the business case for workers age 50+ deborah russell, director, workforce issues aarp

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

10%

-7%

14%

51%43%

13%

-10%

0%

10%

20%

30%

40%

50%

60%

20-24 25-34 35-44 45-54 55-64 65+

Employee Perspective

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% of 50-70 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

0%

10%

20%

30%

40%

50%

60%

70%

1981 1991 2001

Defined Benefit Only

Defined Contribution Only

Both

Why People Think They’ll Work in Retirement

Pre-retirees age 50-70

32%

50%

54%

58%

59%

66%

71%

77%

85%

87%

Pursue a dream

Learn new things

Need money

Be around people

Help other people

Need health benefits

Do something fun

Be productive or useful

Stay physically active

Stay mentally active

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 dependent parent

23% had an adult child move back home

16% were providing child care or day care for grandchild

Employer Perspective

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

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 CompensationCash 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

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.

What’s In it For Business?

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