One of the major concerns of today’s companies is the shortage of labor,especially in management. The baby boomers are nearing retirement age in theUnited States and the birth rate is dropping. These circumstances, coupled withthe booming economy are the main causes of the labor shortage.
There is a highdemand for labor but the once seemingly bottomless pool of employees andmanagers that companies drew from has started to dry up. What are the factorsthat contributed to the problem and how are today’s corporations going to handlethis problem? The type of labor needed in today’s society has been undergoing aconstant change. There is an increase in demand for workers but there is a muchgreater demand for educated white-collar workers, especially managementmaterial. Projections state that the growth in managerial positions willincrease 20% by the year 2010 yet the population aged 35-50 will decrease nearly10%. What these figures say is the already diminishing supply of executives isgoing to dwindle even more over the next 10 years. There is a shortage ofblue-collar workers now and there will also be an even greater shortage of themin the future.
In order for employers to find people who are willing to performunskilled, repetitive jobs they are going to have to be willing to raise thelevel of compensation offered to employees. If McDonalds needs someone to fliphamburgers they better be prepared to pay double to triple minimum wage. Thereare a wide variety of employment opportunities and today’s workforce can affordto be selective when choosing a job. The demand for employees is high while thesupply is low.
The figures on the change in average population ages and growthin industrialized nations is beginning to make the corporate world stand up andtake notice. If the trends continue as they have been for the past thirty years,the shortage of labor is going to continually get worse with each year thatpasses. The predictions from the United States Census Bureau state that between1990 and 2000 the increase of the American population over 60 will be 10. 5% butin 2010 to 2020, the increase will be 32. 5%. The change in the 60 pluspopulation in the United States is projected to nearly triple in thirty years.
Compare these figures to the increase in under sixty-year-old population. From1990 to 2000, the increase in under sixty year olds will be 6. 5% and it isprojected to drop to 2. 8% by 2010. If you look at the changes in the workplaceyou will see that the average age of an employee is steadily rising as theaverage age of retirement continues to drop. The projected increase in 55-64year olds in the workforce from 1996 to 2006 is a staggering 54%.
The projectedchange in the 25-34 year old bracket is -8. 8%. These trends are not only true inthe United States. Japan is also going to be coping with similar problems. Todaythe people over age 65 compose 16% of Japan’s population, but by the year 2020it is projected that percentage will soar to 26. 3%.
Japan, just like the UnitedStates is going to have to attempt to retain some of this group in the workforceto compensate for the continually falling birthrate in their country. Thisproblem is very true in Europe too. Since 1995 Germany, France and Italy haveexperienced a continual fall in working population ages 15-64. This trend isprojected to continue into the year 2000. Our aging population is also choosingto retire much earlier than they once did.
This is a factor contributing to thestrong economy we are enjoying now. The old are growing older, living longer andthey are healthier than ever. Breakthroughs in medicine have enabled people tolive much longer. The advancements our pharmaceutical companies research anddevelopment departments have made are staggering. Diseases that once were adeath sentence are curable. Organs that are failing in the human body can bereplaced or rebuilt.
There are even some types of cancer that are consideredcurable. These things were not true twenty years ago. There also is a trend inthis country towards remaining healthy. Americans are taking much better care ofthemselves; there is a genuine concern towards health. People are not smoking asmuch as they did in previous decades and there is a trend towards exercise. Wetake vitamins, we go out for a weekend run or bike ride and we are eatinghealthier.
All these factors contribute to a longer life expectancy and a risingdemand for products and services. Another major contributor was the big push inthe eighties, “out with the old, in with the new” school of thought,forcing the older management and executives into early retirement has left thecompanies of today in dire need of top caliber people. This coupled with thefact that each year more and more baby boomers decide to retire early. The gainsthe baby boomers stand to receive far outweigh the costs in most cases.
Their401k plans and stock options have sky rocketed in value because of the strongeconomy we have been experiencing for nearly twenty years now. Today’s olderworking population has the choice to continue working or retire because for themost part, they are financially sound. Many are choosing the retirement option. They no longer have to deal with the day-to-day grind, the high pressure andrigorous schedules that are demanded of senior executives in today’s world. Theyhave worked hard for many years and now have the option to retire and enjoy theremainder of their lives.
