Here’s what an aging workforce means for America’s employers
Covid-19 hit our world like a wrecking ball in 2020. Almost overnight, our businesses and schools closed, our communities went into lockdown, and our economies stalled. But even as we grapple with the fallout of the pandemic, new threats are looming, many of them global in scope.
The World Bank warns that stagflation will see growth slump from almost 6% to just 2.9% this year. The war between Russia and Ukraine is undermining the delivery of grain, prompting fears of global food shortages. Record temperatures have seen Americans and Europeans swelter in unprecedented heat and battle wildfires–the product, scientists warn, of human-driven climate change. And in July 2022, the WHO declared another health emergency as monkeypox looks set to spread across the planet. We’re living, it seems, in an era of crises–huge, seismic events or situations that can wreak havoc on our businesses, our communities, and our lives.
Crises always feel unexpected. Mostly, they land with a bang or out of the blue, like COVID, causing shockwaves of confusion. But there are other threats out there in the era of crises; threats equally detrimental to our wellbeing and way of life that quietly gather momentum just beneath the radar. We call these threats smoldering crises–a type of crisis that is hard to predict. And there’s one that should be front of mind for American leaders and organizations right now.
Our population is aging faster than at any other time in history. As longevity rises and birth rates fall, the WHO warns that retirement-age and older adults today outnumber children under the age of five. In the next 20 years, the number of human beings aged 65+ is set to increase by 600 million reaching 1.3 billion, or 22% of the global population. According to demographers from the University of Virginia, by 2040, the average age in America will be 38.6, meaning that almost half of the country will be in their 40s or older.
An aging population is a smoldering crisis for our systems and structures: government and healthcare providers, businesses, educational institutions, and taxpayers. Euromonitor International, a market research company, predicts that the average gross income in the 65+ cohort will be 13% lower than income growth for the population globally.
The analysts warn of a perfect storm. As older people drop out of the workforce in their droves, productivity losses will likely be exacerbated by the concomitant pressure on state resources like pensions or social care. U.S. Secretary of Commerce, Gina Raimondo, pays for home-based, round-the-clock care for her 90-year-old mother. In a July interview with Reuters, she warned that America’s aging demographics were poised to hit the country and the economy “like a ton of bricks.” Failure to introduce the right fiscal and other measures now will damage the U.S. economy–not least because women, as primary caregivers to the young and the elderly during the pandemic, will find it hard to return or even remain in the workplace, and affordability will continue to be an issue–a situation Raimondo describes as “untenable.”
Risk or opportunity?
Crises of any sort are risks. They are always serious. Whatever their provenance, typology or scope, crises have the potential to do significant and far-reaching damage. But crises can also be opportunities.
Even as America ages, its workforce is adapting in different ways. Employees are working longer, in some cases well beyond the traditional age of retirement. The U.S. Bureau of Labor Statistics estimates that by 2024, a quarter of the workforce will be over the age of 55, and of these, a third will be 65 or more. For employers, this has potential benefits. Older workers can bring knowledge, expertise, experience and arguably greater reliability to their organizations.
Research published in the Harvard Business Review sheds light on the correlation between age and wisdom. MIT’s Pierre Azoulay and his colleagues found that entrepreneurs over the age of 40 are three times more likely to set up successful companies–a function, they hypothesize, of no longer needing to “prove themselves.”
For many, particularly those who find meaning and purpose in their work, prolonging a career into older age is not just a means of preserving income but furnishing life with a network of other friends and colleagues and an outlet for intellectual energy and curiosity.
There is, of course, a caveat. Welcoming tenured employees into the workplace is one thing, obliging them to be there is quite another. For policymakers and others tasked with determining the age of retirement, the issues are serious and complex. For businesses and other leaders, realizing the full potential of those in the second half of life to contribute, help reshape organizations, and drive growth is surely contingent on enacting the right approaches. It means determining the right policies and practices to support older workers, to ensure they remain productive, and to help them transition to retirement with ease and without incurring financial penalties–for themselves or for employers. The key to doing this effectively is to prepare now.
Just as we were told about the risks of climate change years before heat waves engulfed Europe and America in 2022, we are now on notice about the demographic changes that will reconfigure our economy and our society in the next 20 years. It is imperative that we act on these warnings and prepare today.
Preparing means heeding all of the evidence in front of us, and rallying the resources, the expertise and the diversity of ideas and perspectives to brace for impact, contain potential damage, and shape optimal outcomes.
