How Employers Are Dealing with the Retirement of the Baby Boomers - Research Paper Example

How Employers Are Dealing With the Retirement of the Baby Boomers The current business environment is facing the risk of mass retirements by baby boomers and this presents very serious consequences for employers. This paper covers how employers are responding to the retirement of baby boomers including employee retaining and sustaining, change of attitude, and change in healthcare benefits. Introduction/Background We are currently living in a knowledge-based economy which implies that employers can best create value through the effective development and application of intellectual capital. Therefore, it is very obvious that employers stand to incur huge losses whenever there is loss of knowledge. However, it is important to note that knowledge is a concept that is multi-dimensional and its value can only be determined by circumstances, so employers are faced with a very complex problem in solving the problem (Datta, Guthrie, Basuil & Pandey, 2010). Management consultants have raised a number of concerns stating that baby boomers are presenting a very complicated problem to employers. Research studies reveal that employers are going to experience and impending mass exodus of employees and this will have a very serious effect on the operation of organizations than never before. The reality is that baby boomers have played an integral role in the success of organizations and they will be retiring in large numbers than never before. As baby boomers will are living their organizations, employers have been conducting careful examinations of the consequences of their exit and have formulate a number of necessary steps to ensure that there has been a smooth transition. By 2010, baby boomers were 48-66 years of age and were retiring from their employment positions. The consequence of the mass exodus was that the government’s entitlement programs and pension plans were strained. However, there was a sudden concern over vacant positions that were as a result of the mass retirements of baby boomers. In the United States, a recent research study revealed that more than 25 percent of businesses in the country have done very little with regards to planning for the effects of mass retirements of baby boomers. The study also predicted that it is expected that there will be significant changes in the workforce demographics of different industries (DeRue, Hollenbeck, Johnson. & Jundt, 2008). This is based on the fact that baby boomers are expected to retire in increasing numbers over the next twenty years. Researchers conducted a survey on 578 organizations in the United States and reported that only 33 percent of the employers in the country had made adequate preparations for the mass retirement of baby boomers. Therefore, it is important that we analyze how employers are dealing with the retirement of the baby boomers using existing literature review on the topic. Discussion According to Dr. David DeLong, managers are faced with a complex problem of an increasing changing workforce. This can be attributed to a number of statistics that have been established by relevant government bodies. First, it is predicted that the age group between 20 and 34 years will increase by 9 percent in the next ten years. Additionally, the prime pool of workers between the ages of 34 and 49 years is expected to shrink by approximately 8 percent while the age group of workers between 50 and 64 years will increase by 34 percent. The implication is that a large pool of workers is within the retirement horizon and employers are faced with the challenge of hiring qualified employees. However, the question is where will they find an adequate number of employees to replace the retiring group? As an employer, the enormous demographic shifts present a number of serious questions that business leaders need to address to ensure effective operation of their organizations. The major questions include what are the economic costs of not responding to the demographic changes? Does your organization have a retention culture? Does the organization have any succession plans? Retaining baby boomers Employers have realized the importance of older employees in terms of working experience and knowledge and have adopted a number of strategies to retain baby boomers. This is despite the fact that they have realized that they are going to retire and this automatically results in loss of talent. One of the most common employer retention strategies for baby boomers is the introduction of flexible working arrangements. Research studies in the field of human resources reveal that flexible work arrangements are very effective when baby boomers are not willing to work under the traditional full-time schedules. Their attitude towards the traditional schedule may be either because they have additional personal obligations or are experiencing a decline in their health conditions. Some baby boomers may not wish to work under the traditional schedule because they simple prefer to sacrifice some of their job income for the sake of gaining more control over their time. However, it is important to note that they may be willing to retain their employment at the same time (Lane, Koka. & Pathak, 2006). By the time they are retiring, baby boomers may have accumulated adequate savings or gained access to their pension benefits offered by employers. The savings are very important for baby boomers because they enable them to maintain the standards of living. However, they still need some income to ensure that their needs are well catered for. Flexible working arrangements include part-time employment, job sharing, contract work, telework, and flexible work schedules (). Flexible working arrangements may also include a change in the organization’s work design and work arrangements that enable aged employees perform new jobs in a different way. Most of the employers have changed the nature of work assignments because of the fact that it enables them accommodate changes in the work schedules and allocation of work assignment to employees as they get towards their retirement age. One notable benefit of flexible work arrangements is that they enable employees extend their working relationship with the same employer. This is somehow a great milestone for employers because they are in a good position to retain talent despite the fact that baby boomers may be retiring. Therefore, employees are able to extend their careers with the same employer towards their retirement age instead of retirement n a different industry. This is advantageous for employers because they get the opportunity to continue using human talent and experience that they have accumulated over a long period of time. They achieve this by raising