The Ageing Workforce: challenges and opportunities

The ageing of the labour force preoccupies public debate in much of the developed world. It is widely considered to be one of the most significant trends for business and society in the next 25 years – and potentially one of the most disruptive.

“If nothing is done to promote better employment prospects for older workers, the number of retirees per worker in OECD countries will double over the next five decades. This will threaten living standards and put enormous pressure on the financing of social protection systems. To help meet these daunting challenges, work needs to be made a more attractive and rewarding proposition for older workers.” (Live Longer, Work Longer, Organisation for Economic Cooperation and Development, 2006.)

Policymakers in Europe are determined to extend working lives in response to the ageing population, growing bill for pensions and shrinking labour force. Skill shortages already affect sectors such as healthcare, teaching, engineering, information technology, finance and accountancy. Responses include outsourcing work to lower cost countries and relying on skilled immigrants. At least part of the solution lies closer to home.

“Europe will see the number of workers nearing retirement grow by a quarter [over the next 25 years]. Some companies are already complaining of a shortage of skills, even before they have started to dole out carriage clocks and fountain pens by the barrow-load.” (The Economist, special report on the ageing workforce, 2006)

However, policies aimed at keeping older people in work are undermined when business or economic pressures cause employers to reduce their workforce. Older workers continue to be targets for redundancy. Early retirement, although expensive given the pension costs of increasing longevity, remains a tool used by many employers to ease the pain of restructuring.

These trends, while challenging, present organisations with significant new opportunities. Many older people are keen to work beyond retirement. Mature workers have knowledge, productivity and reliability. Young workers have speed of learning and agility. Both want flexibility. The 24/7 society demands flexibility. A mixed age workforce makes business sense.

Employers who adapt now will be best placed to:

• reap the benefits of a mature workforce
• recruit from a diminishing pool of younger workers
• meet the needs of customers, both young and old.

“There is clear evidence that both staff turnover and absenteeism are reduced and that motivation and commitment are improved in organisations employing people of all ages.” (Employers Forum on Age)

The Post Branch Network is undergoing a reorganisation in preparation for the planned liberalisation of the postal market by 2008. Management has sought to draw upon the experience of older workers, because their customer knowledge is considered essential in making the transition to a market orientation. Employees were informed that reductions in staff numbers were not planned. Having received this reassurance, they have been motivated and believe that their jobs are secure. Subsequently, workshops have been convened with the intention of involving a largely older staff group (average age 54 years, and average tenure 27 years) in planning the change process. A number of agreements have been made, including the dual management of post offices by older and younger managers. The expectation has been that the coaching skills of older employees would assist in the development of younger workers, while both would benefit from a reduction in job stress. The following outcomes have been achieved:

■ no reduction in staff headcount;

■ a 23% reduction in sickness absence;

■ an increase in the average age of the workforce by 2.7 years;

■ a 5% increase in staff productivity;

■ a reduction of personnel costs by 8.7%.

(Source: Employment initiatives for an ageing workforce in the EU, by Philip Taylor, published by European Foundation for the Improvement of Living and Working conditions, 2006)

Attitudes to work and retirement are shifting. Three in four people around the world see work as part of their ideal later life. The vast majority want compulsory retirement ages to be ditched. They also want flexibility in how they work.

Employers have yet to catch up with these expectations. For many, youth is at a premium in recruitment, even if they can no longer say so openly because of age discrimination laws. Many employers remain reluctant to invest in training older workers, believing it is more cost-effective to focus on younger ones. Negative views persist about older workers, although more positive ones are creeping in.

Employers’ views of older workers:1

·        Employers generally see older workers as more reliable and loyal than younger ones, and equally motivated and productive.

·        Employers in Europe see older workers as less flexible but just as productive as younger ones

·        Two thirds of employers in North America and Europe see older workers as being less technologically minded

·        Half of European employers see older workers as being slower at learning

·        UK employers take a more positive view of older workers than employers elsewhere in the world. They rate them more highly on productivity, flexibility and speed of learning. Yet they are much more likely to have a mandatory retirement age.

 “Many HR departments in large organisations are well aware of the need to recruit from a wider range of ages. Unfortunately, line managers can reflect the prejudices of society and may recruit on the basis of out-dated stereotypes.” Andrew Harrop, head of policy at Age Concern, speaking at the launch of the HSBC Global Forum on Ageing and Retirement

Older people’s views of work and retirement:

• Older workers want to retire later. Eighty% of 56,400 British people polled by Heyday (launched by Age Concern) said it was not acceptable that people should be forced to retire at a certain age.2
• Nearly a third of people in Britain are happy to work until they are 70. More people in their 60s are happy to work until they are 70 than any other group.3
• People in the UK are more likely than those in the US or the rest of Europe to say that “mental stimulation” is a reason for continuing to work past retirement age.1

Youthful expectations of work:

• Teenagers are the most likely age group to have been put off applying for a job because of their age. About 25% say they have. They are closely followed by 50-59-year-olds.3
• For young people in the EU, time spent as a student is getting longer. Young working people also want to spend time with their children. This is shifting the frontiers between periods of economic activity and inactivity.4
• Studies predict that the “millennials” – the sizeable group born between about 1980 and 1995 – will change careers more times than earlier generations, using their talents to reinvent themselves many times over.

Ageing baby boomers represent a lucrative market for business. As the European Commission1 points out, the number of elderly people aged 65-79 will increase by a staggering 37% between 2010 and 2030.

On current trends, these people will remain active and in better health. They will be better off, as they are more likely than previous generations to have built up a full pension, and they will have more savings than their predecessors and their children, so they will consume more goods and services. Some will want to ensure that their wealth is passed to younger generations. This age group is also mobile and keen to travel.

As companies are realising, it makes strategic sense to employ mature staff to serve this market:

• In the UK, over-50s account for 80% of personal wealth, 60% of its savings and 40% of its disposable income.  (Older Richer Wiser conference 2006).
• By 2020, over half the population will be 50+. More than 80% of mature consumers feel that most advertising is irrelevant to them.2
• In Germany, over-50s have disposable incomes per head that are about a tenth above the national average. They book 55% of winter holidays. There are at least 230 travel companies providing holidays explicitly for mature holidaymakers. This age group does not like to be called senior citizens, so travel agents have devised new terms such as “golden customers” and “best agers”.3
• In the US, older people are flocking to social networking websites.4

When it comes to age and technology, there are two digital divides: one between the young, particularly the “millennials” and the over-50s; the other between over-50s who surf merrily and those who cannot afford, or are alienated by, technology.

• Eons, a website for people over 50, was launched in the US in 2006. Users tend to be looking for useful information or wanting to make a connection, according to Eons. Established social networks used by younger people have also attracted large numbers of older people in the US. Five million people over 55 are reported to visit MySpace each month, representing 11% of its audience, according to the Financial Times.4

• Older and lower income people can feel alienated from digital life, according to a 2005 report by the Independent Consumer Panel for the UK communications watchdog Ofcom. People said technology companies were not looking closely at their needs and they felt frustrated when trying to understand information they were given about technologies. Only one in five were interested in keeping up-to-date with technological developments.5

1 European Commission green paper, Confronting demographic change: a new solidarity between the generations, 2005

2 Millennium Group, a marketing agency for the “mature market” www.millenniumdirect.co.uk

3 Financial Times, Travel trends: Greying globetrotters are forcing the industry to adapt, Dec 11, 2006

4 Financial Times, Silver Surfers get social: December 6, 2006

5 Silver surfers say net is vital, bbc.co.uk, May 27^th, 2005