Maturing Workers

This article was published in the July 2006 South Dakota Labor Bulletin.

The United States and South Dakota are clearly in the midst of an aging revolution. The world is growing older, and so are most countries’ workforces. In the United States, 40 percent of the workforce will be older than 45 this year. By the end of this decade, 20 percent will be over 55. At that point, we will face critical shortages of qualified workers; because the number of workers aged 25 to 44 will actually decline.

The enormous jump in older workers is caused by the post World War II baby boom generation – people born between 1946 and 1964. The oldest baby boomers turn 60 this year and modern medicine is helping to prolong their life spans. The weaknesses of public and private pension plans are recognized, and experts predict many more people will work past age 65. Baby boomers have had a huge impact on society throughout their lives. Early on, new schools had to be built and others renovated to accommodate the 76 million of them. Later, entire lifestyles and cultures were changed by the large number associated with this group. Today, baby boomers represent a sizeable portion of the workforce. They will have a significant impact on labor economics as more and more of them become eligible for retirement. Although the post war baby boomers are not yet eligible for Social Security, many, through smart investments and quality retirement programs, are retiring much earlier than the traditional 65-year-old.

Reasons Workers Retire Early

1.    Financial security. Workers have attained financial security either through quality retirement programs, smart investments, savings or inheritance.

2.    Stress. With the increase in modern technology and the need to keep up with it, stress has become one of the biggest reasons for early retirement. Many workers have decided to get out of the high-level stress positions and supplement their retirement with lower-paying but less stressful employment.

3.    Family. Some have teenagers to parent; others want to care for grandchildren or aged relatives.

4.    Travel. Many want to travel while they can still enjoy it.

5.    Return to school. Some may want to finish or further their educational goals.

6.    Change. Some, feeling the most financial security they have ever experienced, may want to try a different career they have dreamed of, or give entrepreneurship a whirl.

7.    Hobbies. Some may want to devote time to hobbies they have had to neglect while employed.

Findings reveal most pre-retirees and early retirees still cling to traditional images of retirement, such as spending more time with loved ones and receiving pension and Social Security benefits. However, the majority also report their personal definition of retirement includes some form of work. Those who expect to work in retirement are considering a variety of occupations, including positions related to teaching, office support, crafts, retail sales and health care.

Financial concerns and the need for health benefits represent the primary reasons many pre-retirees expect to work in retirement. Chief among the financial concerns is the feeling of obligation to care for elderly parents and offspring in their 20s who are struggling to launch their own lives. In a recent American Association of Retired Persons (AARP) survey, 35 percent of boomer-age individuals say they have or are responsible for their parents’ care. Other common reasons for working in retirement include the desire to remain mentally and physically active and the desire to be productive and useful. 

Reasons Older Workers Continue Working after Retirement

1.    Health is a big factor. The older population today is healthier, living longer, better educated and therefore more suited to continue working than their counterparts in the past.

2.    Dwindling retirement savings and escalating health care costs keep Americans working longer.

3.    Employers are scaling back incentives (like the traditional, guaranteed pension benefits in favor of voluntary, defined contribution plans like the 401(k)), and fewer employers are offering health insurance to retirees.

4.    Companies are searching for older workers because of their dependability, experience and work ethics.

5.    Policy changes in Social Security and age discrimination laws have made it more lucrative to continue working.

6.    Work is necessary to make ends meet, especially for older women and minorities impoverished by rising health care costs and poor savings. Social Security benefits for both these groups are lower due typically to lower wages; and for women, extended workforce absences necessitated by family care giving and other responsibilities.

7.    People lack personal savings. The personal savings rate has plunged, with American households spending virtually all of their current income and not retaining any for retirement.

Retaining Mature Workers

Although the impending retirement of millions of older workers in the decade will pose “significant challenges for the economy,” a majority of employers have yet to engage in practices designed to recruit or retain those workers. Employers battle myths and stereotypes, which may prevent some from making efforts to retain mature workers as retirement approaches. 

Common among these are:

1.    Old age is synonymous with frailty and illness. Actually, most of today’s older Americans are not sick. Only about five of every 100 older Americans live in nursing homes. If successful treatments are found for Alzheimer’s disease, osteoporosis, and incontinence, America’s nursing home population would be cut in half.

2.    Older workers are unproductive, and are unwilling or unable to learn new technologies. This is probably the worst myth. Study after study emphatically shows otherwise. Older workers are recognized and valued for having a good work ethic for providing experience, knowledge and stability in the workplace. They are viewed as loyal workers who can be counted on in a crisis. All of these attributes make them desirable in service-oriented economies.

New research suggests maturing workers will have the ability and the desire to work productively and innovatively well beyond today’s normal retirement age. By utilizing and retaining their talents, employers will benefit, living standards will be higher, and the expected drain on Social Security and Medicare will be eased. In coming years, more Americans reaching their 60s and 70s are going to want to work, at least part time. Higher level work is getting easier for the aging, in part thanks to modern medicine’s ability to minimize the effects of aging with such aids as memory enhancing drugs.  Technology such as Internet search engines also serve as auxiliary memories. Technology and other advancements in the way business is done have eliminated much of the heavy lifting formerly required of certain types of jobs, opening them up to mature workers. 

In future years, the phrase “phased retirement” will become commonly used in society. Some companies have been creative and flexible in developing ways to phase employees into retirement – giving them time to explore opportunities and interests before retiring. For example, some employers will allow a worker to reduce the days or hours worked per week or telecommute. Others have even arranged for employees to perform consultant duties or to be available to work on special projects after they retire.

The questions future retirees must ask themselves are: “Can I retire?” “When can I retire?” and “Do I want to retire?” There are no simple answers. Each case will be different and much time will be spent discussing, evaluating and calculating the different scenarios involved in making one of the biggest decisions of their lives.

Over the years, baby boomers have had a huge influence on today’s economy. Every personal decision they have made throughout their lives, ranging from attending college, entering the labor force, and purchasing their first homes, has had effects on the workforce. As they continue to make decisions, including when and how to retire, they will continue to leave lasting impacts.

If you have questions or need more information, contact Brian Bauer of the Labor Market Information Center at (605) 626-2314 or e-mail him at brian.bauer@state.sd.us.