Recruiting the Graying Generation
The 'eldercare generation' cares about continuing to work. Are companies interested in keeping them? HR leaders need to offer workplace flexibility and continued training to ensure older workers remain, experts say.
By The Wharton School
When the AARP announced its seventh annual "Best Employers for Workers over 50" awards this fall, the corporations at the top of the list didn't get there by offering the traditional fringe benefit trio of health, life and disability insurance.
Instead, the AARP recognized companies such as SC Johnson, the Principal Financial Group, Michelin North America and Mercy Health System for providing "forward-looking" benefits packages to workers over 50 that include alternative work schedules, lifelong learning and career training opportunities, and a program that allows today's graying workforce to care for their own aging families.
AARP's announcement included a statement from the organization's CEO, William D. Novelli, which helped highlight the obvious: Focusing on an aging employee's personal needs makes "good business sense" and pays dividends to companies that value the knowledge and experience of older workers.
"As the gap between the demand for, and the supply of, seasoned knowledgeable workers widens, employers in all industries will need to pay close attention to recruiting and retaining older, experienced employees," noted a recent national survey on the aging workforce by the company's information and policy resource center.
"This is particularly true in sectors such as health care, government, education, manufacturing, energy and aerospace, which are expected to be especially hard hit by the loss of veteran workers when millions of baby boomers begin to leave the workforce for good."
Boomers' Influence
"Companies are making a big mistake assuming that older employees will not have the will, motivation or physical stamina to continue working," says Wharton management professor Sigal Barsade.
And given that today's older workers tend to be in better health than their predecessors, what does the term 'older employee' even mean these days, she asks.
Companies that fail to tap into the older workforce "are not only behaving unfairly," Barsade says, "but are likely missing out on excellent employees who have important institutional knowledge and are still ready, eager and willing to do excellent work."
Based on statistics from the U.S. Census Bureau that were reported in September by the Congressional Research Service, the demographic profile of the U.S. workforce will "undergo a substantial shift" as the baby boomers born between 1946 and 1964 approach retirement and fewer younger people join the labor force.
The number of people between the ages of 55 and 64 will grow by about 11 million between 2005 and 2025, while the number of people who are 25 to 54 years old will grow by only five million.
According to a MetLife Mature Market Institute survey, Americans between the ages of 55 to 70 stay in the workforce for two primary reasons: "financial necessity and the desire to remain active and/or try something new."
Those who are now in their 60s and early 70s represent "perhaps the last generation fortunate enough to have broad access to corporate pensions and Social Security," the survey adds. "Boomer employees age 55 to 59 face greater financial uncertainty."
Wharton professor Olivia S. Mitchell points out that the sheer size of the baby boom cohort -- estimated at around 78.2 million -- attracts attention.
"The baby boom generation has been so large that everything it does influences popular culture and media reports, which is one reason there is now a lot of emphasis on this," says Mitchell, executive director of Wharton's Pension Research Council and director of the school's Boettner Center for Pensions and Retirement Research. "But I do think ... that boomers will change the definition of retirement."
Indeed, in her new book, Redefining Retirement: How will Boomers Fare? Mitchell and two co-authors argue that "people are not going to follow the old pattern of work, work, work and then quit. Instead, they are going to take what we call bridge jobs -- leave their long-time career employer and move into part-time transition arrangements."
Some will start companies and become entrepreneurs and some will go into volunteer jobs, Mitchell says.
"This is different from previous generations, and there is some evidence that expectations have changed. What we don't really know is, will the demand for these boomers be there? Even if the supply side of the labor market keeps going down, will employers turn to older workers? I think it's too soon to say."
Mitchell does acknowledge that in some industries, "this has already happened. There has already been outreach to older workers -- such as in call centers, hotel reservation companies and seasonal companies. But these are not permanent jobs, which points to the definition we use to redefine retirement. In this new definition, people ... won't just reach a [certain] age and stop working."
Wharton management professor Peter Cappelli, director of Wharton's Center for Human Resources, adds another word of caution when it comes to the employment landscape for older workers.
"Companies are still pushing them out through early retirement programs," he notes, adding that some employers actively work to retain older workers "for a few jobs with true legacy skills. ... It's worth remembering that employees always left companies. There is nothing new about this. The way companies kept the knowledge was through development programs that prepared younger workers to do those jobs. The big issue is that companies have more or less abandoned those programs."
The 'Eldercare Generation'
In an effort to attract and keep older employees, some employers have responded with a menu of benefits that, by law, are offered to all employees but clearly appeal to the older worker. Here are some examples from the AARP's 2007 list of top employers for workers over 50:
* SC Johnson, the consumer packaged goods company based in Racine, Wisc., provides an on-site medical center and wellness, fitness and recreation programs; an on-site education program that provides lifelong learning and college credits; paid sabbaticals to experienced employees; comprehensive financial benefits; and retirement planning tools.
