Retiring in our 60s is a ritual many look forward to, but with the population in most industrialized nations growing older, stretching our working years may be necessary. That’s because a demographic time bomb is detonating quietly, and its fallout will have a profound effect on the labor market and society at large.
The graying of the global population and workforce is exacerbating one of the most vexing challenges for employers everywhere: ensuring access to a bountiful talent pool. With millions of Baby Boomers still retiring — the first wave began in 2008 — and some Gen Xers starting the process, fewer working-age people are supporting their local economies. This trend, along with record-low fertility in many countries and a declining workforce participation rate, is setting up a labor market reckoning.
According to the World Health Organization, from 2015 to 2050, the proportion of the world’s population over 60 will nearly double from 12% to 22%. In countries such as Japan, Italy and Poland, the working-age population is shrinking considerably. Even China, once the most populous nation in the world, has fallen this year to No. 2 (surpassed by India). In 2022, its population fell for the first time since 1961.
All these developments are contributing to structural talent scarcity in the labor market. This problem will stay with us for many years to come and surely hurt economic growth if we don’t come up with practical solutions. Efforts to prop up population growth in many countries have had little success due to shifting social values. The decline in labor market participation rates also accelerated during the pandemic so fewer working-age people have stayed employed. Technology may help reduce the need for talent, but AI, automation and others may further exacerbate talent shortages due to the need for new and specialized skills.
A massive talent pool growing in size
One solution gaining momentum is incentivizing people to work well into their late 60s and beyond. According to the Society for Human Resource Management, companies are renewing efforts to attract and retain workers 55 and older. Not only does this group offer more professional experience and are less likely to leave their companies, their growing numbers offer a massive talent pool from which to recruit. Furthermore, SHRM reports that multigenerational workforces are more productive and experience lower turnover.
Policymakers and employers are taking steps to encourage and require people to work longer. In France, the minimum retirement age was raised to 64 from 62 earlier this year. Japan made a similar move in March by increasing the retirement age for civil servants from 60 to 61. China, which has some of the lowest retirement thresholds in the world, will raise them gradually to combat a shrinking workforce.
As some governments focus on delaying retirements, employers are turning to incentives. For instance, technology giant Cisco offers paid grandparent leave to employees. Some companies are enacting policies to make the workplace “menopause friendly” to support older female workers. And many businesses are offering more job flexibility and job sharing to keep their most experienced employees around.
Another encouraging sign is people wanting to work later in life. Randstad’s 2023 annual Workmonitor research found that in recent years, people are extending their careers for a number of reasons, including for the social connection with co-workers, the desire to maintain their reputation professionally and that employment offers meaning and purpose. While their financial situation is the biggest determining factor for when they retire, a considerable percentage (32%) also say they need work in their life, and 12% say they are delaying because their employer needs them while 6% say they don’t want to retire at all.
Purpose and flexibility are indeed critical to attracting and retaining people 55 and over. Randstad’s latest Workmonitor research conducted found that among older workers surveyed, flexible work arrangements are an important factor in considering employment. Nearly one-quarter (23%) of those 55 to 67 say job flexibility is their No. 1 requirement, with more than half (54%) ranking it one of their top two priorities. Compensation topped all factors for all age groups.
Accommodate to attract and retain
Indeed, as workers near retirement, many want jobs that can accommodate their personal needs. This may mean shorter work days, more vacation time and flexible schedules. Additionally, some desire a phased retirement that can extend their time with an employer. A growing number of companies are even motivating people out of retirement, according to AARP.
To help attract and retain older workers, consider boosting benefits most important to Gen X and Baby Boomers: job flexibility, health and wellness, and financial security. These factors become increasingly important as people move closer to retirement, and companies with attractive policies can better compete for those 55 and over.
Flexible arrangements. I believe in flexibility with intentionality – and in the case of many older workers they desire flexibility because they care for aging parents and grandchildren. According to AARP, 53% of those ages 40 to 49 and 36% of all workers age 40 and older are caregivers for an adult. Even among non-caregivers, people want more say over when they can take sabbaticals and the amount of responsibility their job requires. Accommodations such as flexible hours, more unpaid time off and job switching are sensible ways to help older workers wanting more freedom.
Wellness offerings. By helping workers achieve a healthy lifestyle as they get older, employers also benefit from higher productivity, engagement and job satisfaction. Physical and mental health is an especially important consideration for Gen X and Baby Boomers, and companies can provide tools, resources and support that promote improved wellness. Programs that help participants manage disease, maintain weight and enhance mental health should be the cornerstone of wellness offering for older workers.
Financial security. A recent CNBC survey found that 56% of Americans aren’t financially on track to comfortably retire. For those 55 and over, it’s a daunting concern since they are much closer to leaving the labor market than younger co-workers. Companies can help overcome such fears by offering resources such as financial literacy courses, planning tools, budgeting advice and other services. Aside from making sure they have enough to afford retirement, encouraging health savings for future medical expenses will provide a more secure future. Employers can also guide workers on post-retirement part-time employment that can add to retirement funds.
As the world’s population grows older, working later in life may be necessary for the good of the global economy. With life expectancy rising and the proportion of working-age adults declining in many markets, getting older workers to stay in their jobs will be an important solution to combating talent scarcity. By offering support and incentives such as flexible schedules and phased retirement, employers have a better chance at defusing the demographic time bomb set to go off.