February 4, 2010
WORLD: The Silver Tsunami
. LONDON, England / The Economist / Business & Finance / February 4, 2010 Schumpeter The silver tsunami Business will have to learn how to manage an ageing workforce MARTIN AMIS and Christopher Buckley are writers who are entering their silver years and are worried about the costs of an ageing population. Mr Amis, who has a new novel out (see article), recently compared the growing army of the elderly to “an invasion of terrible immigrants, stinking out the restaurants and cafés and shops”. Mr Buckley devoted a novel, “Boomsday”, to the impending war of the generations. They have both touted the benefits of mass euthanasia, though Mr Amis favours giving volunteers “a martini and a medal” whereas Mr Buckley supports more sophisticated incentives such as tax breaks. Illustration by Brett Ryder Novelists will have their jokes. But Messrs Amis and Buckley are right to warn about the threat of the “silver tsunami”. Most people understand about the ageing of society in the abstract. But few have grasped either the size of the tsunami or the extent of its consequences. This is particularly true of the corporate world. Companies in the rich world are confronted with a rapidly ageing workforce. Nearly one in three American workers will be over 50 by 2012, and America is a young country compared with Japan and Germany. China is also ageing rapidly, thanks to its one-child policy. This means that companies will have to learn how to manage older workers better. It also means that they will be confronted with a wave of retirements as the baby-boomers leave work in droves. Most companies are remarkably ill-prepared. There was a flicker of interest in the problem a few years ago but it was snuffed out by the recession. The management literature on older workers is a mere molehill compared with the mountain devoted to recruiting and retaining the young. Companies are still stuck with an antiquated model for dealing with ageing, which assumes that people should get pay rises and promotions on the basis of age and then disappear when they reach retirement. They have dealt with the burdens of this model by periodically “downsizing” older workers or encouraging them to take early retirement. This has created a dual labour market for older workers, of cosseted insiders on the one hand and unemployed or retired outsiders on the other. But this model cannot last. The number of young people, particularly those with valuable science and engineering skills, is shrinking. And governments are raising retirement ages and making it more difficult for companies to shed older workers, in a desperate attempt to cope with their underfunded pension systems. Even litigation-averse Japan has introduced tough age-discrimination laws. Companies will have no choice but to face the difficult problem of managing older workers. How do you encourage older people to adapt to new practices and technologies? How do they get senior people to take orders from young whippersnappers? Happily a few companies have started to think seriously about these problems—and generate insights that their more stick-in-the-mud peers can imitate. The leaders in this area are retail companies. Asda, a subsidiary of the equally gerontophile Wal-Mart, is Britain’s biggest employer of over-50s. Netto, a Danish supermarket group, has experimented with shops that employ only people aged 45 and over. Many industrial companies are also catching the silver wave. Some are rejigging processes to accommodate older workers. A forthcoming article in the Harvard Business Review by Christoph Loch of INSEAD and two colleagues looks at what happened when BMW decided to staff one of its production lines with workers of an age likely to be typical at the firm in 2017. At first “the pensioners’ line” was less productive. But the firm brought it up to the level of the rest of the factory by introducing 70 relatively small changes, such as new chairs, comfier shoes, magnifying lenses and adjustable tables. Some companies, particularly in energy and engineering, are also realising that they could face a debilitating loss of skills when the baby-boomers retire en masse. Bosch asks all retirees to sit down for a formal interview in an attempt to “capture” their wisdom for younger workers. Construction companies such as Sweden’s Elmhults Konstruktions and the Netherlands’ Hazenberg Bouw have introduced mentoring systems that encourage prospective retirees to train their replacements. Older and poorer Companies will have to do more than this if they are to survive the silver tsunami. They will have to rethink the traditional model of the career. This will mean breaking the time-honoured link between age and pay—a link which ensures that workers get ever more expensive even as their faculties decline. It will also mean treating retirement as a phased process rather than a sudden event marked by a sentimental speech and a carriage clock. There are signs that this is beginning to happen. A few firms have introduced formal programmes of “phased retirement”, though they usually single out white-collar workers for the privilege. Some, notably consultancies and energy companies, have developed pools of retired or semi-retired workers who can be called upon to work on individual projects. Asda allows employees to work only during busy periods or take several months off in winter (a perk dubbed “Benidorm leave”). Abbott Laboratories, a large American health-care company, allows veteran staff to work for four days a week or take up to 25 extra days of holiday a year. But there is one big problem with such seemingly neat arrangements: the plethora of age-discrimination laws that have been passed over the past few years make it harder for companies to experiment and easier for a handful of malcontents to sue. It would be an irony worthy of Messrs Amis and Buckley if laws that were passed to encourage companies to adapt to the demographic revolution ended up having the opposite effect. [rc] Copyright © The Economist Newspaper Limited 2010.