Talent & Education

Managing an ageing workforce

August 14, 2014


August 14, 2014

Victoria van Lennep
Contributor, The Economist Intelligence Unit

Victoria is Head of Operations at Lendable, a peer-to-peer lending platform. Previously Victoria worked as a deputy editor in the EIU's Thought Leadership team. She holds a Bachelor and a Master in Economics from the Universite Libre de Bruxelles, and an MSc in Environmental Policy from the University of Oxford.

Interview with Ruth Finkelstein, associate director at the Robert N Butler Columbia Ageing Centre

Interview with Ruth Finkelstein, associate director at the Robert N Butler Columbia Ageing Centre

Which countries or regions are most affected by an ageing workforce?

Ruth Finkelstein: Regions such as western Europe or Japan are often cited as experiencing a rapid increase in the proportion of older people in their population, and as a result their workforce, but this is actually a global phenomenon. Most countries in the world are right behind them, thanks to the success of public health and development. We need to recognise the changing age structure of the workforce and figure out how to maximise our quality of life, productivity and effectiveness within that context.

How does this ageing phenomenon impact the competitiveness of companies and countries?

The idea that having an ageing workforce affects the competitiveness of a country is based on the erroneous assumption that having an ageing workforce alone will have a positive or a negative effect. The impact depends entirely on the policies and practices that are in place.
For example, if people work longer, the overall pension and social security costs (the costs to the public of supporting older adults) decline, making labour cheaper overall. Furthermore, if people work longer, they act as consumers longer and at a higher level, which positively impacts economies. There is also increasing evidence that a mix of older and younger workers brings different strengths and skills into the workplace (for example, a mix of technology skills and institutional knowledge), which drives companies’ performances. Finally, research shows that older workers have lower absenteeism rates and more loyalty to their company because of having less competing responsibilities. If you develop policies aimed at maximising everyone’s assets, then having an intergenerational workforce has a huge potential to grow economies.

Could you give an example of effective policy or practice to accommodate an ageing workforce?

Ongoing education at work is essential to ensure continuous productivity. Unfortunately, there are instances where training is not offered to older workers under the mistaken impression that the investment won’t be recouped, when research shows that older workers are more loyal and stay in the company longer.

How should companies adapt their retirement policies to an ageing workforce?

Retirement is currently seen as “all or nothing”, where you are falling off a cliff. This problem comes from the way our public and private pension policies are framed. People would like to be able to work, but not as much, or work part of the year only. Instead of retiring all at once, they could enter phased retirement—that is perfectly feasible from a workplace policy perspective, but goes against some national policies. Most public pension systems don’t allow you to work for more than a very limited number of hours and collect a pension. Partial pension systems could solve that problem.
Similarly, private pensions have disincentives for phased retirements too: the fact that they are based on employees’ highest last salary discourages employees to phase down. We shouldn’t create policies which supplant people who want to work full-time with part-time workers, but the option to work fewer hours should be available.

Should policies and practises aimed at maximising a multigenerational workforce be driven by companies or the state?

We should let innovation flourish through the private sector and expect the state to set floors, not ceilings. I think small businesses are places where innovations in that area can occur faster, as the owner is likely to be on site and connected to the employee personally.

This interview is part of a series managed by The Economist Intelligence Unit for HSBC Commercial Banking. Visit HSBC Global Connections for more insight on international business.

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