Worries that Aging Workers Will Bring Brain Drain to Indiana

According to a report, whose findings will be shared at the “Managing the 21st Century Workplace: Value and Impact of Older Workers” conference, nearly 29% of Indiana residents will be age 55 or older by 2030, versus 22.4% in 2005. Thus, Chris O'Malley reports, "employers and economic development leaders, already lamenting that 36 percent of Indiana college graduates leave the state after graduation, may now have another 'brain drain' to worry about."

While some economists say fears of a labor shortage are unfounded because of expected productivity gains and other offsetting factors, Barry Spiker, a senior fellow at the University of Indianapolis’ Center for Aging & Community, warned: “We’re facing a crisis that’s just never been seen before in this country, ever.”

The conference will share new statewide data, including the findings of “Gray Matters: Opportunities and Challenges for Indiana’s Aging Workforce,” a report written by former Indiana Economic Development Council President Graham Toft and Nadine Jeserich, now both working at local economic development firm Thomas P. Miller & Associates. According to the report, as older workers leave the work force, Indiana won’t see as much of a brain drain as many other states, however, since only 11% of the state's population 55 or older holds a bachelor’s degree or higher, placing it 46th among all states. In addition, only 16% of that population are in high-skill occupations—placing Indiana 42nd. Finally, Indiana ranks dead last in coaxing older workers back to college.

Source: "Employers brace for age shift" Indianapolis Business Journal (May 15-21, 2006)

Hewitt Study Finds Company Efforts Positively Impact U.S. Employees’ 401(k) Saving Habits

Hewitt Associates has released its report “How Well Are Employees Saving and Investing in 401(k) Plans, 2006 Hewitt Universe Benchmarks,” which finds that efforts by companies to help U.S. employees save for retirement--including putting the 401(k) plan on autopilot, simplifying plan choices and targeting communication--have resulted in improvements in employees’ retirement saving and investing behaviors. Nevertheless, the report also discloses that nearly half of employees examined still failed to participate in their 401(k) plan or failed to contribute enough to obtain the full company match.

Source: Press Release Hewitt Associates (May 16, 2006)

McKinsey Survey Finds U.S. Workers Retiring Early

Despite growing financial pressure to stay in the workforce, a report by McKinsey & Co., based on a national survey of 3,086 people, shows that American workers are far more likely to be forced into an early retirement than many expect. Writing for the LA Times, Jonathan Peterson reports that 40% of retired workers left their jobs sooner than they had planned, usually because of health problems or the loss of employment, and that while 45% of people currently employed planned to keep working past age 65, only 13% of polled retirees had done so.

McKinsey's data do not mean that the trend toward a later retirement age is changing, experts say. But the facts counsel caution to those who discount the challenges of working into their late 60s or beyond, and they suggest that many who assume they will work late in life may be mistaken.

Source: "Many Forced to Retire Early" Los Angeles Times (May 15, 2006)

Hong Kong: Low Retirement Age Threatening Brain Drain

Doug Crets writes that attendees at an HSBC retirement forum were told by a researcher on aging and a legislator that "Hong Kong's low mandatory retirement age--coupled with its rapidly aging population and one of the world's lowest birth rates--will lead to a 'brain drain' unless the government and individuals plan for the future." However, he also notes that a recent survey on aging shows that most Hong Kong people believe the government should enforce mandatory "additional private savings" and increase the retirement age.

Source: "Aging expert warns of brain drain" The Standard (May 16, 2006)

The End of Retirement

The U.S. Department of Labor's Monthly Review has published an article by Teresa Ghilarducci, a teacher of economics at Notre Dame University and a visiting professor at the New School for Social Research, about the signs of the end of retirement all around. She argues that "the changes in the retirement future of Americans stem from the decline of union contracts, a dramatic shift in presidential and congressional attitudes about government responsibility for social insurance, and the substitution of defined contribution or 401(k)-type accounts for traditional defined benefit pensions."

Twenty years of experience with 401(k) plans reveal that workers will never be able to accumulate enough assets in individual accounts and choose payout options that will provide a steady stream of income for life after retirement. This means that Americans will turn to the option that American adults have always relied on—contingent, low-paying jobs—and will lose one of the few remaining accomplishments of the American working class, retirement.

However, given that defined contribution plans are here to stay, she believes taht there is barely a regulatory framework in place to protect the public interest. She suggests that sensible protections that already govern the investment behavior of defined benefit plan fiduciaries could be a good place to start, including limiting the percent of a portfolio that is allowed to be in the employee’s company’s stock, banning lump sum payments, and mandating worker representation on pension boards.

