The Business Case for Workers Age 50+ Deborah Russell, Director, Workforce Issues AARP
America’s Aging Workforce Significant Demographic Changes in the USA • In 2000, 13% of the workforce was 55 and older. • By 2015, 20% of the workforce will be 55 and older. • Highest growth rate in workforce will be among persons aged 55-64. • Concurrently, a decrease in the population of workers aged 25-44. • Labor shortages could have an adverse effect on productivity and economic growth.
Projected % Change in Labor Force by Age Group, 2002-2012
Key Factor: Age at “Retirement” • Boomers much less likely to associate retirement with the traditional retirement age of 65. • Nearly 70% of workers who have not retired report that they plan to work into their retirement years or never retire. • Almost half of workers 45-70 indicate that they envision working into their 70s or beyond.
Key Factor: Financial Need • Financial need is a primary reason that individuals are choosing to work longer. • An AARP Stock Market Survey (2002), 70% of50-70 year old investors reported that they had postponed retirement as a result of stock market losses. • Boomers are not financially prepared to retire because of high levels of debt and low levels of savings. • 2003 Retirement Confidence Survey (EBRI) reported that fewer than 4 in 10 workers (37%) said they have calculated how much money they will need to have by the time they retire.
Defined Benefit Plans Disappearing % of Wage & Salary Workers Covered by Plan Type, 1981-2001
Why People Think They’ll Work in RetirementPre-retirees age 50-70 Source: AARP, Staying Ahead of the Curve, 2003: The AARP Working in Retirement Study, 2003
Key Factor: Work/Life Balance • Older workers, particularly the boomers, are striving for work/life balance: • 31% of mature workers became responsible for a dependentparent • 23% had an adult child move back home • 16% were providing child care or day care for grandchild
Aging Not a Big Issue… Yet • 80% of employers do not offer any special provisions (i.e. flexible work arrangements) to appeal to the concerns of mature workers. • 60% of CEOs indicate their companies do not account for workforce aging in their long-term business plans. • Most employers are not yet facing labor shortages or other economic pressures requiring them to recruit and retain mature workers.
Environmental AnalysisWhat Employers are Facing • Workforce aging rapidly, especially in some sectors • Recruiting talent is an issue for many businesses • Many legal barriers to ideal phased retirement programs such as ERISA & ADEA
Employer Perspective Employers tell us their concerns • A majority (58 percent) of HR managers in an AARP survey say that it has become increasingly difficult to find qualified job applicants. • More than half of the managers also predict a shortage of qualified workers within the next five years. American Business and Older Employees: A Focus on Midwest Employers - 2005
Employer Perspective Positive Perceptions of Older Workers • Loyalty and dedication to the company • Come to work on time; low absenteeism • Commitment to doing quality work • Someone you can count on in a crisis • Solid performance record • Solid experience in job/ industry • Basic skills in reading, writing, arithmetic • Getting along with co-workers
Employer Perspective Negative Perceptions of Older Employees • Averse to change • Lack experience with new technologies • Out-of-date job skills • Difficulty reporting to younger bosses • Too Expensive
The Business Case for 50+ Workers Debunk the myths employers possess regarding the costs associated with 50+ workers and build a “business case” for utilizing 50+ workers as one strategy for addressing labor shortages.
The Business Case for 50+ Workers Costs • Cash compensation • Health Benefits • Pension Benefits • Paid Time Off
The Business Case for 50+ Workers Industry Overlay • Energy • Financial Services • Health care • Retail
The Business Case for 50+ Workers Cash Compensation • Tied to market median • Cost depends on ability, experience and performance • Cash compensation not necessarily tied to age
The Business Case for 50+ Workers Health Benefits • Health claims for 50 -64 years and dependents equal 1.4-2.2 times the cost of claims for 30 – 40 year olds. • HR managers are increasingly concerned with behavioral issues that lead to health risks • 50-64 year olds are less likely to have dependent children
The Business Case for 50+ Workers Pensions • Only 21% of private employers offer DB plans vs. 42% that participate in DC plans • DC plans are not age-based
The Business Case for 50+ Workers “Value”part of the Equation • Engagement • Turnover
The Business Case for 50+ Workers Engagement • Towers Perrin study shows that 50+ workers are more engaged as they age. • Highly engaged workers correlates with overall performance of the company.
The Business Case for 50+ Workers Turnover • The average tenure among workers is 3.7 years. • Median job tenure of 55+ worker is 3.3 times that of 25-34 year old. • Employers often don’t see ROI until 3rd year.
The Business Case for 50+ Workers Employer Action • Inventory your current talent and define future needs • Model cost trends to understand the business case for investments needed to attract and retain 50+ workers • Study available labor pool and define your talent strategies • Align reward programs • Align workplace policies and practices
What’s In it For Business? • The boomers will reinvent "retirement," working longer either because they want to or they need to. • Mature workers offer businesses a unique combination of experience, loyalty, enthusiasm and a strong work ethic. • As the workforce ages, businesses that know how to recruit and retain mature workers will gain a competitive edge.
AARP Workforce Programs • AARP Best Employers for Workers Over 50 • AARP Featured Employers • Alliance for an Experienced Workforce
Resources • The Business Case for Workers Age 50+: Planning for Tommorrow’s Talent Needs in Today’s Competitive Environment • Staying Ahead of the Curve 2004: Employer Best Practices for Mature Workers • Staying Ahead of the Curve 2003: The AARP Working in Retirement Study, AARP, 2003 • Staying Ahead of the Curve: The AARP Work and Career Study, AARP, 2002 • AARP Employer web site: www.aarp.org/employerresourcecenter