Many, including TomorrowToday, have been saying for years that the aging population in Europe (and elsewhere), poses the the biggest economic challenge of the future. A recent Economist (April 9-15th) made this theme their cover story and for Boomers and Gen Y alike, it didn’t make for comfortable reading! The underpinning message was that plans to change the retirement age – America is heading for a retirement age of 67 and Britain for 68 – are not bold enough. The suggestion was that the age in Britain needs to be pegged around the 70 mark by 2040. Compounding this problem is that fertility rates are declining which means less workers to support pensioners. Economic growth is a function of the size of the workforce, the amount of capital employed and the rise in productivity. Demographics point to a shrinking workforce in years to come and this means that growth will have to be sourced from capital investment and a rise in productivity. The Economist suggests that by 2050 there will be just 2.6 American workers supporting each pensioner and that the figures for France, Germany and Italy will be 1.9, 1.6 and 1.5 respectively. It represents a double-whamy for an already fragile first world economy. For one thing, working longer will not only boost output but it will also reduce the length of time that pensioners need to be paid. Healthier living and better health care mean that as Boomers head to retirement, they do so healthier and fitter than any preceding generation. In short, they aren’t ready to retire nor for the most part do they want to retire – especially if that translates as ‘sitting and doing nothing’!
Whatever the finer details of the debate are, what is beyond doubt is that working practices and attitudes will need to change. For one thing, there is great value to be had in employing older people for their skill sets, maturity and wisdom. The point was made that had Winston Churchill retired at the accepted age of 65 his career would have been regarded as something of a failure. It was post 65 that Churchill became Prime Minister of Great Britain and made those famous speeches that rallied a nation in the face of a global threat and which have echoed down the corridors of time ever since. Churchill tops most polls as the, ‘greatest Briton ever’ and the achievements that have led to this acclaim, happened after he had passed the 65 marker! We have been guilty of dismissing many who have much to offer long before they feel ready to make way in the work-place. To believe that by getting rid of older employees we are creating jobs for younger employees, is to rely on false logic in the context of the broader debate .
One thing that will need to be revisited is the scale of paying more for older people precisely because of these attributes. People’s productivity does decline with age and pay should reflect this falling off. Traditional seniority systems under which people get promoted and paid more as they age need to change. Merely highlighting this obvious point is a sober realization of just how big the challenge is when talking about the need to change mindsets and attitudes. So, on the one hand we need to recognize the benefits to be gained by keeping people engaged for longer in the work-force; yet we also need to find a different way to reward and recognize that contribution given the reality of a drop-off in productivity that accompanies aging.
If we don’t change the current ‘rules of the game’ – there might not be a game to be played in the not too distant future! It is that simple; it is that complex.