the compensation for baby boomers to prevent the loss of specialized knowledge. Generally, employers are using flexible working arrangements with the aim of attracting and retaining older workers. The other strategy for the retention of baby boomers is the use of part-time employment which enables employees balance their work and social life. Research studies have revealed that more than seventy percent of employees who are yet to retire have made plans to work into their retirement. Some have even contemplated on never retiring. However, employers have discovered that part-time employment is very important to a significant number of old baby boomers. This is because such an arrangement presents them with the opportunity to set their personal time and take care of personal issues while at the same time earning an income to sustain their lifestyles. However, it is very important to note that part-time working schedules have an impact on health benefits and pension plans. This is because there are most legislations limit employers from adjusting such benefits even when their work schedules change. Therefore, employers have reacted to such limitations by introducing working schedules. This means that employers maintain their employees on a full-time working schedule while allowing them to have some control over their working hours. This ensures that employees are able to cater for both their personal as well as professional responsibilities with ease. For instance, an employee can compress his or her work schedule to work for ten hours after which he or she can attend to personal activities. Additionally, a number of employers are offering retiring baby boomers extra hours of work along with a compensatory leave. Sustaining Older Workers The changing demographics in the populations of countries that are developed industrially and for those that are developing favour the growth of increasingly older workers with few young job entrants. These public policy challenges have forced a change in government and employer strategies towards ensuring a sustainable level of manpower. Low birth rates have seen to more and more efforts being placed on retaining the ageing population to sustain productivity in all sectors of the economy. This is one of the ways employers are coping with the reducing number of workers of the baby boomer generation. Employers and governments in general have a difficult time providing welfare which includes health care facilities and pension to the retired workers due to few workers who are in active production. Another area of great concern is that there is need to produce goods and services of high quality that compete both locally and globally. The ageing population has difficulty doing this since they work for a few hours and most of its constituents require special care that is hard to provide at their places of work. Imparting skills that are necessary in addressing the changes in society is also another hurdle since older people take more time to adapt to changes compared to the young. These reasons have forced many employers and governments in general to retain workers past their retirement age with more efforts made in sustaining the latter’s competence. The difficulty in executing this plan is that it is paradoxical in the sense that employers and other persons in need of the older workers’ services hold negative reviews about the workers and treat them as a last resort group. They doubt their competence and sustainability of producing quality work as required by the fast-paced world we live in (Bright, Cameron & Caza, 2006). They also reason that due to most of them being their age mates if not older, it is difficult commanding them to do the required tasks out of respect. It is also reasoned out that, with most of them having already formed their working habits, it would be an uphill task getting them to change to new working environs. The older workers, on the other hand, dispute these claims as being empty and misguided. They further stress their competence and capacity to lead highly productive lives and, best of all, to adapt to changes as quickly as required by the situation. In using the older workers in the production of products and services, some areas need great emphasis to ensure quality results besides the attaining of sustainable economic and production levels. Their adaptability and responsiveness to changes both at the workplace and life in general needs to be exhaustively addressed since it is what makes or breaks many businesses. The workers’ ability to further their capacities in production is also of great importance to potential employers. Since it is widely expected that businesses grow both in size and production capacities, the workers are expected to move along with the increasing levels of operation. The third factor giving employers most concern is the older workers’ ability to contribute positively to the development of other workers. This is aimed at ensuring continued production without much change in the mode of operation. It is one way of sticking to the winning formula. The three points stated in essence sum up the employability capacities of mature aged workers in the countries undergoing demographic changes to the effect of reduced birth rates and ageing working populations. Median Ages and the Labour Market The table below shows the median ages in selected countries in the year 2010 and the projected median ages for the same countries come the year 2050. The differences between the two medians are also included to show the general effect on their total populations. Projected median ages, selected countries, 2010 and 2050 (ABS 2008, p. 3). Country Median age 2010 Median age 2050 Difference Australia 38.2 45.2 +7.0 Canada 40.0 45.3 +5.3 China 34.9 45.0 +10.1 India 25.0 38.6 +13.6 Indonesia 28.2 41.1 +12.9 Japan 44.6 54.9 +10.3 New Zealand 36.8 44.1 +7.3 PNG 20.3 30.9 +10.6 Singapore 40.6 53.7 +12.9 South Korea 38.0 54.9 +16.9 United Kingdom 40.0 43.4 +3.4 US A 36.5 41.1 +4.6 Vietnam 26.9 41.6 +14.7 The trend most visible from this table is the increasing proportion of nations whose median age would, in 2050, be classified as older workers. This is the age of 45 years and above. The developing countries of India and Vietnam have high levels of projected increases from relatively young populations. If the predictions in the table above come to pass, the countries shall continue having a bigger proportion of their populations in their fifth or sixth decades of working lives. Employers shall be heavily reliant upon this manpower for the maintenance of production levels and provision of services required to sustain life like health services. Luckily for the employers, while more and more older workers become commonplace, the latter show increasing willingness