1. Age and Industry Presented by: Marcie Krastman & Melisa Appleby Individual Differences April 14, 2005

2. Outline Myth busters Myth busters US laws and Regulations US laws and Regulations Definitions Definitions Issues Issues Workplace Barriers Workplace Barriers Recommendations Recommendations Foreign studies Foreign studies

3. Older Worker Myth Busters (True or False?) 1. Older workers can’t or won’t learn new skills. False 2. Older workers don’t stay on the job long. False 3. Older workers take more sick days than younger workers. False

4. Older Worker Myth Busters 4. Older workers are not flexible or adaptable to change. Both 5. Older workers are more expensive. Both

5. U.S. Laws and Regulations for employing Older Workers The ADEA prohibits: (a) the unlawful discrimination of an individual based on age for selection, compensation, privileges, and development, (b) classification or categorization of employees based on age, which may adversely impact employees, and (c) the lowering of wages of employees to conform to the ADEA.

6. U.S. Laws and Regulations for employing Older Workers Employment Retirement Income Security Act (ERISA) Employment Retirement Income Security Act (ERISA) Ensured currently employer workers 65 or older would be allowed to contribute to their pensions for retirement. Ensured currently employer workers 65 or older would be allowed to contribute to their pensions for retirement.

7. Definition of an Older Worker According to ADEA… According to ADEA… An employee 40 years of age or older, this includes the baby boom generation. An employee 40 years of age or older, this includes the baby boom generation. There are some specific issues that will have to be addressed now that the baby boomers are beginning to retire from the workforce. There are some specific issues that will have to be addressed now that the baby boomers are beginning to retire from the workforce.

8. Possible Effects of Baby Boomers Retiring Labor force growth is expected to fall from 1.1% per year in the ‘90’s to 0.36% per year between 2010-2020. Labor force growth is expected to fall from 1.1% per year in the ‘90’s to 0.36% per year between 2010-2020. Effects on Social Security Effects on Social Security Who will pay for all these retirees? Who will pay for all these retirees? What other possible problems will we need to face because the baby boomer generation is retiring? What other possible problems will we need to face because the baby boomer generation is retiring?

11. Retirement Trends Longer life spans have contributed to ever- longer retirements. Longer life spans have contributed to ever- longer retirements. People are retiring earlier People are retiring earlier Average retirement age… Average retirement age… Today: Age 62 Today: Age 62 30 Years ago: Age 65 30 Years ago: Age 65 Why? Why? Increases in wealth and income Increases in wealth and income

12. Changes in Retirement The decline in men’s retirement age has tapered off in recent years. The decline in men’s retirement age has tapered off in recent years. “Cliff” v. Gradual Retirement “Cliff” v. Gradual Retirement “Cliff” retirement- Traditional notion of retirement had the worker exiting the workforce suddenly, moving from a full-time job to no work at all. “Cliff” retirement- Traditional notion of retirement had the worker exiting the workforce suddenly, moving from a full-time job to no work at all. Gradual retirement- Retirement occurs over time with reducing the workload until the individual is phased out of the workforce. Gradual retirement- Retirement occurs over time with reducing the workload until the individual is phased out of the workforce. “Bridge jobs” “Bridge jobs”

13. Older Workers Working More Employers will want older workers Employers will want older workers Labor shortages will require companies to seek new sources of labor and redefine the working age population to include older workers. Labor shortages will require companies to seek new sources of labor and redefine the working age population to include older workers. More older Americans will want to work More older Americans will want to work Willingness: Interest in working will lead to “bridge jobs” or post-career. Willingness: Interest in working will lead to “bridge jobs” or post-career. Economy Economy

14. Barriers to Work for Older Workers Recognizing the Value of Older Workers Recognizing the Value of Older Workers 1. Older workers represent a tremendous source of experienced human capital. 2. Older workers’ human capital includes specific skills acquired formally and informally over years of work and also encompasses less defined attributes that add value to the workplace.

15. Barriers to Work for Older Workers Recognizing the Value of Older Workers (continued) Recognizing the Value of Older Workers (continued) 3. Older workers demonstrate a higher degree of loyalty to their employers, reflected in employer surveys and tenure data. 4. Older workers often demonstrate a greater flexibility in work arrangements than younger workers.