Source: "The End of Retirement" Monthly Review (May 2006)

Working Longer: Does it Help People Be Healthier, Happier?

Esteban Calvo, a graduate student in Sociology at Boston College and a graduate research assistant at the Center for Retirement Research at Boston College, has published a paper--"Does Working Longer Make People Healthier and Happier?"--that suggests that longer working lives will help most people maintain their overall well-being. The paper addresses the impact of late-life paid work on physical and psychological well-being, and it includes a review of the literature on work at older ages and elderly well-being.

While working longer seems beneficial for most people, it will likely have negative consequences for some. The type of job seems to be a critical factor. Undesirable jobs can wash out the potential favorable effects of work. Another critical factor is the opportunity to continue working. Older workers may be willing to prolong paid work, but, in order to find a job, they need to be able to work and have a real demand for their labor.

Calvo also suggests some areas for future research. In particular, since an increase in the early retirement age reduces the ability of people to voluntarily decide their labor force participation, he wonders whether less control in the work/retirement decision could have an adverse impact on the well-being of older individuals. Also, he notes that variations in the benefits of work as people move through their 60s should be examined--even though work at older ages seems beneficial for many, the benefits may decrease, or stop increasing, after a certain age or amount of time worked per year.

Source: Issues in Brief No. 2 Boston College Center for Retirement Research (February 2006)

United Kingdom: Age Positive Week

Employers across Great Britain were called to join the fight to tackle ageism at work during Age Positive Week (May 8-12). The Week's goal was to challenge ageist stereotypes at work and promote positive examples of employers and employees defying ageism.

Source: News Release Age Positive (May 6, 2006)

Survey: Firms Ready to Respond to Challenge of Aging Workforce

According to the latest Leadership Pulse™ survey from Dr. Theresa M. Welbourne of eePulse, Inc. and the Ross School of Business, University of Michigan, usinesses are ready to respond to the 17% of the U.S. workforce that will be 55 and older by 2010. The study was designed to understand the current effects of the aging workforce (AWF) and readiness to address future AWF issues.

Specifically, of the 369 general managers to C-level executives surveyed, 62% are ready to retain older workers, 49% are ready to recruit older workers, 43% agree that the AWF currently affects their organization’s culture, 42% agree that the AWF currently affects the quality of talent in their organization, and 41% agree that the AWF currently affects their ability to compete in their particular industry.

A powerpoint presentation of preliminary results is also available.

Source: News Release ClickPress (May 8, 2006)

Commentary: Companies Must Look Across Generations and Borders for Talent

Building on the results of the Human Capital Institute's survey of HR executives, its executive director Allan Schweyer writes that "the winners of the war on talent will welcome talent of all ages and varieties, and they will build their networks into the farthest reaches of the planet." Given the widespread shortages of talent that are already occurring across the country, he finds a strange paradox in the survey findings taht While more than half of the executives agreed that the aging workforce is an issue that must be dealt with because it will lead to a workforce shortage, less than one-quarter said that the aging of their workforce is an issue that is strategically very important to them.

It is imperative that executives and senior managers, from small, mid-size and large firms, understand the implications of our aging and diversifying domestic talent pools as well as the dynamics of a global workforce that is expanding at lightning speed. For human resources leaders, knowledge of best practices in retaining older workers is key. For recruiters, knowledge of top sources for recruiting the diverse workforce and of the factors that appeal to diverse recruits is critical.

Source: "Build Talent Pipelines Across Generations, Cultures and Borders" Inc.com (May 2006)

Reverse Job Fairs for Older Workers

A “reverse” job fair has been held at the Metro Career Center in San Diego, at which job seekers 55 and older stood by while employers approached them to check job qualifications and to talk. The event was put on by Community Options, a federally funded group that has a program to help low-income older people with job training and placement, and by the Oasis Institute, a private nonprofit organization partially funded by a grant from AT&T that helps older individuals with career and education opportunities.

According to an article by Michael Kinsman, Community Options and Oasis teamed up to coach the workers on job-search skills and some personal computer training over a four-month period so they would qualify for a variety of jobs. Charlotte Tenney, a Community Options senior employment counselor said “We thought it might make a difference to teach job candidates how to sell themselves to the employer.” Tenney came up with the idea of having employers approach individuals: “We really wanted to try something different.”

Source:"At this job fair, older workers waited for employers to visit" San Diego Union-Tribune (May 7, 2006)

Removing Obstacles for Older People Looking for Work

Randi F. Marshall, writing for Newsday, tells stories of both why finding work is tougher for older people and what employers can gain by clearing away the obstacles. Despite the efforts of many older people seeking work to e-mail resumes and learn new skills, Marshall says that "some mature workers have come across roadblocks that younger job-seekers haven't encountered. Employers, said some experts, look only at the immediate price tag--in salary, medical benefits, pensions and other areas--and not at the benefits of hiring the over-50 crowd."

