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Research on Aging Workforce: Societies and Organizations Underestimating the Impact

  • September 22, 2009

by Susan Welch, Hewitt Research and Andrés Tapia –

It’s likely that whatever we know about the rapidly aging population severely underestimates what’s in store for our societies.

It’s become common knowledge that the world is getting grayer, with older people becoming a larger part of our population. This is evident in the workforce, grocery aisles, movie theaters, at the park, in the voting booth. Indeed, it’s a natural outgrowth of a very large Baby Boom Generation cohort that, in addition to its size, also is living longer than any preceding generation due to breakthroughs in the nature of work, healthcare, technology, and nutrition.

On closer examination, the aging of the world’s population is more accelerated than most realize. A recent Census Bureau report found that in little more than 30 years, the world’s 65-and-older population will double from 7 percent to 14 percent. In less than 10 years, older people will outnumber children around the world for the first time in history. [1]

It’s important to look at the aging story by country. In certain parts of the world, the population is graying faster than the already accelerated average. Japan, Italy, and Germany are the three “oldest” countries: In each, the 65-and-over population numbers at least 20 percent. [2]

While it’s true that developed nations have higher percentages of people over 65—it turns out the aging phenomenon is widespread. About 62% of the world’s over-65 population lives in developing countries and regions such as Africa, Asia, Latin America, the Caribbean, and Oceania. European countries still have the largest proportion of over-65 people, and Sub-Saharan Africa has the greatest proportion of young people. But between July 2007 and July 2008, developing countries accounted for 81% of the world’s net gain of elderly people. The countries expected to experience the largest increase in 65-and-older citizens by 2040 are Singapore, Colombia, India, Malaysia, and Egypt. [3]

The implications of a rapidly growing elderly population are as mind boggling as they are underestimated. Providing retirement and health care support for older populations will severely strain many countries’ social safety nets, some even to the point of insolvency.

The working population may not be large enough to carry this burden.

The math is unnerving. Today in Europe, for each pensioner there are four people of working age. By 2050, each pensioner will be offset by only two working-age people. [4] In Japan, the scenario worsens: In 2005, only three workers supported every one pensioner, but by 2040 only 1.8 workers will support each pensioner. [5]

The Need for New Paradigms
Of course, these projections assume current paradigms. New realities demand new paradigms where the unthinkable becomes just the thing that needs to happen—for example, dramatically changing approaches to retirement, including retiring the concept of retirement at age 65. Many retirees and near retirees are declaring that they want, need, and are still able to work.

But to make this work, major adjustments to other assumptions will be required, primarily revolving around flexibility. Not just flexibility around the workday and location of the work, but flexibilitly around the amount and nature of the work. And the concept of “phased retirement” is gaining traction.

This paradigm shift of rethinking the hard and fast retirement age of 65 offers a silver lining. A possibility now arises to address the dilemma of a retiree population too big to support, as well as other workforce dilemmas, such as the looming talent shortage.

Employers know the aging workforce is coming. Their challenge, now, is to identify creative strategies to attract and retain those workers, while also eyeing the delicate balance of the needs and preferences of young, middle-age, and older workers who can be forty years apart in age.

And now it appears, employers must be ready to face this challenge even sooner than they expected.

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Sources
1. Kinsella, Kevin and He, Wan. “An Aging World: 2008.” International Population Reports. June 2009.
2. Ibid.
3. Ibid.
4. Dobriansky, Paula J., PhD., Hodes, Richard J., M.D., And Suzman, Richard M., PhD. “Why Population Aging Matters—A Global Perspective.” National Institute on Aging, National Institutes of Health, U.S. Department of Health and Human Services, and U.S. Department of State.
5. Fackler, Martin. “Lost in Japan’s Election Season: The Economy.” New York Times online. August 28, 2009.

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