age and industry

Age and IndustryAge and Industry

Presented by:Presented by:Marcie Krastman & Melisa ApplebyMarcie Krastman & Melisa Appleby

Individual DifferencesIndividual DifferencesApril 14, 2005April 14, 2005

OutlineOutline

Myth bustersMyth bustersUS laws and RegulationsUS laws and RegulationsDefinitions Definitions IssuesIssuesWorkplace BarriersWorkplace BarriersRecommendationsRecommendationsForeign studiesForeign studies

Older Worker Myth BustersOlder Worker Myth Busters(True or False?)(True or False?)

1.1. Older workers can’t or won’t learn new skills.Older workers can’t or won’t learn new skills.

FalseFalse

2.2. Older workers don’t stay on the job long.Older workers don’t stay on the job long.

FalseFalse

3.3. Older workers take more sick days than Older workers take more sick days than younger workers.younger workers.

FalseFalse

Older Worker Myth BustersOlder Worker Myth Busters

4.4. Older workers are not flexible or Older workers are not flexible or adaptable to change.adaptable to change.

BothBoth

5.5. Older workers are more expensive.Older workers are more expensive.

BothBoth

U.S. Laws and Regulations for U.S. Laws and Regulations for employing Older Workersemploying Older Workers

The ADEA prohibits: (a) the unlawful discrimination of an individual

based on age for selection, compensation, privileges, and development,

(b) classification or categorization of employees based on age, which may adversely impact employees, and

(c) the lowering of wages of employees to conform to the ADEA.

U.S. Laws and Regulations for U.S. Laws and Regulations for employing Older Workersemploying Older Workers

Employment Retirement Income Security Employment Retirement Income Security Act (ERISA)Act (ERISA)

Ensured currently employer workers 65 or Ensured currently employer workers 65 or older would be allowed to contribute to their older would be allowed to contribute to their pensions for retirement.pensions for retirement.

Definition of an Older WorkerDefinition of an Older WorkerAccording to ADEA…According to ADEA…

An employee 40 years of age or older, this An employee 40 years of age or older, this includes the baby boom generation.includes the baby boom generation.

There are some specific issues that will There are some specific issues that will have to be addressed now that the baby have to be addressed now that the baby boomers are beginning to retire from the boomers are beginning to retire from the workforce.workforce.

Possible Effects of Baby Possible Effects of Baby Boomers RetiringBoomers Retiring

Labor force growth is expected to fall from Labor force growth is expected to fall from 1.1% per year in the ‘90’s to 0.36% per year 1.1% per year in the ‘90’s to 0.36% per year between 2010-2020.between 2010-2020.

Effects on Social Security Effects on Social Security Who will pay for all these retirees?Who will pay for all these retirees?

What other possible problems will we need to What other possible problems will we need to face because the baby boomer generation is face because the baby boomer generation is retiring?retiring?

Retirement TrendsRetirement Trends

Longer life spans have contributed to ever-Longer life spans have contributed to ever-longer retirements.longer retirements.

People are retiring earlierPeople are retiring earlierAverage retirement age…Average retirement age…

Today: Age 62Today: Age 6230 Years ago: Age 6530 Years ago: Age 65

Why?Why? Increases in wealth and incomeIncreases in wealth and income

Changes in RetirementChanges in Retirement

The decline in men’s retirement age has tapered The decline in men’s retirement age has tapered off in recent years.off in recent years.

““Cliff” v. Gradual RetirementCliff” v. Gradual Retirement ““Cliff” retirement- Traditional notion of retirement had Cliff” retirement- Traditional notion of retirement had

the worker exiting the workforce suddenly, moving the worker exiting the workforce suddenly, moving from a full-time job to no work at all.from a full-time job to no work at all.

Gradual retirement- Retirement occurs over time with Gradual retirement- Retirement occurs over time with reducing the workload until the individual is phased reducing the workload until the individual is phased out of the workforce.out of the workforce.