Perhaps the most difficult part of the process is the interview. It's hard for older job- seekers to sit across from an interviewer who is 20 years younger than they are, or to look around at a roomful of job-seekers who are just out of college--especially when their last interview may have been more than 20 years ago.

However, one staffing firm quoted by Marshall, advises that interviews should focus on what a worker can bring to the company and the worker's knowledge about that company--not the worker's previous experience.

Source: "A job in itself" Newsday (May 6, 2006)

Large U.S. Businesses Continue To Shift Ffrom Traditional Pensions

Watson Wyatt Worldwide has reported new analysis showing the largest U.S. companies continued to shift from traditional pensions to 401(k) plans in 2005. Specifically, it found that only 37% of Fortune 100 companies offered a traditional pension plan to new hires in 2005, down from 42% in 2004, 50% in 2002, and 89% in 1985. At the same time, the percentage of companies offering workers only a 401(k) or other type of defined contribution plan increased to 36% in 2005, up from 25% in 2004 and 17% in 2002.

In light of these results, Watson Wyatt Worldwide urges Congress to act on long-standing funding and regulatory issues affecting pensions. At the same time, the firm’s experts say employers should get a true reading of their plans’ cost structure and of related workforce management issues before making plan changes.

Source: News Release Watson Wyatt (May 4, 2006)

Case Study: Shadowing Program for Boomer Succession Plans

According to an article written by Barbara Rose of the Chicago Tribune, International Truck and Engine Corp. started a program of assigning younger employees to "shadow" veterans before the older workers retire in 2004 after a report to the company's board showed that half its 600 managers and executives would be eligible for retirement within five years. As Dan Ustian, chairman, the company's president and chief executive officer, said: "All that knowledge is really important--the culture, the relationships with customers. It’s vital we get a head start."

Among other things, bosses at International were coached on how to initiate talks with retirement-eligible employees without running afoul of age discrimination laws. They asked questions such as, "Where do you see yourself in five years?" and, "Are there other positions you'd consider?" "Many of the conversations are about trying to get them to stay and groom a successor," said Greg Elliott, vice president for corporate human resources and administration. Then, the company would work with the retiring employee; for example, with one senior executive, his package, which included a retention bonus, kept him on 12 months, long enough to identify a successor and complete a six-month process of job shadowing.

Source: "Preparing for the baby boomer brain drain" Portsmouth Herald (May 3, 2006)

Canada: Pension Crisis Deepens

According to the 3rd annual pension risk survey by The Conference Board of Canada and Watson Wyatt Worldwide, 61% of Chief Financial Officers (CFOs) say the pension crisis in Canada is widespread and likely to persist beyond the next few years. In addition, only 19% said the crisis is widespread but unlikely to become permanent--down from 23% in 2005 and 39% in 2004, and just 15% said the pension situation is isolated to relatively few organizations.

Source: News Release Conference Board of Canada (May 2, 2006)

Japan: Older Workers Retunring to Labor Force

David Pilling, writing in the Financial Times, reports that people over 60 are being drawn back to the workforce as it rises for the first time in eight years. "The willingness of those who left the jobs market to re-enter also shows the mechanisms by which the labour market might respond to the challenges of an ageing society, which is shrinking the size of the traditional workforce."

According to official figures, by last year, there were 9.67m people aged 60 or over either working or looking for work, a 450,000 increase from five years earlier. He also writes that officials from The Bank of Japan say every business sector is now suffering from labour shortages, which could push up wages and lead to further hiring of people who had drifted out of the labour market.

Source: "Japan sees first rise in workforce in 8 years" Financial Times (May 1, 2006)

United Kingdom: Acas Warns Employers To Act Now To Meet Age Discrimination Challenge

Acas, an employment relations organization, has released a guide to help employers and individuals understand how the age discrimination legislation effective October 2006 will affect them. More significantly, Acas warns employers to act now to beat the deadline; according to Acas Chair Rita Donaghy, "A lot of organisations are under the impression that the regulations will not affect them--this simply is not true. Age discrimination can affect employees of any age, not just the young and old."

The Acas pamphlet "Guidance on Age and the workplace" is available for free online.