16. Other Workplace Barriers to Older Workers Pension plans that strongly discourage older workers from working. Pension plans that strongly discourage older workers from working. Workplace attitudes and practices that hinder older workers’ employment opportunities. Workplace attitudes and practices that hinder older workers’ employment opportunities. Federal regulations that inhibit flexible work arrangements. Federal regulations that inhibit flexible work arrangements.

17. Attitude Barriers to Older Workers Organizations typically encourage early retirement to make room for younger workers. Organizations typically encourage early retirement to make room for younger workers. A stagnant labor supply will force many employers to rethink their attitudes toward older workers and reverse policies that inhibit their employment. A stagnant labor supply will force many employers to rethink their attitudes toward older workers and reverse policies that inhibit their employment. Workplace discrimination Workplace discrimination Inadequate training Inadequate training

18. Pension Barriers to Older Workers Pension Plans: Pension Plans: Traditional Defined Benefits Plan Traditional Defined Benefits Plan Findings: On average, the benefits these plans provide by age resemble a hill. Findings: On average, the benefits these plans provide by age resemble a hill. The present value of the pension accrual rises along a slope that becomes increasingly steep as the worker gains in age and time on the job and then, after peaking, suddenly falls dramatically. The present value of the pension accrual rises along a slope that becomes increasingly steep as the worker gains in age and time on the job and then, after peaking, suddenly falls dramatically.

19. Benefit Barriers to Older Workers Defined Contribution Plan Defined Contribution Plan Contributions are based on a constant percentage of salary, regardless of age. Contributions are based on a constant percentage of salary, regardless of age. Seen most in the public sector. Seen most in the public sector. Findings: Pension accruals first rise especially quickly with the length of service and then fall more rapidly for the federal employee retirement system (FERS) and for California, Illinois, and New York teachers. Findings: Pension accruals first rise especially quickly with the length of service and then fall more rapidly for the federal employee retirement system (FERS) and for California, Illinois, and New York teachers.

20. Health Benefits Barriers to Older Workers Health Benefits: Health Benefits: A 1996 panel study revealed that private health costs rose from between $500-$1,000 for workers age 20-40, to close to $2,000 for most workers over age 55. A 1996 panel study revealed that private health costs rose from between $500-$1,000 for workers age 20-40, to close to $2,000 for most workers over age 55. For employees who stay with the job, health cost rise as a proportion of pay mainly when they come close to old age rather than middle age when both pay and health costs are going up together. For employees who stay with the job, health cost rise as a proportion of pay mainly when they come close to old age rather than middle age when both pay and health costs are going up together.

21. Removing Barriers at Work Progress already made: Progress already made: The end of mandatory early retirement* The end of mandatory early retirement* Direct benefit Direct benefit Indirect benefit Indirect benefit Changes to Social Security program Changes to Social Security program Reduction in important financial disincentives to work. Reduction in important financial disincentives to work.

22. The Supply Side of the Labor Market Physical ability as a barrier to work Physical ability as a barrier to work Physical limitations play a small role. Physical limitations play a small role. However, the incidence of physical impairments increases with age, with physical capacity beginning to decline in middle age. However, the incidence of physical impairments increases with age, with physical capacity beginning to decline in middle age. Health problems also become more frequent. Health problems also become more frequent. Fortunately, cognitive function does not appear to decline until very late in life. Fortunately, cognitive function does not appear to decline until very late in life.

23. The Supply Side of the Labor Market Financial incentives to retire Financial incentives to retire Social security Social security One of the goals of the program at its inception was to draw older workers out of the work force in order to make jobs available to younger workers. One of the goals of the program at its inception was to draw older workers out of the work force in order to make jobs available to younger workers. These changes go a long way toward achieving neutrality in the program when it comes to work. These changes go a long way toward achieving neutrality in the program when it comes to work.

24. The Supply Side of the Labor Market A. Private pension plans and early retirement incentive plans B. Medicare and health coverage C. Disability insurance

25. The Supply Side of the Labor Market Older workers who lose their jobs are 3 times as likely to retire as are employed older workers and the effect is even stronger when national unemployment rises. Older workers who lose their jobs are 3 times as likely to retire as are employed older workers and the effect is even stronger when national unemployment rises. Less educated workers, those in poorer health, and black men experience longer unemployment than otherwise comparable older unemployed workers. Less educated workers, those in poorer health, and black men experience longer unemployment than otherwise comparable older unemployed workers. By one estimate, older workers who lose their jobs experience a 39 percent reduction in earnings in the two years following job loss. By one estimate, older workers who lose their jobs experience a 39 percent reduction in earnings in the two years following job loss.

