Common to many publications about the future of the global workforce is the alarming notion of global demographic changes. Specifically, despite a growing global population, the future prospects indicate that the population in developed countries is aging, which means that the working population is shrinking.
As a recent Ernst &Young report on business trends shows, already in 2010 more workers retired in the European market than joined the working population. This gap is predicted to increase and rise to 8.3 million people by 2030. There are of course ‘younger’ countries that are expected to produce new skilled workers in the coming decades, such as India, Brazil, Mexico and Indonesia. However, as the E&Y professionals remark, the emerging markets’ workforce will manage to close the talent gap only if these countries are provided with sufficient educational and economic opportunities for development. Echoing this precaution, an article in the The Economist argues that ‘despite great efforts to improve schools and universities, workers in the emerging world are less educated than those elsewhere’, implying that overall the global workforce will continue to lack educated workers and have a surplus of low-skilled workers in the near future. Hence, a geographic mismatch will persist between the supply and demand of workers.
Summarizing this trend, the E&Y professionals argue that ‘global employers face the challenge that, despite a growing global population, they will soon have to recruit from a shrinking workforce due to an aging population’.
Reflecting on the same topic, David Bloom and David Canning, the leaders of Harvard’s Program on the Global Demography of Aging, confirm that ‘companies will soon have little choice but to welcome older employees’. Although this change is inevitable, employers have a choice of turning this challenge into an opportunity and competitive advantage.
What are the potential implications for employers?
Companies should adjust and make the best use of longer lifespans. An article by Bloom and Canning in the Harvard Business Review blog argues that effectively responding to an aging workforce requires several changes in business practices. The following are suggestions for specific managerial actions:
- Encourage prolonged careers
First of all, companies are advised to review their retirement policies and allow for more freedom in regards to the timing of retirement. Referring to their research on male life expectancy, the authors emphasize that even though between 1965 and 2005 male life tenure increased by an average of 8.8 years, the mean legal retirement age only rose by 0.4 years. Hence, organizations should encourage later retirement by ‘outperforming’ the public social security structure on retirement incentives with pension contributions and payouts.
- Change the attitude
Even when offered an attractive compensation package, older employees may not be willing to prolong their careers due to prevailing ‘pro-youth’ attitudes. The conventional wisdom suggests that older people are less productive and are often seen as a burden. This approach however misses out on what is a unique cohort of talent. Indeed, experience and knowledge of older employees grow in value. As one of my previous posts suggests, older employees can be even better candidates for expatriation, due to their flexibility in terms of family ties, as well as their strong people-skills that develop with time and experience.
- Allow for more flexibility
More flexible work arrangements are a general trend nowadays. For example, as one of my previous articles discusses, as technology evolves virtual work is increasingly becoming a popular way of cost savings and more effective labor engagement. Along with working mothers and Generation Y professionals who strive for a flexible lifestyle, older employees may substantially benefit from part-time work and telecommuting.
- Invest in training
As the business environment changes, it sets requirements for continuous skill development and learning. Quite often however training budgets are allocated to developmental purposes of young professionals. The conventional attitude of not seeing any value in training older employees is what makes them less productive in the end. Changing this attitude will probably show that ongoing training helps older workers master new skills and keep up with the pace of change.
- Invest in health
It is a common sense that investing in the health of all employees will benefit their productivity, and will avoid health-related problems and costs as the workforce ages. Naturally human capabilities decrease with age, however the magnitude and time of such decreases is a matter of health.