Source: Press Release Acas (Aprl 27, 2006)

Survey: Employers Contemplating Changes in Retiree Drug Benefits

According to a survey developed by Towers Perrin and conducted by the International Society of Certified Employee Benefit Specialists (ISCEBS), a number of employers sponsoring post-65 retiree medical programs are rethinking their prescription drug strategies for 2007, and there’s greater interest in approaches that do not involve taking the Medicare Part D subsidy. In particular, the survey showed that 65% of plan sponsors chose to retain a prescription drug benefit and take the subsidy in 2006, 63% said they had not decided on how to respond to Medicare Part D beyond 2006. The two most popular choices for those (37%) with a 2007 strategy are to offer a supplemental plan in coordination with Medicare Part D plans available in the market and to arrange to offer a specific Part D plan. In addition, 12% indicated that they planned to eliminate all retiree medical coverage in 2007 or eliminate prescription drug coverage.

Source: "Employers With Retiree Drug Benefits Charting Different Courses for 2007" Towers Perrin Monitor (April 13, 2006)

Analysis of Aging Workforce Suggests Declining Economic Value for Many Firms

Francesco Daveri and Mika Maliranta presented their paper "Age, Technology and Labour Costs" at 43rd Economic Policy Panel Meeting in Vienna (April 20, 21, 2006). According to their abstract, the paper seeks to answer the question "Is the process of workforce aging a burden or a blessing for the firm?" by providing evidence on the age-productivity and age-earnings profiles for a sample of plants in three manufacturing industries (“forest”, “industrial machinery” and “electronics”) in Finland.

Our main result is that exposure to rapid technological and managerial changes does make a difference for plant productivity, less so for wages. In electronics, the Finnish industry undergoing a major technological and managerial shock in the 1990s, the response of productivity to age-related variables is first sizably positive and then becomes sizably negative as one looks at plants with higher average seniority and experience. This declining part of the curve is not there either for the forest industry or for industrial machinery. It is not there either for wages in electronics. These conclusions survive when a host of other plausible productivity determinants (notably, education and plant vintage) are included in the analysis. We conclude that workforce aging may be a burden for firms in high-tech industries and less so in other industries.

On the more optimistic side, they do note in the paper that "older workers int eh future will be likely more educated than they are today and therefore, as also implied by our results, they may be more apt to deal with the Next Big Things."

A draft of Working Paper No. 309 is available on the IGIER website.

Source: Abstract Innocenzo Gasparini Institute for Economic Research (IGIER) (April 11, 2006)

Burgeoning Number of Older Women Being Forced Back into the Workplace

Writing for the Chicago Tribune, Bonnie Miller Rubin tells the story of how women are particularly vulnerable to the eroding retirement backstops--Social Security, company pensions and personal savings--because they tend to start working later, earn less and live longer. Citing U.S. Department of Labor statistics that show that the number of women over 65 in the workforce has increased by 38% since 1980, while male participation has remained stable, she shows how ill-prepared many women are for this stage of life, which can stretch two decades beyond age 65.

Women's lifetime earnings look different on average than those of men. Women are concentrated in low-wage or part-time jobs and can lack experience dealing with financial matters. They are more apt to drop out of the workforce to be a caregiver, resulting in more meager assets. Such reasons help explain why older women are flocking to job fairs and filling out applications in record numbers, experts say.

Rubin quotes Cindy Hounsell, president of the Women's Institute for a Secure Retirement, who testified about the retirement gender gap before the Senate Committee on Aging, that as saying that it is a "startling post-retirement picture for millions of women who have worked their entire lives."

Source: "More working women find they can't afford to retire" Chicago Tribune (April 24, 2006) Need to register (free)

Global Retirement Survey Shows Traditional Retirement Model Weakening

People want to abandon traditional models of retirement in favour of self-sufficiency and a mix of work and leisure, according to what HSBC Holdings calls "the largest global survey into attitudes towards ageing and retirement ever conducted." Following up on its initial survey released in 2005, HSBC expanded its survey to cover 20 countries. From its survey of 21,000 people and 6,000 companies, the survey finds, among other things, that:

• 43% want to self-fund retirement
• 36% support compulsory saving for retirement--the first choice option for funding later life
• 72% want to scrap mandatory retirement
• 49% of employers recognise the high value of older workers, but many lack the practices to attract and retain them

Stephen Green, Group Chief Executive, HSBC Holdings plc, said HSBC's research “shows that individuals increasingly expect to bear their own costs in later life, but governments and business must understand their role in continuing to support individuals. They cannot afford to shy away from the enormous challenges and opportunities presented by global ageing.”

Future of Retirement: What the world wants, written in conjunction with the Oxford Institute of Ageing, is available for download as either an executive summary, a consurmer report, or an employer report. In addition, country-by-country summaries are available at The Future of Retirement website.

Source: News Release HSBC Holdings plc (April 26, 2006)