Today’s ageing Workforce and Labor Shortages
Canada is witnessing a change in its work force – the percentage of workers aged above 45 has changed from 27% in 1993 to 40% in 2010; a phenomenon that is compelling the experts to re - examine the common beliefs about an aged work force. The Canadian demography is heading towards an increase in senior population with its baby boomers – those born between 1946 and 1965(Parkinson, McFarland & McKenna, 2015), reaching retirement age. Parkinson et al, (2015) predict serious implications on the Canadian economy, Government policies and the well being of Citizens unless significant adjustments are made to address the graying demographic trend.
Impact of Change in Demographics
In the last 50 years the demographics of Canada has undergone a remarkable change. From the 8% population proportion of citizens over 65 in1971, the proportion has gone up to 16%. If we extrapolate the growth this proportion may rise to approximately 25% by 2030. However this rate of growth is not followed by the later generations and the productivity of these baby boomers can’t be replaced when they retire. Moreover with a longer life expectancy, better health and prosperity than preceding generations, the transition of a considerable population group from producers in the country’s infrastructure to consumers and, finally, dependents, will result in a great economic abyss.
Another major threat that confronts the country’s economy is the impending shortage of work force resulting from the superannuation of the ageing labor and absence of adequate succession rate. As a result economic growth, which is directly proportional to labor productivity, slows down.
Other than the slower growth of economy, requirement of an increased budget for senior healthcare and social security plans in future may affect the Government fiscal policy. All these factors will directly contribute to the economic divide between the boomers who had better adjustment of wages and little tax burden and the coming generation who will be saddled with tax increase to support the retired generation. These problems can be averted to some extent by extending the retirement age of work force; some organizations have increased it from 65 to 67. But to implement this proposal, organizations must deal with the myths that surround an ageing work force and check any sort of resultant discriminatory behavior faced by them.
Age Discrimination and its different forms
Age discrimination is the act of depriving aged employees from certain facilities or positions and favoring younger employees. The most common misconception that perpetrates discrimination towards ageing employees is - age renders people incapable of fulfilling the physical and mental demands of a job. Employers hesitate to appoint them in positions that are demanding, also they don’t want to spend on training senior employees because they may be rendered ineffectual soon and are often bypassed for promotions. Some of the common forms of age discrimination are described below
Discrimination in Employment. Candidates over a certain age may find it difficult getting a job. Employers may discriminate on the basis of information in the application form and not call aged applicants for interview only. This type of age discrimination although more subtle than others can seriously impair the chances of older workers getting a job and represents stratification of ages in employment (Roscigno, et al, 2007).
Discrimination in Training and Development. Older employees may not be offered training or advancement opportunities as compared tothose offered to younger employees. Senior workers are less likely to be given on the job training than the new and younger entrants and may be passed over for promotions in favor of younger candidates (Adams, 2002).
Discrimination in Wages. Although there is Equity of wages law enacted in almost every country that prohibits discrimination in wages on basis of age, sex, race or color, older work force is hired at a much lesser wage than younger counterparts. Researchers also claim that there is a downward mobility for aged employees so that they are hired at a position lower than their pre retirement ranks.
Harassment at workplace. Ageing people may face harassment from employers and co workers at the workplace who may ridicule their conservative outlook. Sometimes harassment may be a deliberate tactics on the part of employer to induce the senior employees to exit voluntarily thus foregoing retirement benefits. Co workers may also resort to such acts with the motive of succeeding to the position if the target chooses to leave as a result of harassment.
Discrimination in assignment of roles. Employers may not assign older workers with significant roles in the workplace because they harbor doubts that their capabilities of executing the role may be rendered ineffective with age.
Discrimination during downsizing. It is inevitably the older work force that is a victim of forcible retirement when a firm has to lay off its work force owing to economic pressures. The management prefers to terminate older workers or offer them voluntary retirement schemes when confronted with a situation where it has to close some units.
Discrimination is a result of false notions about the competency of the senior work force rarely backed by substantial proofs. Some of the stereotypes or myths that exist about the aged people in the work place have been discussed below
Myths surrounding the Older Employees
The most discussed myth is the idea that the older generation is not aware of the technological developments in the recent years and cannot adapt themselves to the world of digital and android technology. There are many examples that contradict this misconception as the CEOs of many software firms are 50 plus and are on the way to introducing new technology everyday in the market.
The second type of myth that concerns the older employees is that age renders them physically and mentally incapable of exertions demanded in certain tasks. This notion although may be true in certain cases as in the case of sports coach or manually strenuous jobs, is not true universally as many senior citizens have demonstrated their fitness in many areas of work.
Another myth that needs to be busted is the notion that the older generation is too set in their ways and are not adaptable to the new work place culture (Morello, 2008). Many employers believe that the aged people cannot be molded according to the organizational culture because of a rigid attitude towards embracing change. Again this has been proved wrong by many aged organizational leaders who have steered a total change in the organizational culture.
