Say goodbye to retirement as we know it. The end of retirement, or its transformation, is very much the result of an ageing population. After all, in Medieval Britain there was no such thing as retirement because people didn’t live that long. There was full employment until you were 30. Then you died.
The concept of retirement was introduced by German chancellor Otto von Bismarck, who developed a scheme where a pension would be paid to non-working Germans over the age of 65. Being German, his plan was to keep the economy working at maximum efficiency. At the same time, he wanted to show the public the government was promoting the wellbeing of workers. Why? To stave off the enticement of the Marxists gaining momentum through Europe. Now Bismarck wasn’t stupid when he selected 65 – the average life expectancy then was about 50.
Still, his scheme set the world standard for the beginning of old age and defined public and policy imagination globally. An ageing population is now shifting the concept of retirement.
We have entered an age when septuagenarians like Gerry Harvey (aged 72) and people in the 80s like Rupert Murdoch (81) and Warren Buffett (82) are running companies. Also, many more organisations are now employing people well beyond the age of 65. It’s an inevitable trend, with 60 now the new 50. Demographers say people in developed nations are living in good health. Indeed, they’re living as much as a decade longer than their parents did. That’s not because ageing has been slowed or reversed, but because they are staying healthy to a more advanced age.
A new report from Deloitte Access Economics foreshadows big changes to retirement as we know it. The trend is heading in that direction. Over the past decade, the report says, there has been an enormous increase in the workforce of Australians in their 50s and 60s. At the same time, there has been a dramatic increase in female participation, driven partly by more mature age women in the workforce. Participation rates have risen at a faster rate than foreshadowed in the government's Intergenerational Report.
What’s driving the trend now are the skills shortage and high turnover in certain industries. All this will create enormous issues for some companies in certain sectors that are blindly focused on recruiting the young and that have workforces with declining ages.
The Deloitte report makes it clear that managers at these companies are working against the trend and that they will be left high and dry.
The elderly are the fastest growing section of the population. The older they are, the more rapid the growth. "Over the next forty years, the number of Australians aged 85 and over will go up by a factor of five – some seven times for men and four times for women... with life expectancies continuing to rise, and improvements in health care and other technologies, there is every reason to expect that age will be less of a factor in future retirement decisions.”
With an ageing population putting pressure on government finances, increases in the pension age will be ongoing rising to 67 by mid-2023. According to the report, traditional attitudes to retirement will become "increasingly obsolete.”
Because people are living longer and are healthier, it’s logical to expect them to keep working. Of course, many don’t have a choice because their savings and superannuation are inadequate, wiped out by the global financial crisis. For many, it will take some planning for them not to work until they drop. Rather than the end of retirement, what we’re more likely to see is more people working in jobs one or two days a week, and spending the rest of their time doing volunteer work with community groups. It will be a new form of retirement.
The report makes it clear that encouraging more people aged 55 and over to stay in the workforce would increase national economic output by $48 billion, or by or 2.4 per cent of national income, over the next 12 years. Apart from the impact that the ageing population has on health spending and pensions, it’s another reason why future government will be developing policies to encourage workforce participation of older Australians.
The skills shortage will also be driving the trend. Australia simply does not have enough skilled workers, that gap can’t be filled with migration and there are a significant number of older workers who are either unemployed or underemployed. A study prepared for the Brotherhood of St Laurence last year, titled Workforce Participation and Non-Participation Among Baby Boomers in Australia, found that half of all Australians aged from 60 to 64 are not in jobs. They are usually the first to be made redundant and face an average of 73 weeks unemployment. Many of those who are in jobs are working part time, putting in less than 20 hours a week.
Heidi Holmes, who runs Adage which works as a mini-Seek for mature-age workers, aged over 45, says there is growing demand for older workers from industries where there is a skills shortage or high turnover. Adage clients include corporations like Westpac.
But she says other sectors are ignoring this group. The professional services sector is one of the worst examples. "If you look at all the professional services over the last decade, a lot have had a huge push for graduates. And obviously you need to have new staff coming through but what we haven’t seen at the other end is a strategy around retention or recruitment of mature age workers," Holmes says. "They’re in the business of selling knowledge but a lot of these businesses have an average declining age. It’s hardly justified that you’re selling knowledge at $600 an hour if you have an average age of 27. But going forward, they’re not going to have the same access to that talent.”
She says they will need to change strategies over the next 12 months as the skills shortage continues to hit hard. "If you want to be competitively placed, it makes sense to be looking where not everyone else is," she says.
The shift in retirement will create a number of management challenges. Flexibility is crucial for recruiting older workers. Many would be looking at going part time or contracting, some would need extra time to take care of aged parents or infirm partners. They would also need meaningful work and be constantly trained up for new skills.
Also, there are the younger managers who struggle being in charge of older workers. That needs some work. Specialists say companies that employ many women tend to do better managing older workers, possibly because they have more exposure to equal opportunity issues.
In the end, the confluence of an ageing population, skills shortage and the changing nature of retirement over the next 10 years will create a new landscape for managers. It’s best they start work on it now before they’re left behind.