Sloan Center News
Staying “Age-Responsive” in a Climate of New Organizational Challenges
retirement, knowledge management and labor force change
1 December 2009—Our first article The Way We Were … And Still Are in this series addressed how changing age demographics were being anticipated (or not being anticipated) by employers and human resources specialists. Focusing on the rapid aging of the workforce, we discussed four interrelated areas of concern where these transformations will be particularly weighty: retirement patterns, knowledge management, labor force changes, and quality of employment.
Our second article Leading Edge Strategic Adaptation in this series explored the responses of “early-adapters.” The article shared promising practices from a variety of employers who recognized that the effects of an aging workforce would reverberate beyond retirement planning and replenishing lost labor.
These articles were background pieces, glimpses of issues being discussed in a pre-recession environment. Now it is virtually impossible to comprehend any issues involving workforce transformations without an implicit reference to the recent economic downturn.
In this, our third article in the series we will briefly revisit these original areas of concern, but this time through incorporating the implications of new economic and workplace realities.
Are age-related demographic changes becoming intertwined with reverberations of the recession? It may be too early to know exactly, but we can at least signpost a few areas of concern.
In some ways, there is nothing subtle about the recession’s effects on workers’ priorities. It’s a simple economic equation. Employees need to work longer, sometimes to make ends meet, but certainly to prepare for retirement. While employer contributions to workers’ retirement funds have generally not been reduced by employers during the recession, the overall decline in the value of 401(k) and 402(b) is a main reason why many are planning to work longer. According to a Watson Wyatt 2009 survey of employees and retirees, 76% of workers aged 50-64 site the decline in the value of their 401(k) plans as a key reason for postponing retirement. 1 Furthermore, 69% of workers over 50 believe that they will need to save significantly more for retirement as a result of the economic crisis.2
While one third of workers have increased their planned retirement age during the last year, “older workers are most likely to increase the length of their working career, with 44% of workers aged 50 and over planning to work longer compared with 38% of those in their 40s and only 25% of workers under 40" 3 (p. 2). Another study found that among the “threshold generation” of workers (aged 50 to 64), slightly more than half (52%) of those working full-time have considered delaying retirement during the last year. 4 This demographic shift is not lost on human resources specialists. 79% of human resources executives expect to see a large and permanent increase in employees working past their desired retirement age. 5
Even in a pre-recession context, older workers have desired to stay longer in work situations that are meaningful and rewarding. Perhaps the difference is that a growing proportion of workers continue working due to need rather than want...6
Although difficult to gauge – with data only now taking shape – the subjective experiences of workers are a key element within these transformations. The Watson Wyatt survey found that in 2007 the percent of workers aged 50 to 64 who are confident about having enough resources to live comfortably five years into retirement dropped from 63% to 44%.7 While economic anxieties among all workers are palpable, there is reason to think that older workers feel particularly vulnerable.
Still, the economic picture for older persons is not completely straightforward. It depends on how old is old.
A national Pew Research study of older workers in April 20098 suggests that in some respects, those adults who are 65 and over, have experienced a “kinder, gentler” recession. This assessment is based on data that compare 65+ age groups and those 50 to 64. The 65+ group is more likely to report being satisfied with their financial situation, and they are less likely to indicate that the recession has been a source of family stress. The older group also cut back personal spending, less than middle-aged and younger adults.
In our prior articles, we acknowledged that knowledge loss is a crucial area of concern for employers as the retirement crunch intensifies. The increasing raw numbers of retirees on the horizon keeps this as an active concern. With less qualified workers entering the workforce (and fewer workers overall), organizations need to assess where they are likely to face talent gaps and identity critical knowledge holders among their workers whose departure will be particularly consequential. Depending of the circumstances of each organization, some talent and knowledge deficits might be mediated by the perseverance of older workers, but ultimately it may be like holding back the ocean with a broom. Tough decisions will have to be made in the areas of training, recruitment and retention to ensure a future supply of qualified workers.9
Our earlier articles also discussed how some employers have instituted phased retirement and other workplace flexibility programs to lessen the effects of knowledge gaps. Those programs, like all others, would seem vulnerable in current economic conditions. However, the evidence points to the opposite tendency. According to the Families and Work Institute’s 2009 report,10 81% of employers are maintaining the workplace flexibility they offer, which often includes phased retirement, and 13% have increased their programs during the recession.