It’s a choice that is hard to say no to. It’s a choicethat has proven to be very costly to today’s businesses. The companies of todayare rapidly losing their think pools. The older executives possess a great dealof knowledge and diplomacy that is priceless to many organizations. These peoplecould be mentors to the future stars of the company but they can’t do that ifthey are no longer employed in some capacity by their respective firm. What theforward thinkers of today’s companies are trying to do is lure these valuableassets into staying in the work force.
In order to do that, human resourcedepartments must be very flexible with their offers. Some companies are offeringwhat they refer to as “dream jobs” to their execs who are consideringretirement. What a “dream job” consists of is the opportunity for the’would be retiree’ to work in whatever location and department of thecorporation they prefer, doing what they choose to do. They also are able towork part time verses full time. This gives the person a new job and a freshoutlook on work, which can be extremely beneficial to the individual while italso allows the company to hold on to a key player in their organization.
Employers are being forced to offer options similar to this because if they arenot available where a person is currently employed, they will choose an earlyretirement and seek more flexible working conditions elsewhere. There are manycompanies willing to be more flexible and understanding to the older executive’swants and needs in order to take advantage of their years of knowledge andexperience. Placing this category of employee in a position to guide and advisethe management of tomorrow, forming a stronger base and filling in some of thegaps formed as people retire is very smart strategy. One example of howcompanies are handling the situation is utilizing their aging managers asconsultants. Chevron became aware of the problem three years ago and this is anexample of how they have handled it.
One of their well-respected executivechemical engineers, Jesse Krider announced his retirement from Chevron but henow works as a consultant overseas. This enables Chevron to hold on to his 30plus years of expertise and allows Krider to see the world doing something heenjoys. It is a mutually beneficial situation. Another solution is already upand running at IBM in Belgium.
IBM needed to cut lower labor costs and theyconcentrated on offering an early retirement package to the 55-60 year olds. What they did next was to set up another company called Skill Team and offered ajob to any of the former IBM employees affected by the forced retirement. Therewards to the employee at Skill Team are working 58% of the time they workedbefore for 88% of the last salary received at IBM. Skill Team offers itsservices to IBM allowing IBM to maintain a fair percentage of its “thinkpool” while the former big blue employees can ease their way intoretirement. A third example is corporations inviting the retired executives tosit on the boards of their companies and subsidiaries. John Castle, chairman ofthe leveraged-buyout firm Castle Harlen Inc, exercises this philosophy.
He tapsinto the resource of the retired executives by asking them to serve on theboards of the companies his firm takes over. This arrangement is perfect for allinvolved. The retiree is looking at a short-term commitment because CastleHarlen usually sells off the companies it acquires in less than seven years andCastle Harlen has the services of a qualified director without the worries ofwhat the director will do when they sell off or dissolve the company. These area few examples of the creative approach some of today’s companies are taking tocope with the economic obstacles caused by an aging workforce. The companies oftoday are aware of the constantly growing problem and are working towards asolution.
I think that they are moving in the right direction. Offeringflexibility in what was once a very rigid structured hierarchy is certainly astep in the right direction. People in today’s world lead very different livesthan they did 4o years ago. A rewarding profession is not exclusively defined bythe income generated anymore, rewarding can also mean personally rewarding. Agood employee doesn’t necessarily work 40 hours each and every week, some workpart time or are involved in a job-sharing program. In order to keep theworkforce meeting the needs of the economy, the employer must continue to becomemore flexible and remain open to suggestions.
Today’s companies are on the righttrack. I believe that with proper management and forward thinking, we will beable to cope with the ever-increasing shortage of labor.Bibliography”Grey Dawn” by Peter Peterson Center for Strategic andInternational Studies Newsweek magazine Business Week magazine The Economistmagazine St Petersburg Times Newspaper The United States Census Bureau CNN.comEconomics