Introduction
For the last few years, the proportion of aging population has continued to form a large portion of the total American population. This proportion is expected to rise in the near future as more people attain the age of retirement. There are about 78 million Americans who were born from 1946-1964 (Powell, 2010). This group commonly known as baby boomers has began attaining the age of retirement early this year and they are expected to continue in this trend for the next 18 years. For a long time this generation is known for its passion to remain young and many people are expecting that the group may reshape the general view of the public about old age as baby boomers continue to remain health, working, and active compared to other generations before them (Landau, 2010).
The increasing aging population is also expected to put pressure on the government in the provision of old age benefit programs such as Medicare and social security. In addition, this generation may shake the economy as they start to spend their assets. This generation is expected to affect all the sectors of the economy such as labor force, market focus, among others which will require government and corporate world to change their strategies in order to accommodate this large portion of the population (Beinhocker, 2009). This study will focus on the issues that are surrounding the retirement of baby boomers and the impacts of the expected outcomes to the workers and management.
Background
Baby boomers were born after the Second World War immediately after long period of population growth decline experienced in America that started during industrial revolution. The population shot up immediately from 1946 where more than four million babies were born each year (Forman, 2004).Within a period of two decades the population of America had added a population of about 76 million despite seven million babies dying in this period who were later replaced by immigrants. At this time, women were getting married at a young age than previous years hence the birth rate of the country increased from 2.1 percent to 3.7 percent annually (Kozol, 2011). In 1950s the economy also flourished and it was now possible for the families to bring up the new born babies in better homes with other needs for their proper growth and development. The national economy had fully recovered from the 1930s depression as the GDP grew from $ 227 billions to $ 448 billions from 1940 to 1960 (Powell, 2010). The inflation decreased and the real wages and income was also raised which enabled middle class to buy homes as well as getting collage education. Rising family income created a good environment for growth of baby boomers that could be educated better than all the previous generations. Enrollment in both high schools and collages increased during this period.
Away from the class, boomers were influential and heavy consumers who became a target for many marketers (Schomer, 2011). Many products were developed to target this generation since they formed a significant market segment which offered potential market for many companies. Products such as toys, TVs, and soft music were invented in line with the growth process of this generation. In 1984, Newsweek reported that baby boomers were now reshaping social and economic landscapes as they formed young professional force in many companies (DASH). The payment for social security was raised by the congress from 65 to 67 years in 1983. Mandatory retirement age was also eliminated in 1986 through amendment of the Act on age discrimination. In 2000s, the oldest baby boomers reached sixty years which started to raise alarm about their retirement benefits. In 2005, President Bush who was among the first boomers generation advocated for privatization of the social security but he did not receive the support he expected. In 2010, about 26 million workers attained the age of 55 years raising more concern on how the government will finance this aging population (Powell, 2010). By 2025, this number is expected to hit 33 million people creating more crises not only to the government but also to the managers of companies who have to shift their workforce as more boomers who occupied senior positions in their companies attain the age of retirement.
Impact to the national work force
As noted earlier in this paper, boomers grew at a time of economic prosperity which enabled them to be well educated. This enabled them to train in various professionals and later join workforce of different organizations. With time, boomers have gained experience and age to take them to senior most positions in various organizations. In 2005, this generation formed about 28% of the population though in labor force the percentage was larger than that (Lavigna, 2005). The trend of the worker’s average age has been changing as this generation grows old. For instance, in 1978, workers who aged 32 years and below formed about 45 percent of the workforce. In 2008, the number of workers who were aging 45 years and above were more than 17 million and those below this age were less than 13 millions. To describe this problem in clarity, Van Horn et al.(2006) claim that the percent of workers aging 45 years and above will increase by 27% while that of workers below 44 years will increase by only 3% from 2006 to 2016. According to Dohm (2000), boomers comprise about 40% of the total workforce and about 54 percent of them are expected to retire within a period of ten years. Other statistics show that about 11,000 boomers are attaining the age of retirement each day and this number is expected to grow in the near future. All these workforce statistics narrow down to one question, which is whether the country has enough young workforces to replace the aging workers.
Unfortunately, according to labor force research, there are about 43 million X generation (those born after boomers) to fill about 76 million vacancies that are being left by the aging boomers (Kaye & Cohen, 2008). This means that there are insufficient young workers to fill the gap that is being created by the departing old workers. By 2025, the workforce of the country is expected to decline with about 20% which will have negative effects to the country’s labor force and the budget of the federal government. Government agencies and other industries depend with constant supply of labor to perform their operations effectively. However, in the near future, the number of workforce that is entering labor force will be less than the number that is leaving the workforce. This means that the steady supply of labor in the market will be affected. On the side of the government budget, its expenditures are expected to rise as more retirees claim for their retirement benefits. This may cause the government to change its priorities or even enact new legislations to enable it to deal with the situation.
Organizational impact
Though the main debate about the aging population focuses on whether boomers are assets or costs to the country, companies are expected to lose more revenues when this generation stops working for them. Boomers have been more of assets than costs to many organizations which mean if they depart, these organizations are expected to lose institutional skills, leadership, and knowledge that have been provided for long time by this generation. Though there are a number of boomers who are less skilled, and are being forced to retire to pave way for young workforce, many boomers form the most important portion of the organizations’ labor force. Both public and private sectors will feel the effects of aging population. The effects have been highlighted by Kozol (2011) to be: losses in revenue, reduced production, limited skilled labour, less innovations, and erosion of company cultures.
