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A recession can negatively impact many aspects of life, including the cost of senior living. In the United States, the average cost of senior living has been rising in recent years, and a recession could cause those costs to increase even more.
But at the heels of the pandemic, insane currency fluctuations, and rising costs, is the looming recession impact on senior living disastrous or a blessing in disguise?
Let us take a look at how it will be severe to the senior living sector, but also how it can help bring better changes to the industry for more profitable growth.
How recession can impact the senior living
The recession, in several ways, can impact the senior living industry. For example, demand for senior living services may drop as people tighten their budgets. This can lead to fewer people moving into senior care communities like assisted living and may cause occupancy rates to fall. Additionally, revenue and profits may decline as costs increase and fewer people are able to pay for services. This can lead to layoffs and cutbacks in staff and services. In extreme cases, recession can force senior living communities to close their doors.
The USA’s population, for those over 65, is on the rise. By 2030, it is projected to increase from 55 million to 73 million by 2030. As most elderly people wish to remain in their own housing for as long as possible, the number of people looking toward senior living communities will still grow. In addition, senior living communities are experiencing a trend of older residents with more significant care needs who would otherwise prefer to age in place.
The impact on senior living communities
If the global economic crisis continues to exist and worsens from 2023 to beyond, the chances of the domino effect from the looming recession will extend to the senior living sector in two significant ways.
New establishments
The recession will have a number of impacts on new senior living establishments. Firstly, the number of people retiring will decrease as people delay retirement or return to work. As a result, the number of seniors moving into these facilities will fall, and the number of staff will be reduced. This will lead to fewer customers for senior living establishments.
Secondly, the economic downturn will lead to a decrease in property and land value, making it more difficult for developers to finance and build new senior living establishments. Lastly, the recession will reduce seniors’ disposable incomes, making it harder for them to afford the fees associated with senior living. This, in turn, will signify a decrease in the quality of care and a decline in the level of service.
Labor supply
Any recession is expected to have a negative impact on senior living labor supply and demand. The number of people retiring will exceed the number of people available to replace them, resulting in a labor shortage. This will lead to higher wages and benefits for those who can find jobs in the senior living industry.
As the U.S. labor market remains highly competitive, with an unemployment rate of 6.3 percent, businesses feel the pinch from rising inflation costs and have had to reduce staff and wages. This has made it difficult for employers to find the qualified talent they need.
Senior living facilities have been particularly affected, as 48% would mean they may have to shut down due to insufficient staff. However, despite many of these facilities turning to agency staffing and overtime labor, there’s still a genuine concern about staffing shortages in this sector.
Senior living technology Is the safety net
Though for several years, the impact of the recession on senior living will slow the development of new establishments across the country, including a battered labor supply, there is a chance that technological introduction could bring flavorful results in the long term.
Efficiency
In the senior living industry, decreased occupancy rates and slimmer profits have been significant factors in the past two years. Considering that costs are high and a recession is on the horizon, taking measures to optimize spending is very important for senior living leaders. Investing in technology solutions is one way to approach this.
Implementing various technologies, automating processes, better appealing features for new residents, and cost-cutting measures are all possible. In the upcoming months, investments in these areas can help support your community in this ever-changing market.
New kinds of devices
Technology can be a considerable asset in both engaging staffs and bringing in residents. Prospective residents will notice the satisfaction exuded by your team and may become more likely to choose your community. It’s also important that older adults have the opportunity to retain their independence and maintain their lifestyle with long-term technology solutions; this, of course, has become even more relevant since the pandemic started. Smart bulbs, or any devices for living automation, represent this goal because they increase efficiency for both staff and residents.
Engagement platforms further provide residents with digital pathways for social connection. Technology systems, when implemented correctly, can make your senior living community a more inviting and comfortable place for everyone involved.
Seniors may not feel the burn much
From a historical point of view, the recession will not have a significant impact on seniors for a number of reasons:
- Many seniors are retired and are not actively participating in the workforce.
- Seniors typically have more savings and assets than younger adults, so they are less likely to be impacted by job loss or financial instability.
- Seniors are more likely to have fixed incomes, which means they are less likely to be affected by rising costs or inflation.
A recent U.S. Department of Labor report found that June has seen the highest inflationary rate since 1981 at 9.1%, meaning that many likely feel the strain of price hikes. J.P. Morgan recommends assigning a separate line item for health care costs due to a 6% growth rate, whereas other categories may have an annual rise of 1.5-2%. Moreover, older households typically spend less on transportation than those in the 35-44 range, thus providing them with some protection from inflating prices.
Furthermore, retirees can reduce their fuel expenses by making artful use of combining trips and looking into ride-sharing opportunities. Lastly, it is worth noting that lower-income families are more vulnerable to higher inflation rates.
Final thoughts
There are a number of ways that a recession can impact the cost of senior living and the industry as a whole. But it is best to wait and see how the economy transpires in 2023. But it is always smart to be prepared.
As an older adult, facing the impact of the recession in senior living communities could last for many years. So at BoomersHub, we advise you to start planning and preparing your financial requirements and find established senior living communities to navigate the looming economic crisis.
Read the following articles for a better idea of navigating any kind of crisis with proper planning.
- How to manage elderly parents’ finances.
- Best health insurance plans for seniors.
- 5 Ways to protect parent’s assets from nursing homes.
FAQs
How does a recession affect the elderly?
One of the worst things about a recession is rising costs. Like a domino effect in full swing, everything is interconnected, and the rising cost of one object is backed and linked to another. In other words, many seniors would find assisted living or memory care expensive due to the increasing prices.
Which industries are most affected by the recession?
Most industries in a country are poorly affected by a recession. Aside from the senior living or healthcare industry, retail, restaurants, real estate, and other relevant sectors suffer the most. As most of these industries are, in some way, connected to the other, senior living communities also undergo a slump.
How did the great recession affect retirees?
As per past figures and the recession, it hit savings for retirees. During the recession, most people experienced a decline in their retirement savings and home values. Thankfully, however, by 2012, these losses had been recovered almost completely. Spending cutbacks were relatively small, with seniors over 65.
