The Insider recently participated in the Aging Workforce Summit, a meeting of the minds focused on retirement in America. The conference took place on the 80th floor of the Aon Center in Chicago. The views of Chicago and Lake Michigan were supposed to be spectacular, but for the duration of the conference the building was socked in a fog, so all you could see from the windows was an indeterminate white haze – rather appropriate, given the foggy futures confronting a huge proportion of workers in America.
One participant quoted the late Ernest Hemingway: “Retirement is the ugliest word in the language.” Setting aside Hemingway’s horrendous approach to his own pending retirement (he blew his brains out with a rifle), the quote raises a valid point. The boomer generation, long a staple of the American workforce, is starting to make its slow, inexorable exit from work, but in typical boomer fashion, they are not “going gentle into that good night.” In fact, many boomers are planning to work well beyond the conventional retirement ages of 62 and 65. They are doing this for two fundamental reasons:
: Many want to work because they view retirement as boring
: Many must work, because they lack the financial means to retire
Are you saving enough?
Experts in a variety of fields presented some pretty startling data. Jack VanDerhei, director of research at Employee Benefit Research Institute (EBRI), discussed the paradigm shift in retirement funding: employers have abandoned “defined benefit” programs, which offer a guaranteed monthly benefit that would ensure a secure retirement (and which cost companies billions because retirees are living longer). Instead, employees are offered “defined contribution” programs, through which they essentially fund their own retirement, with no guarantees. They set aside a certain amount each month, which is matched to some degree by the employer. The money is invested in stocks and bonds. If the investments do well, the employee might be OK. If the investment tanks (or the employee cannot put enough money in the account), there is virtually no prospect of a secure retirement.
Guess what? Most of us are not setting enough aside. If you’re wondering where you stand, check out EBRI’s “choose to save” calculator (there’s a lot of useful information at this website). Here’s a hint: if you’re saving less than 15%, you’re probably not saving enough. And if you’re unfortunate enough to work in the lower quartile of the economy, and you are approaching retirement with very little in your retirement account, the projected required savings might actually exceed your total income! Yikes!
Welcome Mat from the Labor Market
Fortunately for the boomers, the labor market really needs their continued participation. Ed Vitalos, from IBM’s consulting arm, pointed out that there simply aren’t enough replacement workers ready to take on the jobs currently performed by (aging) boomers. In fact, there are already substantial shortfalls in a number of areas, including long haul trucking, engineering, mining, healthcare, government, aerospace and utilities. Because it takes time to train for these professions, employers are trying to incentivize current workers to stay on the job. They are offering very creative packages to accomplish this goal, including flex-time, creative benefit packages and work-from-home options. One company had the brilliant idea of offering scholarships for the grandchildren in return for the continued participation of their valued older workers.
Steven Sass, from Boston College’s Center for Retirement Reseach, offered a sober assessment of the crisis facing many American workers. He anticipates cuts in social security, as fully one third of the population enters retirement. Because we are living longer, we have to work longer. Sass projects that working until age 70 is the most efficient way of overcoming a lack of savings prior to retirement. Sass’s solution is likely to work for white collar workers, but what happens to the blue collar worker, the tradesman, the factory worker, the driver, the utility worker? How well will their bodies hold up after a lifetime of wear and tear on the job? How can you be sure that they are able to perform physically demanding jobs safely ? Finally, what about the workers whose bodies succomb to the wear and tear of a lifetime – who cannot continue working and who have little or nothing saved for retirement? These folks have the prospect of living out their “golden years” in abject poverty.
Conundrums
As we track the evolving issue of older and older workers, the Insider will focus its attention on the implications for workers comp. We know from prior blogs that older workers have fewer injuries, but when they get hurt, it takes longer for them to recover. We know that they are more prone to suffer from shoulder and repetitive motion injuries. We also know that the cost of treating an injured worker goes up with age. The Aging Workforce Summit has shown that many older workers lack retirement resources. They cannot stop working without plummeting into poverty. When you combine the injury and disability implications of an aging workforce with the economic necessity that drives worker behavior, you truly have a potentially toxic mix for workers comp system.
Looking ahead, managers need to shift their focus onto the unique challenges of an aging workforce. The continuing participation in the labor market of older workers is basically both positive and necessary. At the same time, managers need to keep their eyes open to new and unprecedented risks as these valued people labor on past normal retirement age. Managers need to take proactive steps to ensure that workers comp does not become the default retirement program for employees who either are performing tasks they can no longer handle safely or for workers who happen to have no retirement funding at all.
