If you still need proof that our society—and, in turn, the U.S. labor force—is getting older, look no further than our increased life expectancy and lower birth rate, according to one expert.
“The combination of low fertility and low mortality will bring significant change in the makeup of our population,” said James Poterba, president of the National Bureau of Economic Research, in a recent address to an economics trade group in Washington, D.C. “Today, when we reach age 65, one in five women will live to 96, and one in five men will live to 93. In the late 1950s, the birth rate was nearly 3.5 per woman. Now it’s a little below two.”
These trends have significant implications for the economy and workforce, Poterba said during a forum as part of the annual meeting of the National Association for Business Economics (NABE) on Oct. 11, in Washington, D.C. Older individuals may reduce their consumption when they are retired, and there will be greater demands on public services, among other factors. “It could have an impact on innovation, productivity and entrepreneurship,” he said.
Many HR professionals are probably asking themselves about those very issues, according to recent findings from the Aging Workforce Research Initiative, a three-year project by the Society for Human Resource Management (SHRM) and the SHRM Foundation that is being underwritten by a grant from the Alfred P. Sloan Foundation. (The project classifies older workers as those that are ages 55 and older.)
In one of the initiative’s surveys, HR professionals were asked how their organizations are preparing for the projected increase in the proportion of older workers in the labor force. More than one-third (36 percent) said they have begun to examine internal policies and management practices to address this change, but just 6 percent said they have already implemented specific policies and practices in response to this demographic shift.
Perhaps of greater concern is the fact that more than half (52 percent) of respondents either indicated “no changes in policies and practices were necessary” (20 percent), that they were “just becoming aware of this potential change” (19 percent), or were “not aware of this potential change” (13 percent).
That could spell trouble for some employers that may not be prepared for a growing number of workers to stay on the job longer. Another speaker at the NABE meeting suggested this trend is not a short-term phenomenon.
“Incomes haven’t been rising at the bottom, the population is aging and it’s not transitory,” said Olivia Mitchell, professor of business economics and insurance/risk management at the University of Pennsylvania. “People think this is temporary, and it’s just not the case. We’ll perpetually have an older population; it won’t go away with the Baby Boomers.”
Pension reform and changes to Social Security and Medicare will be necessary to address the situation, she said, along with “substantially” enhancing financial literacy. The average person will “have to work longer, until 70 at least,” even if these problems are addressed, she said. “Getting old is very expensive,” Mitchell said. “We face a number of risks that our parents didn’t face.”
Employers, meanwhile, face their own risks if they don’t acknowledge these changes taking place in the labor force. Even with more workers extending their careers, a succession plan should be in place in order to retain the knowledge and skills possessed by those older workers when they do decide to retire.
From a recruiting and retention standpoint, there are also plenty of positives associated with this demographic shift, according to other research from SHRM’s Aging Workforce Research Initiative. The top advantage of having older workers is the fact that they have “more work experience,” according to 77 percent of HR professionals. Also cited: Older workers were “more mature/professional” (71 percent) and have a “stronger work ethic” (70 percent).
More than half of HR professionals (52 percent) also said that older workers had “more loyalty” and had lower rates of turnover at their organizations, compared with other demographic groups. Nearly one out of four (23 percent) also said older workers were “more productive” than workers of other age groups, a finding that has been echoed in other research.
“For now, regarding workforce issues, the atmosphere is encouraging,” Poterba told those in attendance at the NABE meeting. “Studies show that productivity is quite comparable [to other age groups], and they are also more reliable than their younger counterparts.”