““Bridge jobs”Bridge jobs”

Older Workers Working MoreOlder Workers Working More

Employers will want older workersEmployers will want older workersLabor shortages will require companies to Labor shortages will require companies to

seek new sources of labor and redefine the seek new sources of labor and redefine the working age population to include older working age population to include older workers. workers.

More older Americans will want to workMore older Americans will want to workWillingness: Interest in working will lead to Willingness: Interest in working will lead to

“bridge jobs” or post-career.“bridge jobs” or post-career.EconomyEconomy

Barriers to Work for Older Barriers to Work for Older WorkersWorkers

Recognizing the Value of Older WorkersRecognizing the Value of Older Workers1.1. Older workers represent a tremendous Older workers represent a tremendous

source of experienced human capital.source of experienced human capital.

2.2. Older workers’ human capital includes Older workers’ human capital includes specific skills acquired formally and specific skills acquired formally and informally over years of work and also informally over years of work and also encompasses less defined attributes that encompasses less defined attributes that add value to the workplace.add value to the workplace.

Barriers to Work for Older Barriers to Work for Older WorkersWorkers

Recognizing the Value of Older Workers Recognizing the Value of Older Workers (continued)(continued)

3.3. Older workers demonstrate a higher degree Older workers demonstrate a higher degree of loyalty to their employers, reflected in of loyalty to their employers, reflected in employer surveys and tenure data.employer surveys and tenure data.

4.4. Older workers often demonstrate a greater Older workers often demonstrate a greater flexibility in work arrangements than younger flexibility in work arrangements than younger workers.workers.

Other Workplace Barriers to Older Other Workplace Barriers to Older WorkersWorkers

Pension plans that strongly discourage older Pension plans that strongly discourage older workers from working.workers from working.

Workplace attitudes and practices that hinder Workplace attitudes and practices that hinder older workers’ employment opportunities.older workers’ employment opportunities.

Federal regulations that inhibit flexible work Federal regulations that inhibit flexible work arrangements.arrangements.

Attitude Barriers to Older WorkersAttitude Barriers to Older Workers

Organizations typically encourage early Organizations typically encourage early retirement to make room for younger workers. retirement to make room for younger workers.

A stagnant labor supply will force many A stagnant labor supply will force many employers to rethink their attitudes toward older employers to rethink their attitudes toward older workers and reverse policies that inhibit their workers and reverse policies that inhibit their employment.employment.

Workplace discriminationWorkplace discrimination

Inadequate trainingInadequate training

Pension Barriers to Older WorkersPension Barriers to Older Workers

Pension Plans:Pension Plans:Traditional Defined Benefits PlanTraditional Defined Benefits Plan

Findings: On average, the benefits Findings: On average, the benefits these plans provide by age resemble a these plans provide by age resemble a hill.hill.

The present value of the pension accrual The present value of the pension accrual rises along a slope that becomes rises along a slope that becomes increasingly steep as the worker gains in increasingly steep as the worker gains in age and time on the job and then, after age and time on the job and then, after peaking, suddenly falls dramatically. peaking, suddenly falls dramatically.

Benefit Barriers to Older Benefit Barriers to Older WorkersWorkers

Defined Contribution PlanDefined Contribution PlanContributions are based on a constant Contributions are based on a constant

percentage of salary, regardless of age.percentage of salary, regardless of age.Seen most in the public sector.Seen most in the public sector.Findings: Pension accruals first rise especially Findings: Pension accruals first rise especially

quickly with the length of service and then fall more quickly with the length of service and then fall more rapidly for the federal employee retirement system rapidly for the federal employee retirement system (FERS) and for California, Illinois, and New York (FERS) and for California, Illinois, and New York teachers.teachers.

