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June 6, 2008

HR Fact Friday: Aging Workforce – Myth vs. Reality

Filed under: General HR Buzz8:53 am

Are you at an age where you have started receiving annual notices from the IRS informing you how much you can expect to receive in monthly benefits if you retire at age 62, 65, 70 etc.? If I remember correctly I started receiving these notices around the time I turned 40.

I am now at an age where I pay much more attention to these notifications than I did say 5 years ago. I am a tail-end baby boomer. The lead edge of baby boomers (born in 1945-50) are beginning to hit ages 60-65 and the majority are currently in the 50 to 60 year old age range.

Numbers tell the story:  In 2007, according to the U.S. Bureau of Labor Statistics, of 146 million people working full-time and part-time in the United States, only 13%, or 5.6 million, were age 65 and over. Of these about 20% or 1.1 million were still working full time.

More significant are the 36.4 million predominantly full-time workers currently between the ages of 50 and 64 – that’s GET THIS . . . one quarter of the U.S. workforce and growing. 1 out of 4 U.S workers is over the age of 50.

Logic would conclude that many of these older, more experienced, workers currently hold positions of leadership and responsibility at the middle to senior management or executive level (i.e. more highly compensated). Yet many in their 50’s and 60’s, the majority in fact, will quite likely be reporting to a boss and associating with coworkers that are younger than them. What are the perceptions of these younger workers, management, and HR policy makers towards older workers?

Some interesting data on this topic are published in a must read cover story for HR professionals in the May, 2008 issue of HR Magazine titled “Keep Pace with Older Workers” written by Robert J. Grossman. For example:

Do older workers cost more? Yes. Older workers ages 50-64 cost more, but not much – only about 10% according to the Urban Institute, who basis this estimate on compensation and health care costs. The balance is that these workers bring a wealth of experience and knowledge to their positions of responsibility and leadership. Is that worth 10% more? I think it’s a fair bargain.

Are older workers absent more? No. According to the U.S. Bureau of Labor Statistics, in 2007 full-time workers ages 25-54 were absent at a ratio of 3.2 per 100. Workers ages 55 and over were absent with only a barely measurable increase of 3.6 per 100.

Are health care costs for older workers higher? Yes. This is true. There is a gradual increase in health care spending (premiums and claims) as workers age from 40 on. A Towers Perrin study of company paid medical claims concluded that employees aged 50-64 cost on average 1.4 to 2.2 times as much as workers in their 30’s and 40’s. But it all comes down to balance and demographics of the overall workforce. For example, the Vanguard Group issued a report stating that their largest health care costs were for “preemie-babies” being born to predominantly younger workers.

Are older workers harder to train? Yes and No. Some older workers tend to take a bit longer to learn a task and are more reluctant to learn new technology, but given a little more time they readily pick up new skills and perform them at a pace and quality level equal to younger workers.

But aren’t older workers just putting in their time and coasting for retirement? Absolutely Not. A national study of 600 organizations asked to measure productivity of older workers found no significant drop off at older ages. The study also found older workers to be more committed to their careers than younger workers.

So some questions HR professionals need to ask are:

1. Do our workplace, staff management, and retirement policies (and benefits) adequately address the needs and concerns of an aging workforce?

2. Am I properly preparing for the succession of leadership when key staff members retire?

3. Should my hiring strategy be more inclusive and open to older workers that want to (or need to) continue earning an income and delay their retirement?

4. Do the positives outweigh the negatives of recruiting, retaining, and training older workers?

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