"Both younger and more experienced workers increasingly play key roles in powering organizations' performance."
In companies around the world, the nature of work continues to change. One noticeable shift is the generally aging workforce. Today, more employees are remaining on the job past the traditional retirement age. At the same time, lifetime (or near lifetime) employment with a single organization is becoming the exception rather than the rule. This shift is occurring even in countries like Japan, where long-term job security has been the norm. As a result, younger employees must take charge of their careers, and employers stand to gain when they help them do this.
Understanding the Drivers Behind Later Retirement
Mercer's Next Stage: Are You Ready? reports that about half the babies born today in the developed world can expect to live to their 100th birthdays. For these individuals, the traditional model of working in Japan — in which they're employed full-time, roughly from age 22 until retirement in their 60s — is less viable. Few households can finance a retirement that may stretch for nearly four decades.
Interestingly, during the past decade, labor force participation by workers aged 55 to 64 in the Organization for Economic Cooperation and Development (OECD) rose by 8 percentage points, reaching an average of 64% in 2018.1
The Asia–Pacific region is one the fastest-aging in the world. For instance, by 2030, Japan is forecast to become the first "ultra-aged" nation in the world, with those 65 and older accounting for more than 28 percent of its population.
While many Japanese employees in larger companies still retire at 60 or 65, more self-employed and workers with small companies are staying on the job longer. One of the reasons is the disintegration of the traditional promise of lifetime employment and a state pension due to the high costs associated with these practices. Mercer estimates that the retirement savings gap in Japan will total about $26 trillion by 2050. This means that many Japanese workers need to boost their own pension and retirement savings, or opt to work for a longer period. Moreover, Japan faces a shortage of 6.44 million workers by 2030.2
This presents challenges for both employers and workers. The members of an aging workforce in Japan and other countries tend to be concentrated in jobs where at least half the tasks can be automated. While Japanese companies typically rehire employees beyond the retirement age of 60, it's often as non-regular workers in jobs with lower pay.3
While older employees are often perceived as less productive and less technically savvy, an aging workforce can often provide skills and insight developed over long, productive careers. Organizations who can leverage the attributes offered by experienced workers can build a competitive advantage.
Dismantling the Myths of Experienced Workers
For instance, research has shown that many countries with aging workforces also boast growing economic productivity.4 One potential reason could be the number of organizations adopting automated technologies, such as industrial robots. Japan, South Korea and Germany are at the forefront in adopting these to perform physical tasks previously completed by workers. With those tasks taken care of by machines, opportunity opens for experienced workers to offer more strategic value and drive more business outcomes for the bottom line.
Retaining older employees also mitigates the loss of knowledge and workforce cohesion. Groups of workers that include both younger and older employees also tend to be more productive than those with only younger workers.
Engaging Experienced Workers
Organizations can benefit by leveraging the advantages of an older workforce. Offering positions and benefits (often at little cost) designed to appeal to an aging workforce can foster loyalty and boost motivation. For instance, job flexibility, such as flexible or reduced hours or the ability to work from home, can be a desired benefit for some older workers.5
Organizations can also benefit by developing policies that maximize the contributions of older workers, including those who have been with their organization for a while. This must be accompanied with regular opportunities for training and professional growth, as well as support for employees who balance work with responsibilities as caregivers.
Helping Employees Manage their Careers
Many companies in Japan (and elsewhere) do benefit by engaging older workers, tasking them with helping younger employees develop their careers. These efforts can bolster employee commitment and morale, and allow organizations to uncover new skills within their own employee base, thus building workforces that can help them thrive into the future. However, such senior employees need to recognize and understand that younger employees may be engaged with the company for different reasons than their own. "Job security" may have been the employee value proposition for senior employees, while such promise may be harder to sell for younger workers.
A first step is committing to regular employee reviews, as these can provide insight into employees who are ready to take on new challenges. Developing an environment of continuous learning, including both formal classes and activities like cross-department training and mentoring, builds both employees' expertise and their commitment.
Both younger and more experienced workers increasingly play key roles in powering organizations' performance — in Japan and around the world. Organizations that fail to capitalize on the contributions from employees at all ages risk talent gaps, potential legal action and the loss of expertise and insight. In contrast, those who harness the benefits of both can gain in big ways.
1. "Ageing and Employment Policies:Working Better with Age Overview," OECD, 2019,http://www.oecd.org/els/emp/Brochure%20OW%2028-08.pdf.
2. "Worker shortage in Japan to hit 6.4 million by 2030, survey finds," NIKKEI Asian Review, 30 Oct. 2018,https://asia.nikkei.com/Spotlight/Japan-immigration/Worker-shortage-in-Japan-to-hit-6.4m-by-2030-survey-finds2.
3. "Japan should reform retirement policies to meet challenges of ageing workforce," OECD, 20 Dec. 2018,http://www.oecd.org/newsroom/japan-should-reform-retirement-policies-to-meet-challenge-of-ageing-workforce.htm.
4. Acemoglu, Daron; Restrepo, Pascual."The New Economic Benefits of Older Workers," MIT Sloan Management Review, 19 Dec. 2017,https://sloanreview.mit.edu/article/the-new-economic-benefits-of-older-workers/.
5. "Best Practices for Recruiting and Retaining Older Workers," The Society for Human Resource Management,https://www.shrm.org/foundation/ourwork/initiatives/the-aging-workforce/Documents/2017%20ADEA%20Briefing-FINAL.pdf.