Health Benefits Barriers to Older Health Benefits Barriers to Older WorkersWorkers

Health Benefits:Health Benefits:A 1996 panel study revealed that private A 1996 panel study revealed that private

health costs rose from between $500-$1,000 health costs rose from between $500-$1,000 for workers age 20-40, to close to $2,000 for for workers age 20-40, to close to $2,000 for most workers over age 55.most workers over age 55.For employees who stay with the job, health cost For employees who stay with the job, health cost

rise as a proportion of pay mainly when they come rise as a proportion of pay mainly when they come close to old age rather than middle age when both close to old age rather than middle age when both pay and health costs are going up together. pay and health costs are going up together.

Removing Barriers at WorkRemoving Barriers at Work

Progress already made:Progress already made:

The end of mandatory early retirement*The end of mandatory early retirement*Direct benefitDirect benefitIndirect benefitIndirect benefit

Changes to Social Security programChanges to Social Security programReduction in important financial disincentives to Reduction in important financial disincentives to

work.work.

The Supply Side of the Labor The Supply Side of the Labor MarketMarket

Physical ability as a barrier to workPhysical ability as a barrier to workPhysical limitations play a small role.Physical limitations play a small role.However, the incidence of physical However, the incidence of physical

impairments increases with age, with physical impairments increases with age, with physical capacity beginning to decline in middle age.capacity beginning to decline in middle age.

Health problems also become more frequent.Health problems also become more frequent.Fortunately, cognitive function does not Fortunately, cognitive function does not

appear to decline until very late in life.appear to decline until very late in life.


Financial incentives to retireFinancial incentives to retireSocial securitySocial security

One of the goals of the program at its inception One of the goals of the program at its inception was to draw older workers out of the work force in was to draw older workers out of the work force in order to make jobs available to younger workers.order to make jobs available to younger workers.

These changes go a long way toward achieving These changes go a long way toward achieving neutrality in the program when it comes to work.neutrality in the program when it comes to work.


A.A. Private pension plans and early Private pension plans and early retirement incentive plansretirement incentive plans

B.B. Medicare and health coverageMedicare and health coverage

C.C. Disability insurance Disability insurance


Older workers who lose their jobs are 3 times Older workers who lose their jobs are 3 times as likely to retire as are employed older as likely to retire as are employed older workers and the effect is even stronger when workers and the effect is even stronger when national unemployment rises. national unemployment rises.

Less educated workers, those in poorer health, Less educated workers, those in poorer health, and black men experience longer and black men experience longer unemployment than otherwise comparable unemployment than otherwise comparable older unemployed workers.older unemployed workers.

By one estimate, older workers who lose their By one estimate, older workers who lose their jobs experience a 39 percent reduction in jobs experience a 39 percent reduction in earnings in the two years following job loss.earnings in the two years following job loss.

The Demand for Older WorkersThe Demand for Older Workers

A key factor in older A key factor in older worker productivity is worker productivity is skill level and training.skill level and training.

Workers over the age Workers over the age of 55 are far less of 55 are far less likely to receive likely to receive training to improve training to improve their skills than any their skills than any other age group.other age group.


EarningsEarnings Individuals’ earnings typically increase over Individuals’ earnings typically increase over

their working lives, independent of growth their working lives, independent of growth and wage trends in the economy.and wage trends in the economy.

Pay for experiencePay for experience Over payment Over payment

Health insuranceHealth insurance On average, the cost of coverage is higher On average, the cost of coverage is higher

for older employees than for younger ones.for older employees than for younger ones.


CostsCostsThe costs associated with work injury and The costs associated with work injury and

disability are higher for older workers.disability are higher for older workers.Half of older workers who experience health Half of older workers who experience health

impairments remain with their current impairments remain with their current employers after the onset of the impairment.employers after the onset of the impairment.

Absenteeism is slightly higher for older Absenteeism is slightly higher for older workers than for younger ones.workers than for younger ones.

