It’s Time to Retire Retirement
Long-standing human resource practices invest heavily in youth and push out older workers. This must change—and public policy, too—or companies will find themselves running off a demographic cliff as baby boomers age.
In the past few years, companies have been so focused on downsizing to contain costs that they’ve largely neglected a looming threat to their competitiveness, the likes of which they have never before experienced: a severe shortage of talented workers. The general population is aging and, with it, the labor pool. People are living longer, healthier lives, and the birthrate is at a historic low. While the ranks of the youngest workers (ages 16 to 24, according to Bureau of Labor Statistics groupings) are growing 15% this decade as baby boomers’ children enter the workforce, the 25- to 34-year-old segment is growing at just half that rate, and the workforce population between the ages of 35 and 44—the prime executive-development years—is actually declining.
In the United States, the overall rate of workforce growth faces a sharp drop. After peaking at nearly 30% in the 1970s (as the baby boomers as well as unprecedented numbers of women entered the workforce), and holding relatively steady at 12% during the 1990s and again in the present decade, the rate is projected to drop and level off at 2% to 3% per decade thereafter. That translates into an annual growth rate of less than 1% today and an anemic 0.2% by 2020. Meanwhile, age distributions are shifting dramatically. The proportion of workers over 55 declined from 18% in the 1970s to under 11% in 2000—but it’s projected to rebound to 20% by 2015. In other words, we’ve recently passed what will prove to be a historic low in the concentration of older workers. Just when we’ve gotten accustomed to having relatively few mature workers around, we have to start learning how to attract and retain far more of them.
During the next 15 years, 80% of the native-born workforce growth in North America—and even more so in much of Western Europe—is going to be in the over-50 cohort. In the next decade or so, when baby boomers—the 76 million people born between 1946 and 1964, more than one-quarter of all Americans—start hitting their sixties and contemplating retirement, there won’t be nearly enough young people entering the workforce to compensate for the exodus. The Bureau of Labor Statistics projects a shortfall of 10 million workers in the United States in 2010, and in countries where the birthrate is well below the population replacement level (particularly in Western Europe), the shortage will hit sooner, be more severe, and remain chronic.
The problem won’t just be a lack of bodies. Skills, knowledge, experience, and relationships walk out the door every time somebody retires—and they take time and money to replace. Given the inevitable time lag between the demand for skills and the ability of the educational system to provide them, we’ll see a particularly pronounced skill shortage in fast-growing technical fields such as health care. What’s more, employees are your face to the marketplace. It’s good business to have employees who reflect the ethnic, gender, and, yes, age composition of your customer base—especially when those customers are well off. Baby boomers will be the most financially powerful generation of mature consumers ever; today’s mature adults control more than $7 trillion in wealth in the United States—70% of the total. As the population at large ages, and ever-more spending power is concentrated in the hands of older customers, companies will want to show a mature face to their clientele—and yet those faces will be in high demand.
The problem is pretty clear. Workers will be harder to come by. Tacit knowledge will melt steadily away from your organization. And the most dramatic shortage of workers will hit the age group associated with leadership and key customer-facing positions. The good news is that a solution is at hand: Just as companies are learning to market to an aging population, so they can also learn to attract and employ older workers.
And yet, despite irrefutable evidence of workforce aging, many managers may be marching their companies straight off a demographic cliff. According to a recent survey from the Society for Human Resource Management, two-thirds of U.S. employers don’t actively recruit older workers. Furthermore, more than half do not actively attempt to retain key ones; 80% do not offer any special provisions (such as flexible work arrangements) to appeal to the concerns of mature workers; and 60% of CEOs say their companies don’t account for workforce aging in their long-term business plans. Instead, relying on the mistaken assumption that the future will be populated by a growing pool of talented and loyal young workers, companies are systemically offering older workers the “package” and skimming people out of the labor force from the top age brackets down.
Little wonder that baby boomers and “mature” workers (those 55 and above) are feeling little loyalty to their current employers. These employees are bottlenecked, with too many people competing for too few leadership positions. They’re distrustful, fearful, and defensive, knowing that they’re “too old” to easily find work elsewhere and likely to be pushed out before the “official” retirement age. They’re struggling to update their skills, and they’re feeling burned out after 30-plus years on the job. Meanwhile, they stand back and watch as recruiting, training, and leadership development dollars, as well as promotion opportunities, are overwhelmingly directed at younger employees, with little thought to the skills and experience that the over-55 crowd can bring to bear on almost any business problem.