It is difficult to come to a general conclusion about knowledge management in a recession-based economy. There are many possible scenarios and fallout patterns.
labor force changes
The US workforce is aging, and the number of workers retiring is increasing, however, we know that many older workers desire to work beyond traditional retirement years. This ”reshaping” retirement is happening while less overall numbers of workers are entering the workforce, which in turn, creates hard-to-manage workforce imbalances and complicated HR scenarios. With economically-driven labor force changes added to the mix, the situation becomes even thornier.
Unemployment, of course, is an obvious place to begin to understand how the economic downturn has affected older workers and their present work situations. Prior to the recession, older workers had higher levels of unemployment than in previous years. Compared to all other demographic groups, however, older workers had lower rates of unemployment (see Figure 1) and their overall rates of labor force participation remain high. While the overall unemployment rate was 7.2% in December 2008, the rate for persons 55 and over was 4.8%. 11 The highest number of unemployed persons in 2008 was the group aged 25 to 34, supporting the view that those with less work experience are particularly vulnerable to losing their jobs.
These numbers do not provide a sense of the difficulties older workers face once they are displaced – for example, facing rising health costs and dwindling retirement savings.12 These problems are even more pronounced when we realize how difficult it is for older worker to re-enter the workforce. According to a 2008 Bureau of Labor Statistics survey on displaced workers, "reemployment rates for workers ages 20 to 24 and 25 to 54 were 68 and 73%s, respectively. Reemployment rates for older workers ages 55 to 64 and 65 years and over were 61 and 18%, respectively. Among those age 65 years and over, 69 percent were no longer in the labor force when surveyed."13
We have already seen that phased retirement and other flexibility based programs are not usually sacrificed (layoffs and the elimination of bonuses, promotions, and salary increases are much more common). In fact, over one fourth of employers in the same survey indicated that they used flexible work options to minimize the need to lay off employees.14
Dealing with labor force changes brought on by the recession has challenged organizations to keep themselves afloat while, at the same time, confronting a shifting and dwindling labor pool. Employers also face a demoralized and anxious workforce. The data is still not clear, but perhaps we already have a glimpse into one key area for responding to both problems: the re-engagement of older workers.
quality of employment and employee engagement
Flexible work options are a large part of organizations’ support system for employees, and it is well established that older workers highly value flexible working arrangements. The fact that eight out of ten organizations kept established flex programs during the recession indicates the importance these programs.
Flexibility is certainly a hallmark of a quality work environment to workers, but other programs and policies have survived and thrived under the weight of the recession as well. Health and wellness programs are one example. According to a 2009 survey of 489 US employers, 58% of organizations offer lifestyle improvement programs, which is up from 43% in 2007. 56% offer health coaches compared with 44% in 2007. “The number of weight management programs is also on the rise, offered by 52% of companies, up from 42% in 2007. Also, health risk appraisals are offered by 80% of companies, up from 72% in 2007." 15
The perseverance of these kinds programs through the economic downturn is perhaps part of a larger effort by employers to address worker wellbeing during a time of stress and uncertainty.
It makes intuitive sense to reengage anxious employees through support, involvement, and quality work during tough times. Engagement initiatives during a time when workers are especially vigilant about all matters pertaining to work seem only appropriate and organizationally healthy.
Baby boomers in the workforce have experienced the greatest personal financial losses. They also carry a great deal of work and family related stress due to the economic downturn. Yet, a recent Sloan Center study16 shows older workers still have greater levels of engagement than other age groups. Figure 2 illustrates, workers 53 years and older have maintained the same level of engagement before and throughout the recession, continuously higher than younger workers. (“Time 1” represents November 2007 through March 2008, and “Time 2” runs from May 2008 through September 2008.)
This study also demonstrates the importance of job security for employee engagement for all age groups. If older workers feel they have job security, employers stand to benefit from their high levels of engagement, even in challenging economic conditions.
It is certainly a complex picture: the workforce is aging radically, which means an imminent retirement boom. Many workers, especially those approaching retirement, are serious about working longer. The trend of postponing retirement, then, is a countervailing force against the retirement exodus. The sheer number of older workers in the workforce will still mean historically high retirement numbers at the same time the needs and demands of 50+ workers promises to be a salient part of workforce planning, especially when economic pressures weigh heavily on all parties.
A recent Watson Wyatt press release takes an optimistic stance, suggesting that we may be at an “engageable moment.” 17 An engageable moment is a “critical juncture for maintaining and building engagement” during a time of organizational change. The Watson Wyatt statement encourages intra-organizational leadership, communication and inspired productivity. We feel this idea also has a larger application in terms of general climate and culture of the workplace today. In other words, economic and social shifts have, perhaps, thrown organizations back on themselves as they retool and revaluate their organizational philosophies. It is important for organizations to reassess not only the dynamics of the work setting but also the subjective situations of workers.