to remain in productive positions. Many sources have evidence of individual workers, in the age bracket between 45 years and 64 years, who are willing to continue working till they retire. Most of them have no retirement on their minds and aim to work till they die. What most of them intend to do is reducing their levels of work to part-time participation. What pushes some of them to make this decision is the fact that their retirement funds cannot sustain them in the cases where they retire. Economic factors like inflation causes negative effects on their funds and hence they not good hedges against adversity. Employers, therefore, have less to worry about since nature in this case works for them. While baby boomers may be in their retirement ages, most are willing to go on being productive. Employers also have another factor in their favour. Governments, having realised the increasingly ageing workforce, have responded by increasing the retirement ages. This has seen to more and more people spending more time in the working environment. It has also dispelled the worries among employers and other parties keen on having enough and efficient manpower. Its other benefit is that it reduces the burden on employers and governments since the dependent part of the population is less. There are less people requiring pension and other maintenance costs and, with more in productive activities, the society’s sustainability levels are greatly enhanced. Employer Attitudes Towards Older Workers Research and surveys about the most prevalent attitudes employers have towards the older members of their teams reveals a mostly negative relation. Irrespective of the individual workers’ performance appraisals, employers have negative notions when it comes to the older members of their workforce (Rosen and Jerdee 1988). European and North American employers showed a bias towards the funding the training of the young and recently educated workers as opposed to the older ones. This is not the overall notion in all employers though. Surveys carried in 1997 (Bishop 1997) and 2003 (Smith and Billet 2003) show that there are indeed positive attitudes and practices towards the older workers among some northern European nations. The overall feeling is negative though. It can be related to the fact that the thinning number of youthful workers endowed with natural dexterity makes them dearer. What comes about as a most surprising occurrence is the fact that despite the looming labour shortage in most countries, it has been difficult for employers to appreciate the older workers and harness the great potential they harbour in the production process. Minimal interest has been shown of recruiting workers over 45 years and very little preference for those from 56 years of age and beyond. These negative attitudes may not only hinder older workers’ potential for employment but their individual development within organizations (Taylor and Walker 1998, p.644). Older workers are perceived to lack motivation and enthusiasm, being close-minded and are highly susceptible to injuries and ailments. They are also deemed less capable and show little signs of facing new challenges. They are, in essence, perceived as possessing less potential for development. This can also be alluded the perception that they are risk averse. Even with the above perceptions, there are industries that require mature and reliable workers with enough experience to handle issues. These require skills and experience that is industry based rather than that gained from mere knowledge. These industries include the finance sector where consistency and transparency, values mostly doubtable in the youthful workers, are vital parts of the daily work. It is thus no surprise that the best performing financial companies like hedge funds are run by older people. Other companies especially in the telecommunication and technology sectors require young workers who are upbeat on the current goings-on and thus easily adapt. Due to these hurdles in appreciating the older workers in the workforce, initiatives have been put in place by many bodies that aim to utilize this important part of the population. Studies show that the negative attitudes held by employers hinder not only the older workers’ potential for employment but denies them the chance to put to task the vast experience they poses. Efforts geared towards adoption of older workers get a boost when there is a presence of older members in a firm’s management team. These older managers are not only a testimony to the productivity of older workers but their presence dispels any biases that may come up against older candidates in hiring processes. Care should be taken to see to the fact that older workers are not stigmatised or obligated to perform duties beyond their ability. The younger workers should not suffer isolation from this focus on the older workers though. The negative notions towards older workers go further by not considering hiring or, for the hired, applying them tasks to which they are more experienced in doing. Even with better qualifications than their younger counterparts, older workers rarely get the jobs that they apply for simply due to the societal glorification of youth over age. More resources are thus channelled towards advancing the knowledge of the youthful workers and, upon attaining the required skills and obviously older, ditching them for even younger ones. What society doesn’t realise is the fact that the very people it shuns due to their being at advanced ages today are the same people it spent resources training yesterday. The participation and advancement of older workers at the workplace has many similarities to that of women. Even with the widespread campaigns to have women and older workers treated as fairly as possible, the statistics show little or no improvement in the two groups’ participation at the workplace. It is hoped that the thinning youthful population will force employers into considering older workers as they will be the only option left. Though it will be a matter of necessity, the quality of work the older workers will produce will be of a high –if not better- quality due to their experience and steadiness. Effects of Negative Attitudes The attitudes stated above show that older workers, many of them baby boomers, experience a lot of hurdles at the workplace. The major hurdle is that it is hard for the older populations to find employment opportunities that fit them. Most employers lock out older candidates from getting jobs based more on societal perceptions than on qualifications. It has become so much commonplace that older workers, once out of active employment, give up the idea of ever getting employed again. This underutilization of their talents and experiences has resulted to the reduction