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February 3, 2003

Baby Boomer Retirements - What can I do now to Prepare?

There is a crisis in American business - the growing number of aging Baby Boomers in the workforce and the much smaller number of younger workers following behind them. In the near future, there will be an upswing in the number of 50 - 69 year olds, a shrinking population of 30 - 44 year olds, and a small increase in Generation Y workers.

Two issues of Astronology will focus on the impact of Baby Boomer retirements on the remaining workforce, and creative, proactive steps organizations can take now to ensure uninterrupted future success.

The information in this article comes from the Bureau of Labor Statistics, the General Accounting Office, William M. Mercer, the Federal Interagency Forum on Aging Related Statistics, the Employment Policy Foundation, and the Center for Organizational Research.

According to the GAO, the proportion of workers age 55 and up is expected to increase an average of 4% per year between 2000 and 2015. This rapid increase is due to the “Age Bubble” and a general trend toward greater labor force participation by older persons. The Age Bubble is the balloon effect created by the Baby Boom generation - people born between 1946 and 1964.

The BLS states workers age 25 - 44 will decline by 3 million, from 51% of the labor force in 1998 to 44% in 2008. During the same period, workers over age 45 will increase from 33% to 40% of the workforce.

Employment Policy Foundation research notes more than 61 million Americans will retire during next 30 years. Within five years, the US workforce will begin to dwindle. The Foundation further projects a labor shortage of 4.8 million workers in 10 years, 19.7 million in 20 years, and 35.8 million in 30 years. College educated, highly skilled workers will be in particularly short supply. The country’s gross domestic product, the output of goods and services produced by US labor and property, could drop 3% in 10 years and over 17% in 30 years. For workers, that translates into a significant drop in average per capita income.

William M. Mercer recently surveyed 232 large employers in a variety of industries. While only 9% report that over 35% of their workforce is currently over age 50, 55% anticipate that will be the case in 15 years. The percentage of organizations in each industry category with at least one quarter of their workforce over age 50 is as follows:

Higher education (83%),
Government (50%),
Manufacturing (38%),
Not-for-profit service (29%), and
For-profit service (12%).

According to the BLS, certain clusters of occupational groups will see a dramatic increase in vacancies, called “replacement needs,” due to employee retirements. The greatest turnover is expected to be in executive, administrative, and managerial occupations. Workers age 45 and older now make up 41% of this group. 42% of them are expected to retire by 2008. The BLS notes the following:

Executive, supervisory, or administrative employees are typically older than front-line employees.
Many clerical and manufacturing jobs are becoming obsolete due to technological developments, thus reducing the number of new entrants.
Highly educated professional occupations tend to have older workers, due to high opportunity costs for such high-wage earners to leave the field. Many choose to continue working because they enjoy their work.
As knowledge work is less physically demanding than other jobs, knowledge workers are able to continue working later in life.
Downsizing or a temporary oversupply, as in the case of teachers, scaled back hiring during a specific time period, thereby increasing the proportion of older workers.
In unionized occupations, such as airline pilots, senior workers are given preference. Turnover tends to be low.
Some occupations, such as tool and die makers, simply fail to attract younger workers.

Based on this, BLS economists have identified key workforce implications:

The US workforce, as a whole, will be affected by the steep rise in the number and proportion of older workers and the dwindling replacement pool of younger workers.
Some occupations will be disproportionately affected.
Industries that employ a significant number of these occupational groups and, within those occupations, employ more than 20% of the workforce, will be most severely affected. These industries are manufacturing, public administration, educational services, transportation, and health services (especially hospitals).
Some employers, such as those in education and public administration, already know the effects of these changes. As the first Baby Boomers reach retirement age, organizations expect to feel the greatest impact. This has averaged age 62 across industries, but is likely to rise due to changes in Social Security.

Employers will face many challenges in addressing the changing workforce. In particular, employers will need to:

Slow the departure of some or all older workers through retirement,
Enhance older workers’ capacity through continued training and development,
Attract, develop, and retain younger workers despite increased competition for a smaller labor pool,
Facilitate the transfer of knowledge, skills, and relationships from older workers to their successors,
Implement succession planning and management,
Manage intergenerational issues within the workplace, and
Address perceived and actual age bias issues.

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ISSN Number 1549-0467