Don't Stop Thinking About Tomorrow
GRAND RAPIDS — Employers need to prepare for the future labor shortage because there’s going to be a real tug-of-war for top talent ahead. Companies have always relied on their people for their success, but will there be enough people in the next generation with the skills needed to carry on that success?
According to a study released in September by First Advantage Corp.’s recruiting solutions division, there are currently 44 million Gen “X”ers in the work force to replace 77 million retirees, and 11,000 people are reaching age 55 every day.
George Bosnjak, business development manager for The Right Place Inc., discussed the challenges and opportunities for the region’s employers at the recent West Michigan 2008-2009 Economic Outlook sponsored by The Right Place.
“From Dallas to Los Angeles, we’re all in the same boat, and there are lots of reasons for it,” said Bosnjak.
The most obvious of those reasons is an aging population. The huge spike in births that took place between 1946 and 1964 in the United States, United Kingdom, Canada and Australia created what is commonly known as the baby boom generation. In the United States, baby boomers are 80-plus million strong. Since about 1960, the American economy has benefited from strong growth in the 20-to-64 age group, which has historically been the primary source of the labor force.
When baby boomers entered the work force in the 1970s, ’80s and early ’90s, there was an “incredible” surge in the U.S. labor force that created an excess of labor, Bosnjak pointed out. The labor force grew between 2.5 and 3 percent in the ’70s, by about 1.5 percent in the ’80s and by slightly more than 1 percent in the ’90s. Since 2000, the labor force has declined steadily. However, a few years from now a demographic shift will begin, resulting in a large increase in the 65-and-over age group and a decline of the 20-to-64 age group. By 2010, labor force growth is expected to drop below 1 percent, and by 2020, to an average of only 0.3 percent, he said.
“With the national economy growing at 3 percent and the labor force only growing at a rate of 0.3 percent, those pressures nationally will affect West Michigan and the entire state,” Bosnjak said.
How will companies adapt to the changing demographic landscape? Some factors companies can control include retention of older workers, correcting gender imbalance in certain positions, outsourcing, and hiring newly arrived immigrants.
Even if baby boomers decide to keep working past age 66, as many are expected to do, eventually their participation rates will start to negatively impact labor force growth. In 1984, 28 percent of the people in the labor force were 45 years old and over, and by 2014, 43 percent of the labor force will be 45 and over. In 1984, 13 percent of people in the labor force were 55 and over, and by 2014 more than 21 percent of the labor force will be in that age category and headed toward retirement.
“That’s one in five people that will be leaving jobs,” Bosnjak noted.
Bosnjak recently met with a company that had 500 employees with an average age of 52. Within the next 10 years, that company is going to lose half its work force to retirement and will be faced with the challenge of replacing 25 to 50 jobs every year — jobs held by people who have 20 to 25 years of experience.
“Those jobs will need to be replaced, and in order for the company to stay competitive, they will need to be replaced with skilled people,” Bosnjak pointed out. “How do we make sure those skills and that knowledge aren’t lost during the transition?”
To help prepare for this transformation in the work force, Bosnjak suggested companies take a close look at their employee demographics in terms of age, gender, position and number of years in a position, then ask themselves a few key questions: What are the company’s retirement polices; specifically, is early retirement encouraged or discouraged? What mechanisms and programs should be put in place now to capture key competencies and critical work knowledge of employees who will be retiring? Demographic trends show that companies may be faced with large groups of both very young and very old workers. Is the company willing to find innovative ways to meet the needs of their age-divergent employees?
Organizations must consider how to attract and retain older workers while meeting the development and career needs of younger workers.