Recommendations for Adapting Recommendations for Adapting the Workplace:the Workplace:

Fixing Financial IncentivesFixing Financial IncentivesReplacing Stereotypes about Older Replacing Stereotypes about Older

WorkersWorkersGetting older workers trainingGetting older workers trainingRethinking the organization of workRethinking the organization of workGetting older workers into new jobsGetting older workers into new jobsDeveloping a strong and flexible safety netDeveloping a strong and flexible safety net

Getting the Financial Incentives RightGetting the Financial Incentives Right

Major changes in public policies necessary Major changes in public policies necessary to encourage long work lives include:to encourage long work lives include:Eliminating the Social Security Earning testEliminating the Social Security Earning test Increasing Social Security’s normal and early Increasing Social Security’s normal and early

retirement eligibility agesretirement eligibility agesAnd eliminating the employer first-payer And eliminating the employer first-payer

provision in Medicare.provision in Medicare.Employers need to educate workers about Employers need to educate workers about

financial planning for retirement.financial planning for retirement.

Replacing Stereotypes about Older Replacing Stereotypes about Older WorkersWorkers

Employers need to stop age discrimination Employers need to stop age discrimination through training sessions and workshops.through training sessions and workshops.

Employers should abandon stereotypes Employers should abandon stereotypes about older workers in favor of honest about older workers in favor of honest assessments of value.assessments of value.

The Training ImperativeThe Training Imperative

Older workers need to to acquire and Older workers need to to acquire and maintain their own skills. maintain their own skills. Employers should also offer training to older Employers should also offer training to older

workers and give these workers equal access to workers and give these workers equal access to training.training.

Higher education institutions should expand Higher education institutions should expand their course offerings and programs to older their course offerings and programs to older workers who want and need to update their workers who want and need to update their training.training.

Rethinking the Organization of WorkRethinking the Organization of Work

Companies need to explore new ways to Companies need to explore new ways to reorganize work for long-tenure employees in reorganize work for long-tenure employees in order to avoid career plateaus.order to avoid career plateaus.

Phased retirement may be good but they are Phased retirement may be good but they are very uncommon. Successful implementation of very uncommon. Successful implementation of phased retirement may require a change in phased retirement may require a change in company pension and benefit rules and changes company pension and benefit rules and changes to federal regulations governing employee to federal regulations governing employee benefits. benefits.

Getting Older Workers into New JobsGetting Older Workers into New Jobs

Better opportunities for older job seekers are required. Better opportunities for older job seekers are required. Older workers looking for new employment should Older workers looking for new employment should

update their job search skills and use computer-based update their job search skills and use computer-based job searches.job searches.

Federal law governing employee benefits should be Federal law governing employee benefits should be amended to allow greater flexibility in hiring older amended to allow greater flexibility in hiring older workers for contingent and part-time work. workers for contingent and part-time work.

Employers should consider greater use of “cafeteria” Employers should consider greater use of “cafeteria” type flexible benefit packages to facilitate the hiring of type flexible benefit packages to facilitate the hiring of older workers in flexible work arrangements. older workers in flexible work arrangements.

A Strong and Flexible Safety NetA Strong and Flexible Safety Net

Social Security Disability Insurance should Social Security Disability Insurance should be reformed to promote work by be reformed to promote work by recipients, many of whom are older recipients, many of whom are older Americans, while maintaining an adequate Americans, while maintaining an adequate safety net of benefits. safety net of benefits.

The reforms of social security should The reforms of social security should illustrate how public safety net programs illustrate how public safety net programs can serve their intended populations while can serve their intended populations while also promoting work. also promoting work.

Foreign StudiesForeign Studies

Singapore Singapore In 1998, 14% of our resident population or In 1998, 14% of our resident population or

about 451,900 were aged 55 and above. The about 451,900 were aged 55 and above. The figure will increase to 27% or some 1,124,200 figure will increase to 27% or some 1,124,200 by the year 2020.by the year 2020.

