such as the disabled, the jobless and the poor.

Longevity is a gift from God, but even the holy Vatican has warned Europe’s governments that the ageing of Europe is a looming crisis. The existing solutions show little promise—and even less imagination. The very notion of increasing the retirement age compelled French protesters to bring the country to its knees. A proposal to reduce pensions humbled the Austrian chancellor. And with Europe’s tax rates at their current level, increasing employee contributions is out of the question. Some have proposed admitting young immigrants to balance the greying natives, but such proposals run up against the continuing fact of ethnic and racial prejudice in places, such as France, England, Germany and the Netherlands. The situation is so desperate that former German chancellor Gerhard Schroeder has even suggested cash compensations to encourage couples to have children, by which couples would earn 1,000 marks per month per child. Plainly, Europe needs some new ideas.

Why not move the retirees to India? Establish communities across the country at a fraction of the price. One envisions a French outpost in Puducherry. The Italians could settle in Kerala. The Swiss and Germans could recreate the majesty of the Alps in the Himalayas. And the British could find peace on the beaches of Goa (along with the Spanish and Portuguese). The camps could be relatively small. Maybe 100,000 or so in each settlement. A total of one million people at most. With spending of anywhere between $10,000 and $15,000 annually, this could leave India with a windfall of $25 billion per annum (including the multiplier effect)—or more than double the total exports of the Indian information technology (IT) industry today. Preposterous? Maybe. But if one sits back and thinks for a moment, the idea isn’t so crazy. The main drawbacks are easily addressed: would they move to India? The idea of retirement homes or the elderly moving to warmer, more hospitable places is a well-established one. The elderly seek out places where they can afford to live and the climate is suitable. In the US, Arizona and Florida have become known as retirement communities. Today, more than 100,000 Americans retire to sunnier abodes every year. The English have turned parts of southern France into a mini-England as they find both the climate more suitable and the prices more affordable. India will suit the budgetary and climactic needs of the elderly.

What about the Western standard of living? How will the Europeans adjust? One of the persistent myths about India, which shatters upon arrival, is that Western comforts are unavailable. For much less than in the West, everything is available in India.

Will the elderly move away from their families? Telecommunications will keep the old and young connected. Telephonic conversations, video conferences, email, SMS, MMS, chat and old-fashioned letters will keep European families close. The joint family is a rarity in Europe. While people stay close to their parents, they move out early. They meet for vacations and parties. If you live a flight away, the difference between a three-hour and six-hour flight is marginal. And while the grandchildren may yawn at the prospect of another jaunt to the English countryside, imagine how excited they would be to jet to exotic India.

Europeans can enjoy the standard of living they have come to know, at price levels they can afford. For India, the retirees’ spending offers another growth industry, potentially employing another several hundred thousand people working in the hospitality retirement business and all the ancillary services associated with it. Since they are retirees, they will not reproduce and add to India’s population. If India can serve as back office to the world, why can’t we become its retirement home as well? It’s no loftier a dream than the notion that we would become an IT hub. After all, who would have thought a decade ago that IBM would hire more people in India this year than in the US, or that Accenture will have more employees in India than in any other country?

Mumbai-based Prashant Agrawal heads an investment fund. Comments are welcome at theirview@livemint.com