There is also a persistent belief that aged employees nearing retirement simply bide their time instead of making some substantial contribution towards a job or to organizational performance. This too has been proved a fallacy as many organizational leaders delivered crucial assignments competently just before retirement.
The above discussion shows that the aged work force is a victim of misconceptions and discrimination resulting from it. As a result employers have reservations about hiring or retaining an aged work force. But confronted by a situation where retirement of these workers may lead to crisis, the organizations and policy makers have to address certain issues related to the aged employees described below
Issues related to an aged workforce
The issues related to an aged work force have been grouped under the general categories of talent and succession planning, retirement, health care, executive compensation, and HR risk and compliance by (Arnone, 2006), on the basis of survey conducted by Ernst & Young LLP in 2007.
Talent and Succession Planning. This issue is considered the most strategic by Arnone (2006), as it addresses recruitment, retention and talent management for the future because firms that pay attention to succession planning and talent management will be ahead of the graying curve and achieve higher retention rates, better productivity and increased employee satisfaction, resulting in significant returns. Employers must concern themselves with issues of knowledge transfer from their baby boomers to the next generation as retirement of experienced employees will result in lost knowledge (DeLong 2004). In order to facilitate the transfer of know how companies are formalizing the practice of mentoring and knowledge sharing where older workers are formally assigned to younger workers who have potential in certain area of competency, with the objective of developing these individuals.
Retirement. Another issue that needs to be addressed by the employers is the retirement procedure and retirement benefits. Retirement of the bulk of an aged workforce also entails pensions and healthcare benefits in bulk payments. Therefore employers are considering options like extension of retirement age, phased retirement and part time employment as a solution to the issue.
Healthcare issues. Older workers need more healthcare protection and medical reimbursements. With the growing proportion of senior workers, the employers must concentrate on designing healthcare plans for aged workers pre and post retirement. Arnone (2006) claims that the absence of a strategy or a thorough analysis of health care issues can influence long-term costs and cause organizations to miss out on opportunities for obtaining economies of scales.
Executive Remuneration. Compensation of older executives is another issue that has to be addressed to retain senior employees. Companies need to assess whether compensation may be a solution to the brain drain and act as a decisive factor for retirement.
HR Risk and Compliance. A flexible working plan for the ageing employees for the purpose of retaining and transferring knowledge has to be in compliance with the legislations. Also it must fall within the framework of HR plans of pension and retirement benefits failing which the HR may be liable to discrimination litigation.
Methods to address labor shortages
As described before, the imminent retirement of a significant size of aged workers and a disproportionate succession volume of younger workers will cause labor shortage and affect the Canadian economy adversely. This brings us to the proactive plans to mitigate labor shortage. Some of the strategies that can be followed have been presented in the following paragraphs.
Parkinson et al (2015), has offered plans like (1) Mitigation of the labor shortage by hiring immigrant workers. (2) Extending the retirement age (3) Retaining retirees as part time workers or as consultants and mentors (5) Stepping up Innovations- using technological and efficiency up gradation to expand the per-worker productive capacity.
Tishman, Van Looy, & Bruyère, (2012), recommend ergonomic design for helping aged personnel and engagement of older workforce as effective strategies to retain them. He also presents a Deferred Retirement Option Plans (DROPS) - An incentive to retain aged workforce, which allows workers nearing retirement age to continue working while receiving contributions to a retirement fund .Upon final retirement, the employee will access full pension and can withdraw the amount in the DROP account as a onetime payment or in annual installments.
Conclusion
The probable solutions to the problem may be retaining the retirees as part time workers, consultants or mentors, hire immigrant workers, upgrade and incorporate technology to replace manual labor and design phased retirement plans. A well thought out plan in advance can overcome the impending labor and economic crisis to some extent.
References
Adams, S. J. (2002). Passed over for promotion because of age: an empirical analysis of the consequences. Journal of Labor Research, 23(3), 447-461.
Arnone, W. J. (2006). Are employers prepared for the aging of the US workforce?. Benefits quarterly, 22(4), 7.
DeLong, D. W. (2004). Lost knowledge: Confronting the threat of an aging workforce. Oxford University Press.
Morello, R. (2008, February). Types of Age Discrimination. Houston Chronicle, Retrieved from http://work.chron.com/types-age-discrimination-22208.html
Parkinson, D., McFarland, J. & McKenna, B. (2015, November). Boom, Bust and Economic Headaches. Globe and Mail. Retrieved from http://www.theglobeandmail.com/globe-investor/retirement/the-boomer-shift-how-canadas-economy-is-headed-for-majorchange
Roscigno, V. J., Mong, S., Byron, R., & Tester, G. (2007). Age discrimination, social closure and employment. Social Forces, 86(1), 313-334.
Tishman, F. M., Van Looy, S., & Bruyère, S. M. (2012). Employer strategies for responding to an aging workforce. The NTAR Leadership Center, Rutgers, The State University of New Jersey.
