Demographic Changes and Business Operations in the United Kingdom - Research Paper Example

? Changing Demographics: Issues and Challenges for Business Executive Summary Ageing of the population is a long-term trend that started decades ago in the European Union and the UK. This ageing has been most visible in the age structure development, reflected in the increasing share of older citizens, coupled with a declining share of persons in the working age in the total population. Demographic changes in Europe have had several impacts on business organizations on the continent. First, these demographic changes lead to fewer young workers and a profound change in labor Force Demographics. Additionally, a growing mismatch between the employer’s skill requirement and available talent has resulted from decreased graduation from colleges due to a decreasing population of young people. This has seen an increase in employment opportunities for previously under-utilized labor-force sources like women and generation U. Finally, demographic changes in Europe have created an increasingly global and mobile market. CHANGING DEMOGRAPHICS: ISSUES AND CHALLENGES FOR BUSINESS Introduction European states face challenges with the composition of their age structure changing substantially now and in the near future. Demographic change also requires development of urgent social policies. The concept of demographic change can be defined as the age structure of a population adjusting to various changes in the living conditions. These changes in the societal age structure composition result from social shifts. The European Union population pyramids show that, after the Second World War, the first two decades experienced especially high rates of birth. However, since the 1970s, professional demographers have begun to observe negative trends in Europe’s population structure. Lower rates of birth come, in the present and recent past, with ever-increasing life expectancy among Europeans. Ongoing low rates of birth have seen a progression towards an ageing society, as rates of mortality remain low. Consequently, approximately half of population growth forecasted in Europe between 2005 and 2050 will be because its population is living longer, rather than an increase in birth rates. Furthermore, the baby boomer generation is now coming past its retirement threshold and highlights a turning point in the development of demographics. This paper aims to discuss the impact of demographic changes on business operations in the United Kingdom and the larger European Union. The challenges of demographic change refer to the adjustments or changes arising from a society that is aging. Ageing of the population is a long-term trend that started decades ago in the European Union and the UK. This ageing has been most visible in the age structure development, reflected in the increasing share of older citizens, coupled with a declining share of persons in the working age in the total population. In the preceding two decades, the working age share in the European Union increased by 0.3% while that of the older generation grew by a more significant 3.7%. Because of this, top of the age pyramid for the EU-27 for the year 2012 has become larger as compared to that in the year 1992. This growth in older people’s relative share can be explained by an increase in longevity, which has been in evidence for some decades as life expectancy has also increased. This development is referred to as the population pyramid’s ‘ageing of the top’. On the other hand, low fertility levels have remained across the European Union, resulting in a decreased share of the younger generation. This is referred to as ageing at the bottom. The EU-27s median age development of the population also illustrates an ageing population. The median age has gone up from thirty five and a half in 1990 to forty one in the year 2012. The median age has risen in all the EU member states by at least seven years. Impacts of Demographic Changes in the EU and UK Never before has there been such a swift change in demographics, in Europe. On the continent, the employers are coming face to face with the challenge that, in spite of growth in global population, they will be needed to recruit from a shrinking and aging workforce. Demographic changes in Europe have had several impacts on business organizations on the continent. 1. Fewer young workers The above is considered as a major challenge, which has to be dealt with by the European organizations. At BMW, an analysis of demographic implications of employment in Germany was carried out. The decrease in birth rates some thirty years ago means that there are fewer young workers coming to take up jobs that the baby boomer generation has left through retirement (Blanpain, 2012: p21). In response, the German government raised the age for retirement, before whose attainment one cannot get a state pension, to sixty-seven years. Worldwide, BMW has ninety six thousand employees, with about seventy-five percent employed in the home country, Germany. The average age of these workers, due to changing demographics, is expected to rise from forty years presently to forty-six by the year 2020. Around half of its staff is over the age of fifty, which is expected to rise to approximately fifty percent in the coming ten years. The working assumption is that most German companies, like BMW, will have over fifty percent of its employees over the age of fifty by the year 2015. For the Unions operating at BMW, this threw up a dilemma. Over a long period, they had been involved in fighting for shorter working lives. Cooperation with companies to get people working for a longer period contrasted greatly with their earlier stance to fight against this (Blanpain, 2012: p21). 