* Mercy Health System of Janesville, Wisc., provides a variety of alternative work arrangements, including what the company calls "float" options (the ability to work at different facilities or departments) and "seasonal work" that allows employees to go on leave for lengthy periods while maintaining their eligibility for benefits.
* Michelin North America provides flexible work schedules, temporary assignments for workers and access to job rotations, plus a part-time work policy for retirees.
* The Principal Financial Group, based in Des Moines, Iowa, offers what AARP calls an "ambitious working caregiver leave program" that allows employees the option to work a part-time schedule for up to 12 weeks a year while maintaining job security and full benefits.
AARP has long emphasized the benefits of eldercare programs for older workers, and has even called baby boomers with aging parents the "Eldercare Generation." As AARP points out, providing such benefits is simply good business; companies realize a $3 to $14 return on every $1 they spend on eldercare benefits. It's no coincidence that 42 of the 50 companies on this year's "Best Employers" list offer eldercare benefits.
Deborah Russell, director of Economic Security and Work at AARP, believes that the number of boomers who work past retirement will continue to rise.
According to estimates, nearly 20 percent of the workforce will be over age 55 by 2010. The trend is driven by "money issues and the cost of health insurance -- the top two reasons that dominate why people will remain working," Russell says. "Longevity will drive it as well. If you're living until your mid-80s, you have a long time to work."
But she agrees with Mitchell that the trend towards older workers in the workforce "doesn't cut across every industry. You talk about advertising and high tech, and the demographic skews to the younger worker. But if you look at demographics in general, there are fewer younger workers, period. There are industries that are going to feel the pain -- health care, for instance, as well as teaching. And the replacement rate of engineers is very low."
Russell does not anticipate that companies will ever return to the traditional defined-benefit plan, even if they are eager to recruit younger employees or keep older workers.
"I don't see that happening. That model no longer works. Clearly, flexibility is going to be important, and defined-benefit plans are not portable."
Instead, AARP research shows that what companies must offer "in order to keep workers and attract new ones are flexibility and the ability to retrain," says Russell. "Workers will want to keep their skills up to date. An employer should not assume when looking at 62-year-olds that they don't want to learn something new. That's not the case any more."
In addition, the AARP found that "age discrimination is the single largest barrier for those 50 plus who want to continue working.
A Win-Win for Both Sides
Though labor force participation historically begins to fall for men and women after age 55, Census Bureau data shows that the percentage of men and women age 62 and older who work has risen over the past 10 years.
According to data, 49 percent of men aged 62 to 64 were employed in March 2007, compared with 43 percent in 1995 and 42 percent in 1990; among older men aged 65 to 69, 33 percent were employed in March 2007, compared with 27 percent in 1995 and 26 percent in 1990.
A similar increase is noted among female workers. Among women 62 to 64 years old, 42 percent were working in March 2007, compared with 32 percent in 1995 and 28 percent in 1990; in women 65 to 69 years old, 26 percent were working in March 2007, compared with 17 percent in 1995 and 1990.
These older workers are not just punching the clock on part-time jobs. Older Americans who work are increasingly pursuing full-time employment.
In March 2007, 81 percent of employed men aged 62 to 64 were working full-time, compared with 77 percent in both 1995 and 1990; among men aged 65 to 69, 71 percent who were working in March 2007 were employed full-time, compared with 57 percent in 1995 and 56 percent in 1990.
Among working women aged 62 to 64, 69 percent worked full-time in March 2007, compared with 60 percent in both 1995 and 1990; among working women aged 65 to 69, 54 percent were employed full-time in March 2007, compared with 43 percent in 1995 and 44 percent in 1990.
These workers won't be penalized for working more than another decade. The Senior Citizens Freedom to Work Act in 2000 repealed the Social Security earnings limit, allowing workers 65 through 69 to earn income without losing Social Security benefits; if they choose, workers can now postpone receiving Social Security benefits until age 67.
The trend should benefit both employers and employees.
As Lynn Selhat, an editor at Wharton's Center for Human Resources, points out, the growing push by some companies to meet the needs of an increasingly older workforce "is not at all just about a lack of younger workers. It's about what the older workers bring to the companies."
Some companies are working hard "not only to retain, but also recruit, older workers," says Selhat, who is collaborating with Cappelli on a book about the strategic benefits of older employees.
"Companies are bringing on those who are 50-plus. When they talk about older workers, they talk about dedication, understanding customers, loyalty. Experience is important. And older workers tend to have experience."
Republished with permission from Knowledge@Wharton (http://knowledge.wharton.upenn.edu), the online research and business analysis journal of the Wharton School of the University of Pennsylvania.
October 25, 2007 Copyright 2007© LRP Publications
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