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Symposium 2012

Proposal - Four Proposals for a World Where the Workforce is Ever Older

The Challenge

Bureau of European Policy Advisers (BEPA) Session The key socioeconomic trend in many parts of the world—including China, Europe and the United States—is an ageing society. This trend is driven i ...

Bureau of European Policy Advisers (BEPA) Session

The key socioeconomic trend in many parts of the world—including China, Europe and the United States—is an ageing society. This trend is driven in part by lower fertility but mainly by higher longevity. This means that growing old age dependency—the ratio of older retired people to younger working people—will not disappear with the passing of the baby boom generation: indeed, it will keep increasing.

Author, Shock of Gray: The Aging of the World’s Population and How It Pits Young Against Old, Child Against Parent, Worker Against Boss, Company Against Rival, and Nation Against Nation and CHINA, INC.

Writer:  New York Times Magazine, USA Today

The world’s population is growing older for two well-understood reasons:  Family sizes are shrinking and people are living longer.  Both trends are new to human existence. The workforce challenges wrought by an aging population arise from both causes.  Approaches to the challenges of an older society with an older workforce must make sense in a world where traditional family supports will not exist and where the costs of living a good life—for people living decades longer than their processors—is staggeringly high in historical terms.  What follows are a few suggestions for framing policies.  The suggestions here are a partial list made to complement the policy recommendations (most of which I endorse) of my fellow panelists at GES. I hope they point a way to thinking holistically about challenges ahead.