2. A profound change in labor Force Demographics In spite of the population’s projected growth around the world of 7.6 billion in 2020, the population of working-age people is set for a decline in most European countries (Blanpain, 2012: p24). Germany already sees more people exiting the workforce than those workers that want to enter this market. In the European labor market, the year 2010 marked the beginning of an era where there were more workers retiring than there was joining the labor-force. This labor gap presently stands at a manageable twenty thousand. However, this is expected to climb to eight and a third million by the year 2030. By the end of the present decade, large economies like the UK and Russia will see more people reach retirement age than will be orienting to the workforce. This should see other economies outside the EU like Mexico and Brazil benefitting from the change in demographics with a productivity surge in these countries. These workers in the developing world will also move to work in the EU, or the EU companies could outsource jobs with the aim of reducing labor costs (Blanpain, 2012: p25). To counter this, EU countries, need to equip their younger generation with adequate economic and educational opportunities for the development of their skills. 3. A Growing Mismatch between skill set required by employers and available talent Approximately thirty-one percent of employers in the EU and the UK experience difficulty when employing young people into the vacated positions because of a shortage of talent in the respective markets (Kunisch et al, 2011: p11). When it comes to getting employees with the required critical skills, this becomes increasingly more difficult. Sixty five percent of all companies in the EU and the UK, with more than eighty percent of companies in fast growth economies like Germany seem to be having problems in finding employees possessing the requirements needed. It begs the question why the companies cannot find the right talent given the growing ranks of workers with a college-education, coupled with high unemployment in educated markets. This is partly due to the rising levels of skill needed and the failure of educational systems to churn enough talent to satisfy the changing needs of an ageing population (Kunisch et al, 2011: p12). Although access to education is highest in the EU and the UK, there is a decrease in students graduating with the desired skills by EU and UK employers. 4. Women and Generation U to Fill the Gaps With the increasing desperation for workers, most companies in the EU and the UK will become more open to accepting diverse employees like women and older workers (Kunisch et al, 2011: p14). The EU believes that eighty percent of the baby boomers will go on working in full-time and part-time past the retirement age currently set out. Generation U, or unretired, workers will fuel about ninety-three of the EU labor markets growth through to the year 2016. Women, who are an increasingly well-educated talent source, have entered the labor-market in even greater numbers over the last two decades. Their talents, however, are still greatly under-utilized. This is particularly true in Eastern European countries that still have traditional views towards the roles of different genders. 5. An Increasingly Mobile and Global market Greater integration and economic development across the markets in the previous decade or so has motivated many people with talent to explore overseas opportunities. Cross-border migration in the EU has spiked over 42 % to 214 million from 150 million (Macura, 2009: p7). Increased unemployment witnessed many developing countries has led to a migration into the EU with an aim of supplementing an already ageing and decreasing labor-force. As European economies recover, the demand for labor is expected to be even higher, leading to increase in immigrants from developing countries. Some countries in the EU like Norway have started to take initial steps to reverse or soften restrictive policy changes, which had been implemented during the recession. This is vital if the EU is to get an additional work force to help improve their economies in recovery. 6. Employees are Gaining More Bargaining Power Over the last 2 to 3 decades, the bond between the employee and the organization has become increasingly weaker, even for corporate cultures in which loyalty was once a prized asset. Increased company needs, coupled with a desire aimed at cutting of costs, first led to an increase in lay-offs in the EU, followed by an “un-European” relationship where expectations were not for decades of service but rather for only a few years of service (Macura, 2009: p10). In the recent unemployment climate, this new social contract was more advantageous to the employer. However, as the market turns, skilled employees are braced to reap the benefits. This new demographic of workers will want to understand better their employment options, as well as affect how decisions are made. In spite of the substantial regional differences in population development, as well as their impact, demographic changes will portend extensive consequences for various member state societies. Therefore, the increasing population of old people requires adjustment in the socio-political area anchored in a partial national or supranational area of responsibility. Change in demographics can thus be understood as a mainstream issue that should be considered among others in employment policies and pension, family policies, education, regional and city planning, as well as integration and immigration policies. References Blanpain, Roger. (2012). Challenges in european employment relations. Alphen aan den Rijn : Kluwer Law International, cop. Kunisch, Sven. Stephan, Boehm. & Michael, Boppel. (2011). From grey to silver : managing the demographic change successfully. Heidelberg : Springer-Verlag Berlin Heidelberg. Macura, Miroslav. (2009). The new demographic regime : population challenges and policy responses. New York: United Nations. Read More