The older workers in Singapore are generally The older workers in Singapore are generally less educated compared with the younger less educated compared with the younger cohorts because many of them have missed cohorts because many of them have missed out on the limited educational opportunities out on the limited educational opportunities available in the earlier years.available in the earlier years.


Singapore (cont.)Singapore (cont.)Although older workers have lower turnover Although older workers have lower turnover

and unemployment compared with their and unemployment compared with their younger counterparts, they are more younger counterparts, they are more vulnerable to job loss and longer vulnerable to job loss and longer unemployment spells.unemployment spells.

As Singapore moves towards a Knowledge-As Singapore moves towards a Knowledge-Based Economy, age may become less Based Economy, age may become less important than skills in sustaining important than skills in sustaining employment.employment.


Singapore (cont.)Singapore (cont.)The employment of older workers is protected The employment of older workers is protected

through legislations and non-statutory anti-through legislations and non-statutory anti-discriminatory guidelines by the government discriminatory guidelines by the government of Singapore.of Singapore.

Currently, flexible working arrangements such Currently, flexible working arrangements such as flextime, job sharing, part-time work and as flextime, job sharing, part-time work and tele-working are not commonly practiced in tele-working are not commonly practiced in Singapore.Singapore.


JapanJapanRetirement income for the majority of

Japanese is mainly derived from the national pension system.

The Japanese national old-age pension The Japanese national old-age pension system consists of two tiers, both of which are system consists of two tiers, both of which are financed on a pay-as-you-go basis.financed on a pay-as-you-go basis.


JapanJapanEmployer-Provided PensionEmployer-Provided Pension

Employer-provided pensions are primarily defined Employer-provided pensions are primarily defined benefit in nature and may be received as (a) lump benefit in nature and may be received as (a) lump sums, (b) annuities, or (c) a combination of the sums, (b) annuities, or (c) a combination of the two.two.

Disability Insurance PlanDisability Insurance PlanThe Disability Employees Pension benefits, like the The Disability Employees Pension benefits, like the

Old-Age Employees’ Pension benefits, are based Old-Age Employees’ Pension benefits, are based on earnings and months of contributions with on earnings and months of contributions with additional benefits when a spouse is present.additional benefits when a spouse is present.


JapanJapan

Labor Market PoliciesLabor Market PoliciesLifetime EmploymentLifetime EmploymentSeniority SystemSeniority SystemEmployment TrainingEmployment TrainingAge Discrimination and Mandatory RetirementAge Discrimination and Mandatory Retirement


SwedenSwedenOld age and disability pensionsOld age and disability pensionsNew National old age system pensionNew National old age system pension

Earnings related pensionEarnings related pensionNotional defined contribution pensionNotional defined contribution pensionPremium pensionPremium pensionGuarantee pensionGuarantee pension


SwedenSwedenEmployer provided old age pensionEmployer provided old age pensionPrivate individual old age pensionPrivate individual old age pensionDisability pensionDisability pension


SwedenSwedenLabor Market Policies Labor Market Policies

Mandatory retirementMandatory retirementSeniority RulesSeniority Rules SwedenSweden

Age DiscriminationAge DiscriminationTrainingTrainingQuality of Work Life


United Kingdom United Kingdom Old Age and Disability PensionOld Age and Disability PensionNational old age and pension systemNational old age and pension system

Basic State PensionMeans-tested BenefitsEarnings-related pensionDiscretionary savings vehicles


United KingdomUnited KingdomOther Features of the national old age Other Features of the national old age

pension systempension systemEligibility ageEligibility ageDeferral of Pension BenefitsDeferral of Pension BenefitsFundingFunding

Employer provided pension plansEmployer provided pension plansDisability InsuranceDisability Insurance


United KingdomUnited KingdomLabor Market PoliciesLabor Market Policies

Mandatory retirement and Age DiscriminationMandatory retirement and Age DiscriminationEmployment AssistanceEmployment AssistanceQuality of work lifeQuality of work life

Questions?Questions?

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