in companies’ and countries’ production levels as effective manpower lies about. Older workers are also likely to end up in poorly paying jobs as employers relegate them to these positions. Due to the strain they experience in these positions, many of the older workers decide to opt out of active involvement with work. Most baby boomers are still in good health and, if returned into active production, would prove their worth. The negative attitudes shown their way has seen many of the baby boomers go into early retirement when they could still be productive for many years thereafter. The best solution to these perceptions though lies in society’s hands. If society stopped ageism, most would be willing to work through their sunset years. Many employers argue that the reason behind their preferences for younger workers is not majorly ageism but a direct result of cost-benefit analysis. They argue that labour costs that are directly or indirectly associated to wages rise more steeply with age than production. Employers also require shorter periods for returns on investments from the training programs meant for older workers than from their younger counterparts. Older workers also have skills that could get outdated easily at the workplace hence most require expensive training programmes. This may become a necessary evil with the ever reducing youthful crop of workers. What it all boils down to is the fact that no matter the effort spent championing for the re-employment of older workers, employers simply can’t get out of rating them as last-resort workers. Even though the real costs spent on taking care of the older workers are negligible in most cases, employers know (or rather believe) that eventually the costs shall come to pass. Employers therefore have a hard time deciding on hiring older workers given the reducing number of youthful job entrants after the baby boomers. Unless the demographic structure tilts towards more young people than old ones, employers shall be left with only one option: hiring and re-hiring older workers. New Perceptions The findings above show that there is much to be done in coping with the reducing youthful crop of workers. Employers need to get out of their perceptions and embrace what the situation offers them before it is too late. There needs to be a change right from society concerning the ageism notion since it is the main hurdle inhibiting the quick adoption to the changing times. To reduce being taken as a burden, the older crop of workers needs to take action and ensure they exert as little costs to their employers as possible. This may entail taking extra classes to further their skills on their own budget and not necessarily their employers.’ Regular exercising also makes up for good health resulting into reduced medical costs both to them and to their employers. Employers should remind them of these so that they find little reason not to employ older workers. Employment, therefore, shall be based more on qualifications and experience and not only on age. Baby boomers should thus be encouraged to stay at their places of work for as long as they are productive. Those who are already retired and are still capable of being useful members of working teams should be re-employed in various capacities. These are efforts channelled towards curbing on the thinning manpower as the reduced birth rates have their toll on the population. Retirement ages in many countries, especially the developed and the developing ones, should be increased as much as possible to retain as much manpower as possible. De-emphasis of the term ‘older workers’ should be stressed to unify the workforce and encourage more and more baby boomers to stay around and make their mark in the production process. If the retirement ages are increased, the term ‘older workers’ shall encompass more people and thus relieve the members of this group of minority status (Bock, Zmud, Kim & Lee, 2005). It motivates everyone to work for a common good knowing that they are part of a great team endowed with the dynamism and experience required for success. Changes in Pension and Health Care Benefits An increasing number of retiring baby boomers has the effect of increasing pressure on pension and health care benefits. Consequently, employers are faced with the challenge of managing the increasing cost of pension and health care benefits. Pension is an important strategy of retaining baby boomers but there are funding concerns which place such plans at risk. A significant number of employers are experiencing shortfalls in the funding of pension plans. Therefore, they are reevaluating how they can finance such policies by reinvesting pension funds in trust assets because of the guarantee that they will gain some benefits that will be adequate to cover their employee pension plans. Research studies reveal that employers are facing the challenge of budgeting funds to meet their pension contribution obligations (Anderson & Sun, 2010). Some of the major m0difactions that employers are making include the conversion of government DB plans to hybrid defined contribution and closing DB plans to establish a 401(K) type plan for new hires so as to transfer risks to the government when it comes to payment of pensions. By the year 2004, employers had recorded that pension plans were becoming very costly to manage and that the costs had increased by 8.2 that same year. Employers in both public and private sectors have responded to the problem by adopting cost-saving measures including increasing employee deductibles, adopting disease management programs, and switching to health driven health plans. Conclusion The full utilisation of workers aged 44 years and above would prove to be of more benefit than most employers think. Building their capacity through training and provision of rewarding working environments shall do more good to society than having them idle. This group of people consists of the most experienced workers the employers can ever wish for. Policies by governments and other bodies associated with the working population, societal sentiments and employee attitudes should also be geared towards creating working environments that are conduce for the thriving of these workers. Building the workers’ capacities is nothing if the air in the society is negative, the working conditions not conducive and the policies in place against them. There is need to, best of all, tilt society’s take on older workers towards appreciation and respect. Most of the constituents of this group require nothing more than respect and appreciation to thrive and produce optimally. References Anderson, M & Sun P. (2010). What have scholars retrieved from Walsh and Ungson (1991)? A citation context study. 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