  1. The first change that must come is a change in perception. Old modes of work and support do not apply in world where demography has been fundamentally altered. Lawmakers, workers’ representatives, bureaucrats and voters must rethink the rhythms of life, the structure of family and the role of community. The new reality of an aging world is that people will routinely come from small families. In old age, a large proportion of the planet will have no family to turn to for significant material support.
    When we think about families and social supports, we draw on a history of seven thousand prior generations who did not live as we do. Their families were bigger, their lives were shorter. The old view is a hard worldview to abandon. We are imbued with myths about family duties, the roles of parents and children, the roles of women. Books, movies, stories told at the knee of grandparents and around the dinner table tell and retell the journey of the traditional family, as it existed before a series of unprecedented demographic changes first began to percolate about a century ago.
    The trends that shrink families and give us more years of life change nearly every important relationship we have in this world. They change how we deal with our own lifespans (we outlive governments and global companies!). It changes how we regard our families, which are now much smaller than in the past. Families may be made up of just one child with no brothers or sister, no cousins or uncles and aunts. Or, they may include living relatives who are four generations and one hundred years apart. The aging of our population also fundamentally changes the nature of work over one’s longer lifetime. People are likely to work more years than ever before. Work is liable to require more years of preparation than before.
    In an aging world, jobs are more likely to be competitive, across generations and across borders than ever before. This competition may seem to be a coincidence, unfolded at the same time the world economy is growing ever more interconnected and jobs, money and goods cross borders more easily than ever before. Yet, these two trends—demographic change and globalization-- are not mere coincidences. The aging of the world’s population is one of the primary drivers of globalization. Addressing the new realities of work in an aging world is the same as addressing many of the new realities of the global economy. Some of the new realities—such as stagnant growth in old-line mature economies—are challenges which older workers can help solve. Some new realities—such as rising incomes and better-skilled labor forces in many developing countries—are opportunities that can create better lives for people in countries that are relatively young today but aging rapidly.
    Still, opportunities in one part of the global labor market are often threats in another. So it is with the world that older workers face. Addressing the challenges of older workers requires grasping the great diversity of the circumstances they face. Cookie cutter solutions that, for example, require people to work long past traditional retirement ages, or which require older workers to stop work and make way for younger job aspirants, overlook the diversity of circumstances the world older workers (and non-workers) face. A world where older people make up a larger and larger proportion of the world’s population is not just demographically older, it is demographically more diverse than the world has ever been. Any solutions we consider at this forum make begin by seeing that diversity.
  2. Legislation and work rules must be rationalized so that practices which mark workers as old do not conflict with the more important goal of keeping workers engaged into their later years. The temptation of employers to make “older” workers redundant, or to transfer their jobs to younger, lower-cost workers cannot be halted altogether (nor should it), but regimes that encourage workers to hone their skills over their lifetimes, can turn “old” workers into “midcareer” ones. In an older world marked by longer lives for most people, relatively young people should not be treated as “older workers.” In most walks of life is ridiculous to think of a person in his or her mid-40s as an old person. (In all of the industrialized world, people who reach the age of 40 have, on average, more than 40 years of life yet to come. People who reach age 60 have a strong chance of living to 95.) Yet, in the workplace, employers often begin to regard workers as old when there is a lot more energy and creative life left in them. In some categories of work—such as the military and public safety—many countries have structural incentives that push people out of the work place in their 40s and 50s. For some categories of public servant in China, for example, women are encouraged to leave their jobs in their mid-40s. Yet, in other careers, workers in their 50s and beyond are regarded as mid-career. Think of scientists, doctors, professors, and politicians, to name a few. Age discrimination often persists for economic reasons unrelated to workers’ abilities.
    Among the reasons is that older workers can be perceived as expensive, and younger workers perceived as less expensive. Older workers benefit from long periods of climbing wages and benefits. For those in jobs that can be filled with younger, cheaper, often foreign (whether they are abroad or immigrant) workers. Other times, pensions penalize or prohibit workers staying on the job. Yet, in places where there are few structural barriers to longer work lives, people do work longer. And where training that helps workers keep their skills current and high is affordable and meaningful, middle aged workers remain highly valuable to employers and are less vulnerable to being replaced with younger, lower-cost labor elsewhere. The old equation in academic economics that counted retirement leisure as a higher good and work as undesirable. That is an understandable assumption in world where work is defined by physical toil and life was shorter as a result. Toiling jobs still exist and they can still use up people’s bodies, but in mature economies they make up a small fraction of jobs. The old equation does not capture the diversity of desires among older workers today. For many older workers, work is a good, and highly sought. In workforce that is largely freed from toil, work for older people provides extra financial resources (which are often spent on younger generations), social interaction and contributes to good health.
  3. Grandparents, who are often quite young, ought not be relegated to domestic service because of age discrimination. Policies that allow them both to provide family services, and to stay employable benefit families, the economy and the grandparents themselves. In developing countries the strong preference for younger workers often relegates relatively young and capable grandparents to domestic, familial roles and removes them early from the workplace. Visit the workbenches of new factories in developing economies and the workers there are almost always young. Some global outsourcing companies have hundreds of thousands of workers under 26, and only a tiny handful over 40. What’s more, very often the young workers are also young parents who need help caring for their children at home. Grandparents are not welcome in the workplace no matter what their willingness or abilities to work at jobs like those held by the young adults. They are drafted—often in the forties or early 50s-- into the job of caring for grandchildren. This practice effectively makes grandparents unemployable in the regular workforce, most often for the rest of their lives. This is a kind of exploitation in which employers get two, or three workers for the price of one. Employers get the salaried employee in their workplace, and they get the labor of grandparents, who provide their workers’ social safety net, childcare and domestic management for free. For the grandparents (average age of a new grandparent around the world is in the early 40s), leaving their own former lives behind means they often give up their old friends, move to new cities, and have trouble reconnecting to their former circles once their services as a caregiver for grandchildren is over.
    Similarly, among lower-income groups in many advanced industrial countries, grandparents play an increasingly important role, providing seemingly low-cost family services that enable younger adult family members to stay in the workforce. This is particularly true where there are weaker options for daycare for children and where the families tend to be matrifocal (or, as often the case, “grandmother-focal”).
    Laws against age discrimination in hiring can remedy part of this problem. Older people who want to work would be ensured equal access to work they can competently perform. Another partial remedy is to make the years of grandparenting educationally rich for grandparents and grandchildren alike. Pilot programs in the United States track the effects of having caregiving adults study in work training programs while they wait for their children to complete their day in pre-school or elementary education. The effects on both children and adults are strong. Children who see an adult devoted to study happen to learn better themselves. What’s more, the adults who study acquire skills that keep them current. There is exhaustive research on the lifelong difference good early childhood education can have on its beneficiaries and on society (which gets better skilled workers in the long run, and fewer who depend on social services or who need policing and jailing). That suits an aging world in itself, since well-educated, healthy people tend to earn more, stay healthier and live longer than less-educated people. But the benefits to adult learners are strong too, since they raise themselves up in the workforce, primed with skilled to work for others or to start their own businesses. It also keeps the adults socially engaged in the world of adults, something family duties alone often work against.
  4. An older society has a strong tendency to exacerbate the income divide between those with high skills and those with low skills. Social justice in an aging society demands robust opportunities for education across the entire lifespan.
    Roughly speaking, prospects for older workers in mature economies fall into two categories. For skilled workers who long tenures enhance their value, job prospects and earning prospects remain high later in their careers. When they do retire, skilled, high-income workers have far more financial security, and higher net worth from which to create income, and annuitized retirements. For lower skilled workers, there is more pressure—sometimes structural (related to employment, social security and pension laws), but often informal---to exit formal employment at younger ages. This accentuates an earning a wealth gap beyond the already strong effects of the difference in employment earnings. In addition, older (in this case, over age 50), less-skilled workers are often barred from reentering the job market and face long, punishing job search periods (in the US it is more than one year) which ultimately force older job seekers to accept work that pays far less in salary and benefits than their former jobs. A higher skilled workforce is less vulnerable to this divide.

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