We hope that this research overview has helped to surface some of the trends and intersections now underway. We offer two questions to consider as we head into 2010:
- How has the economic downturn added new challenges and contingencies to the management of age demographics? What’s changed? Are employers “age-responsive” when confronting new labor force constraints?
- How has the recession affected employees’ work-related priorities and their own sense of their career stage and career trajectory? Do employers have insight into this? Do they need insight into this?
- How can a deeper understanding of the impact of age diversity on the 21st Century workplace foster an environment of productivity, engagement, and overall business success?
Authors, Fee, Dwight, Ph.D.; Lynch, Kathy; and Woodnick, Pamela
1 Watson Wyatt Worldwide. (2009). Effect of the economic crisis on employee attitudes toward retirement - part II: Retirement Timing. Washington, DC: Watson Wyatt Worldwide. Retrieved from http://www.watsonwyatt.com/research/deliverpdf.asp?catalog=WT-2009-12911&id=x.pdf
2 Watson Wyatt Worldwide. (2009). Effect of the economic crisis on employee attitudes toward retirement - part II: Retirement Timing. Washington, DC: Watson Wyatt Worldwide. Retrieved from http://www.watsonwyatt.com/research/deliverpdf.asp?catalog=WT-2009-12911&id=x.pdf
3Watson Wyatt Worldwide. (2009). Effect of the economic crisis on employee attitudes toward retirement - part II: Retirement Timing. Washington, DC: Watson Wyatt Worldwide. P.2. Retrieved from http://www.watsonwyatt.com/research/deliverpdf.asp?catalog=WT-2009-12911&id=x.pdf
5 Watson Wyatt Worldwide. (2009). Effect of the economic crisis on HR programs. Update: June 2009. Washington, DC: Watson Wyatt Worldwide. Retrieved from http://www.watsonwyatt.com/research/deliverpdf.asp?catalog=WT-2009-12732&id=x.pdf
7Watson Wyatt Worldwide. (2009). Effect of the economic crisis on employee attitudes toward retirement—part I: Retirement Security. Washington, DC: Watson Wyatt Worldwide. Retrieved from http://www.watsonwyatt.com/research/deliverpdf.asp?catalog=WT-2009-12718&id=x.pdf
8 Morin, R. & Taylor, P. (2009). Oldest are most sheltered: Different Age Groups, different recessions. Washington, DC: Pew Research Center. Retrieved from http://pewsocialtrends.org/assets/pdf/recession-and-older-americans.pdf
10 Galinksky, E., Bond, J.T. (2009). The impact of the recession on employers. New York: Families and Work Institute. Retrieve from http://familiesandwork.org/site/research/reports/Recession2009.pdf
11 Rix, S. E. (2009). Little to cheer about: Unemployment and the older Worker—December 2008 (Fact Sheet No. 150). Washington, DC: AARP Public Policy Institute. Retrieved from http://assets.aarp.org/rgcenter/econ/fs150_worker.pdf
12 Garr, E. (2009). Older Americans in the recession: More are staying in the workforce, more are losing their jobs. Washington, DC: Economic Policy Institute. Retrieved from http://epi.3cdn.net/c8cd1b7008ed2a4fe2_ohm6bnava.pdf
13 Bureau of Labor Statistics. (2008). Worker displacement, 2005-2007. Washington, DC: U. S. Department of Labor. Retrieved from http://www.bls.gov/news.release/archives/disp_08202008.pdf
14 Galinsky, E. & Bond, J. T.(2009). The impact of the recession on employers, New York: Families and Work Institute. Retrieve from http://familiesandwork.org/site/research/reports/Recession2009.pdf
15 Watson Wyatt Worldwide. Companies continue to add wellness programs, Watson Wyatt/National business group on health survey finds. Retrieved May 4, 2009, from http://www.watsonwyatt.com/us/news/press.asp?ID=20961
16 Matz-Costa, C., Pitt-Catsouphes, M., Bensen, E., and Lynch, K. (2009). The difference a downturn can make: Assessing the early effects of the economic crisis on the employment experiences of workers (Issue Brief No. 22). Chestnutt Hill, MA: Sloan Center on Aging & Work at Boston College. Retrieve from /content/dam/files/research_sites/agingandwork/pdf/publications/IB22_AgeGen_Downturn.pdf
17 Watson Wyatt. (2009). Watson Wyatt’s WorkUSA Survey Identifies Steps to Keep Employees Engaged, Productive in Downturn. Retrieve November 30, 2009, from http://www.watsonwyatt.com/news/press.asp?ID=20559