Public sector
This sector has employed more boomers than the private sector due to the fact that in 1960s government employment attracted many young boomers compared to other employers. This means that public sector is expected to lose more workers compared to private sector as boomers attain retirement age. The expected wave of retirement is expected to hit some areas of the government than others. As Willet (2006) explains, the government is expected to replace about 400,000 elementary school teachers and about 350,000 teachers for secondary schools in the near future. Other public sector areas that are expected to be hit hard by this wave include public administration, nursing, school administrators, public defenders, socials workers, fire personnel, police, and financial managers among others. In total, federal government will lose about 33% of its workforce in the near future as boomers leave their office. In addition, federal government expects to lose about 64% of its career executives as they attain their age of retirement by 2012. This labor shortage is expected to negatively affect the performance of public sector unless urgent measures are taken.
Private sector
Compared to the public sector, private sector was not very attractive to idealistic boomers in the 1960s though the trend has changed as government sector became more ineffective in later years. However, this does not mean that boomers were not employed in the private sector. In fact, a large portion of the private sector assets are owned by this generation who has employed younger generations to operate them. Again a good proportion of the boomers are working in this sector as the managers of private companies and businesses. This means that their retirement will be heavily felt in this sector as the companies lose their experienced managers, supervisors and advisors. More than 50% of the directors of many private companies are boomers due to their long time managerial skills and experience.
Retirement benefits
One of the major concerns surrounding the retirement of baby boomers is how the government through social security and Medicare will pay the increasing retirement benefits (Edmondson, 2011). In public sector, civil servants are even allowed to retire before retirement age with full compensation which is creating more problems to the federal government. Increasing number of retiring boomers are costs rather than assets to the government. This is coming at a time when the labor supply is declining at a significant rate to reduce the revenue that government collect from the workers. The government also lack good preparedness plan to finance these people and therefore forcing government to act with urgency to reduce the effects of the aging population. This has led to enactment of several legislations such as health care reform bill which have been strongly opposed by republicans.
Strategies employed
In order to deal with this ranging problem, government, private, and public corporate managers have come up with several strategies to reduce the impacts of the aging population to the economy. It is anticipated that this retirement wave may retard economic growth, lower revenues of the government and lead to the closure of social security schemes as they become financially unstable. Some of the strategies adopted to prevent these impacts include:
a) Retaining and hiring old workers
Both private and public organizations are encouraged to retain and also to hire old workers as a way of controlling the retiring population. According to Condrey (2005) research, old workers have a number of advantages such as less drug and alcohol addiction, good attendance records, fewer accidents and job injuries, fewer offs, and strong work ethics. In addition, these people have a lot of skills and experience that can be passed to young workers. Retaining old workers will give both the company and the government time to prepare for their retirement. The organization will have time to look for other workers to replace them and more importantly succession plan will be prepared to enable the retiring workers to pass on their knowledge and experience to the young workers. This will reduce the effects of transition to the organizations. The government will also be in a position to pay the retirement benefits since the number of beneficiaries is regulated in accordance with the country financial status.
b) Government legislation
Federal government through the congress has already passed some laws and is in the process of enacting others to help to deal with increased expenditures on retirement benefits compensation. For example health care reform Act 2010 will help the government to cut its spending on Medicare and Medicaid. Insurance companies are also required to adjust their premiums as per the constrained budget of the government.
c) Other managerial strategies
The organization may come up with initiatives to encourage older workers to stay such as working for fewer hours, flexible hours for working or even working from home. This will make them work comfortably without a lot of pressure or demanding schedules. Secondly, organization may provide more opportunities for retraining old workers to ensure their skills are updated. Third, it is necessary to have workforce plan especially on the government organizations to ensure that the number workers leaving the labor force are equivalent to those who are joining it. Reforming HR system is an urgent need in these organizations in order to make them an equal employer with the private organizations. More strategies ought to be adopted to attract and retain new employees especially the young generation in the public organizations. Hiring speed also need to be increased through the use of online services and other methods to ensure that the number of workers hired is equal or greater than those who are retiring. Fourthly, federal government ought to change retirement and pension plan to control and regulate how it disburses the retirement benefits (Kozol, 2010). For instance, allowing workers to receive their benefits in smaller bits that are distributed in a long period of time will allow the government to pay them without financial pressure. Finally, having an effective succession plan will enable private and public organization to retain experience and skills of the retiring workers since they have ample time to prepare their successors even in the most challenging tasks such as management positions. This will save these organizations the risk of losing their human capital resources.
Conclusion
The impact of aging population is felt in various sectors of the economy as industries and other organizations prepare to lose millions of workers through retirement. Government is also feeling the pressure of increased burden to financing the welfare of this generation through social security and Medicare benefits. Both private and public organizations are expected to lose their experienced and skilled employees who occupy most of the senior positions in those organizations. Economic growth of the country may also be affected as a result of labor shortage, decreased revenue and increased government expenditures to compensate this group their retirement benefits. However, government and other organizations may take several measures such hiring and retaining old workers, enactment of legislations and proper planning for labor force to ensure there is no shortage. These measures will reduce the effects of aging population to the economy.
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