In short, most baby boomers want to continue working—and they may need to, for financial reasons—but they may not want to work for you. Twenty percent of those collecting employer pensions are still working in some capacity, and among people under 60 who are already collecting pensions, more than 50% are working. Among those age 55 and older who accepted early retirement offers, one-third have gone back to work. But these working retirees are more likely to be working part-time or be self-employed than their not-yet-retired counterparts—in other words, they’re working on their own terms. That’s increasingly where you’ll need to meet these older workers if you want to gain access to their skills. As the labor market tightens, they will have more choices, and the most capable and accomplished among them are likely to be the most mobile and financially independent; they’re the ones who are most likely to move on. The challenge is to find a way to reconnect with these employees before they’re ready to take a retirement package and run—perhaps to a competitor.
Source: http://hbr.org/2004/03/its-time-to-retire-retirement/ar/1
During the next 15 years, 80% of the native-born workforce growth in North America—and even more so in much of Western Europe—is going to be in the over-50 cohort. In the next decade or so, when baby boomers—the 76 million people born between 1946 and 1964, more than one-quarter of all Americans—start hitting their sixties and contemplating retirement, there won’t be nearly enough young people entering the workforce to compensate for the exodus. The Bureau of Labor Statistics projects a shortfall of 10 million workers in the United States in 2010, and in countries where the birthrate is well below the population replacement level (particularly in Western Europe), the shortage will hit sooner, be more severe, and remain chronic.
The problem won’t just be a lack of bodies. Skills, knowledge, experience, and relationships walk out the door every time somebody retires—and they take time and money to replace. Given the inevitable time lag between the demand for skills and the ability of the educational system to provide them, we’ll see a particularly pronounced skill shortage in fast-growing technical fields such as health care. What’s more, employees are your face to the marketplace. It’s good business to have employees who reflect the ethnic, gender, and, yes, age composition of your customer base—especially when those customers are well off. Baby boomers will be the most financially powerful generation of mature consumers ever; today’s mature adults control more than $7 trillion in wealth in the United States—70% of the total. As the population at large ages, and ever-more spending power is concentrated in the hands of older customers, companies will want to show a mature face to their clientele—and yet those faces will be in high demand.
The problem is pretty clear. Workers will be harder to come by. Tacit knowledge will melt steadily away from your organization. And the most dramatic shortage of workers will hit the age group associated with leadership and key customer-facing positions. The good news is that a solution is at hand: Just as companies are learning to market to an aging population, so they can also learn to attract and employ older workers.
And yet, despite irrefutable evidence of workforce aging, many managers may be marching their companies straight off a demographic cliff. According to a recent survey from the Society for Human Resource Management, two-thirds of U.S. employers don’t actively recruit older workers. Furthermore, more than half do not actively attempt to retain key ones; 80% do not offer any special provisions (such as flexible work arrangements) to appeal to the concerns of mature workers; and 60% of CEOs say their companies don’t account for workforce aging in their long-term business plans. Instead, relying on the mistaken assumption that the future will be populated by a growing pool of talented and loyal young workers, companies are systemically offering older workers the “package” and skimming people out of the labor force from the top age brackets down.
Little wonder that baby boomers and “mature” workers (those 55 and above) are feeling little loyalty to their current employers. These employees are bottlenecked, with too many people competing for too few leadership positions. They’re distrustful, fearful, and defensive, knowing that they’re “too old” to easily find work elsewhere and likely to be pushed out before the “official” retirement age. They’re struggling to update their skills, and they’re feeling burned out after 30-plus years on the job. Meanwhile, they stand back and watch as recruiting, training, and leadership development dollars, as well as promotion opportunities, are overwhelmingly directed at younger employees, with little thought to the skills and experience that the over-55 crowd can bring to bear on almost any business problem.
In short, most baby boomers want to continue working—and they may need to, for financial reasons—but they may not want to work for you. Twenty percent of those collecting employer pensions are still working in some capacity, and among people under 60 who are already collecting pensions, more than 50% are working. Among those age 55 and older who accepted early retirement offers, one-third have gone back to work. But these working retirees are more likely to be working part-time or be self-employed than their not-yet-retired counterparts—in other words, they’re working on their own terms. That’s increasingly where you’ll need to meet these older workers if you want to gain access to their skills. As the labor market tightens, they will have more choices, and the most capable and accomplished among them are likely to be the most mobile and financially independent; they’re the ones who are most likely to move on. The challenge is to find a way to reconnect with these employees before they’re ready to take a retirement package and run—perhaps to a competitor.
Source: http://hbr.org/2004/03/its-time-to-retire-retirement/ar/1
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