For much of the last 200 years, the age chart of the population in the U.S. looked like a pyramid, with the youngest on the bottom and the oldest on the top. Generally speaking, there were more babies than toddlers, more toddlers than teenagers, more teenagers than young adults and so on to the oldest age groups. But in the coming decades, that chart will mutate. Except for the over-65 segment, each age cohort will have about the same population by the year 2020. For the first time in the history of the United States, because people are now living longer than they used to, “we will be moving from a population pyramid to a pillar,” said Martha Farnsworth Riche, a fellow of the American Statistical Association and former director of the U.S. Census Bureau. “How that will change the workforce of the future will be very interesting.” Riche spoke at an April 30-May 1 conference on
Although there will be an increase in minority – especially Hispanic and Asian immigrant – participation in the new work force, conference presenters generally agreed that the biggest changes will come from the simultaneous aging and “youthening” of the work force in the years immediately ahead.
According to Riche, today’s work force is generally between 25 and 64 years of age. Traditional ideas of retirement at 65 account for the upper number, while the trend of more and more young adults going on to higher education, and thus delaying entry to the permanent work establishment, defines the younger boundary.
But with immigration increasing – and the tendency of younger immigrants to take jobs before higher education – and the trend of healthy adults to continue working past retirement age, employers may well have to change benefits to attract the best of these workers.
“People, especially older workers, have become quite comfortable with the 401(k), for instance,” said Olivia Mitchell, executive director of the Pension Research Council, whose research focuses on employee benefits and pensions in the U.S. and abroad. “They like the feeling of ownership over their pension plans. They like to design their own portfolios and they like the access to their money that they don’t have with old-type pension programs.”
Donald H. Sauvigne, director of IBM’s capital accumulation programs, said that in the technology business, IBM is unusual in having pension programs – and retirees to use them – at all. “We prospered first in the age of paternalism – the ‘50s, ‘60s and ‘70s,” said Sauvigne. “We shifted in the 1980s and 1990s to the age of personal responsibility with things like the 401(k).
“But now, for the next 10 years, especially with the 45-to-55-year-old age group, we are looking at the age of free agency,” he said. Because baby boomers are comfortable with the idea of shifting jobs and acquiring additional skills, corporations will have to use different benefits – ranging from increased health benefits to more flexible retirement plans – to attract them.
According to Sauvigne, IBM has a $2.5 billion annual retirement payroll, with 110,000 retirees. “Seventy-five percent of our industry doesn’t have a defined benefits program because, frankly, 75% of them have no retirees. But the free agency of the baby boomers is likely to change that for us as well.”
Judith F. Mazo, director of research for the Segal Company, whose specialty is public policy and regulatory issues in employee benefits, said the free agent phenomenon is one of many issues changing the nature, even the definition, of the word “employee.” A labor union, for instance, would not define management personnel as employees, though they may well be so in the eyes of owners. What about an au pair? Is that person an employee of the agency or the parents? And are so-called free agents seen as employees of the firms they work for on a part-time basis? “It’s difficult for companies,” Mazo said, adding that it may not be “safe to monkey around too much with the definitions of employers and employees.”
When it comes to retirement plans, older workers in particular want to be employees if it means signing up for 401(k) plans. Marjorie Honig, professor of economics at Hunter College whose research concentrates on the economics of aging, said her statistics showed that older workers are more likely to sign up for 401(k)s than younger ones, even though they have less opportunity for building up equity.
“It’s fairly unambiguous that these plans will be even more popular in the future,” she said, adding that the combination of the increasing numbers of older and younger workers have already brought increases in certain other benefits like elder care, flexible medical benefits, child care, employee assistance programs and well-baby care.
“Employees now think flex-time is more important than most other benefits, even if they aren’t offered it,” said Honig, agreeing that the free-agent mindset is becoming more apparent even among corporate employees. “It is the one great demand these days.”
William Even, a professor of economics at Miami University of Ohio, who with David Macpherson of Florida State University studies pension economics, said that in trying to be creative, employers will have to be careful about their new benefit plans. Even pointed to his own university, which offers fully-paid family medical benefits. “But nearby at the University of Cincinnati, they have flexible benefits,” he said. “Therefore, Miami University is often paying benefits for Cincinnati employees, who may be spouses and who choose other [benefits] with their flexible plans.”
He also said that Cincinnati-based Procter & Gamble has had its own retirement-plan problem, mainly due to the fact that its pension fund was in company stock, which has lately been in a slump. When the company recently wanted to offer early retirement packages to cut back its workforce, employees, who have seen their pension dollars decrease, weren’t very receptive. The company had to put in more cash incentives, making the buyout more expensive.
Patrick Meyer, a human-resources consultant for PricewaterhouseCoopers, LLP., noted that even reacting to current trends could be tricky for benefits professionals, mainly because he thinks those trends are due to change. “In the next 20 years, the labor market will go from a sellers to a buyers market,” Meyer predicted. “There will be more globalization, more workers for U.S. firms outside this country. It will be more difficult for employers to be giving certain benefits, and they may not need to with that bigger labor pool. You always have to be aware of the demographic shifts.”