In the case of the age crisis specifically, this might mean scenario-planning the kind of impact an aging workforce will have for your organization–and putting together an action-oriented team with the breadth of vision to explore all of the possibilities and the solutions you will want to see through.
It also means asking questions: How do you see older workers in your organization? Are there systemic risks (ageism or discrimination) you need to address? What can you do to realize the opportunities that older workers bring? How can you support their physical and financial wellbeing? And what will you need to do to square this in terms of your balance sheet?
The World Economic Forum has a few ideas that might help. In Davos this year, a team looking at the “longevity economy,” outlined three areas of focus for companies looking for a more forward-facing perspective on our aging workforce.
The first area is about finding ways to be flexible in terms of career breaks and sabbaticals. This is because giving people a chance to take time away and welcoming them back not only helps prolong careers way beyond the standard retirement age–meaning that valued workers can contribute longer–but it also helps people pick up new skills and knowledge. Sabbaticals are a chance to to reset ideas and goals and build the energy to see them through. As our workers live longer, it’s in our interest as employers to find ways to sustain them throughout their lives, partly by keeping our doors (and minds) open.
Then there’s the way that we think about retirement itself. An idea gaining traction among forward-focused companies is that of phased retirement–gradually transitioning out of full-time work–which can bring a raft of benefits to employers and employees alike.
For businesses, there’s a chance to continue leveraging the experience, expertise, diversity of perspective, and mentorship opportunities that older staff offer. For these employees, there is the security of stable income as well as sustained contact with colleagues and friends. Haleh Nazeri, a platform curator with the WEP, says that depression is a risk in retirement when older people lose their connection to their work community.
Of course, financial worries can make this worse. To that end, another idea is gaining traction among forward-thinking businesses. Some are starting to take a “living wage” approach to pension payments, ensuring that payouts to retired staff keep pace with inflation and spiraling costs. Just as living wages are adjusted annually to ensure employees aren’t worse off when there’s a squeeze on the economy, living pensions could also be paid by companies with the integrity to do the right thing by their staff, says the WEP, and have game-changing consequences particularly for low to middle-income retirees.
Some businesses are already stealing a march on the advancing age of their workforce. Employment website Monster has published a list of companies who are receiving real kudos for their inclusion and treatment of older workers. Among them is manufacturing firm Franklin International, where employees routinely work well into their 70s, and benefit from phased retirement and part-time work schemes as well as “good retiree medical benefits.” Home security specialist, SafeStreets USA, is lauded by its employees for its approach to diversity and inclusion: “Age diversity is obvious and considered a strength by all…fresh ideas and energy being mentored by wise and experienced guides,” say reviewers. Meanwhile, employees at U.S. label converter Omni Systems say that “senior colleagues are valued… most often they become mentors to younger operators.”
What these companies have in common is an attitude–a leadership approach–that is both inclusive and humane. But it’s something else too. It is an approach that is adept at preparing for the impending age crisis. These are companies that are getting ahead of the curve now, proactively making an opportunity out of risk–and bolstering employee engagement, productivity, and reputation in the process. In effective crisis management, the linchpin–even for a smoldering crisis–is being prepared. And that’s true of any crisis be it COVID, climate change, or the Silver Tsunami. Your (prepared) leadership will help decide if this crisis is a ticking time bomb or a golden opportunity.
Erika James is an award-winning educator, accomplished consultant, and researcher, and an expert on crisis leadership, workplace diversity, and management strategy. She is the first woman and first person of color to be appointed dean in Wharton’s 141-year history. Lynn Perry Wooten is a seasoned academic and an expert on organizational development and transformation, is the ninth president of Simmons University and the first African American to lead the institution. Their book, THE PREPARED LEADER: Emerge From Any Crisis More Resilient Than Before, is out in September from Wharton School Press.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not reflect the opinions and beliefs of Fortune.
More must-read commentary published by Fortune:
- Recession or resilience? Here’s how the U.S., Europe, and Asia stack up
- Patagonia: ‘We are turning capitalism on its head by making the Earth our only shareholder’
- How Germany’s regulators beat the SEC in the race for crypto regulation–and convinced me to establish my business there
- Week-to-week management could be the solution to employers’ distrust of remote work
- Don’t spoil the unique chemistry between America’s universities and pharmaceutical companies
Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.