26. The Demand for Older Workers A key factor in older worker productivity is skill level and training. A key factor in older worker productivity is skill level and training. Workers over the age of 55 are far less likely to receive training to improve their skills than any other age group. Workers over the age of 55 are far less likely to receive training to improve their skills than any other age group.

27. The Demand for Older Workers Earnings Earnings Individuals’ earnings typically increase over their working lives, independent of growth and wage trends in the economy. Individuals’ earnings typically increase over their working lives, independent of growth and wage trends in the economy. Pay for experience Pay for experience Over payment Over payment Health insurance Health insurance On average, the cost of coverage is higher for older employees than for younger ones. On average, the cost of coverage is higher for older employees than for younger ones.

28. The Demand for Older Workers Costs Costs The costs associated with work injury and disability are higher for older workers. The costs associated with work injury and disability are higher for older workers. Half of older workers who experience health impairments remain with their current employers after the onset of the impairment. Half of older workers who experience health impairments remain with their current employers after the onset of the impairment. Absenteeism is slightly higher for older workers than for younger ones. Absenteeism is slightly higher for older workers than for younger ones.

29. Recommendations for Adapting the Workplace: Fixing Financial Incentives Fixing Financial Incentives Replacing Stereotypes about Older Workers Replacing Stereotypes about Older Workers Getting older workers training Getting older workers training Rethinking the organization of work Rethinking the organization of work Getting older workers into new jobs Getting older workers into new jobs Developing a strong and flexible safety net Developing a strong and flexible safety net

30. Getting the Financial Incentives Right Major changes in public policies necessary to encourage long work lives include: Major changes in public policies necessary to encourage long work lives include: Eliminating the Social Security Earning test Eliminating the Social Security Earning test Increasing Social Security’s normal and early retirement eligibility ages Increasing Social Security’s normal and early retirement eligibility ages And eliminating the employer first-payer provision in Medicare. And eliminating the employer first-payer provision in Medicare. Employers need to educate workers about financial planning for retirement. Employers need to educate workers about financial planning for retirement.

31. Replacing Stereotypes about Older Workers Employers need to stop age discrimination through training sessions and workshops. Employers need to stop age discrimination through training sessions and workshops. Employers should abandon stereotypes about older workers in favor of honest assessments of value. Employers should abandon stereotypes about older workers in favor of honest assessments of value.

32. The Training Imperative Older workers need to to acquire and maintain their own skills. Older workers need to to acquire and maintain their own skills. Employers should also offer training to older workers and give these workers equal access to training. Employers should also offer training to older workers and give these workers equal access to training. Higher education institutions should expand their course offerings and programs to older workers who want and need to update their training. Higher education institutions should expand their course offerings and programs to older workers who want and need to update their training.

33. Rethinking the Organization of Work Companies need to explore new ways to reorganize work for long-tenure employees in order to avoid career plateaus. Companies need to explore new ways to reorganize work for long-tenure employees in order to avoid career plateaus. Phased retirement may be good but they are very uncommon. Successful implementation of phased retirement may require a change in company pension and benefit rules and changes to federal regulations governing employee benefits. Phased retirement may be good but they are very uncommon. Successful implementation of phased retirement may require a change in company pension and benefit rules and changes to federal regulations governing employee benefits.

34. Getting Older Workers into New Jobs Better opportunities for older job seekers are required. Better opportunities for older job seekers are required. Older workers looking for new employment should update their job search skills and use computer-based job searches. Older workers looking for new employment should update their job search skills and use computer-based job searches. Federal law governing employee benefits should be amended to allow greater flexibility in hiring older workers for contingent and part-time work. Federal law governing employee benefits should be amended to allow greater flexibility in hiring older workers for contingent and part-time work. Employers should consider greater use of “cafeteria” type flexible benefit packages to facilitate the hiring of older workers in flexible work arrangements. Employers should consider greater use of “cafeteria” type flexible benefit packages to facilitate the hiring of older workers in flexible work arrangements.

35. A Strong and Flexible Safety Net Social Security Disability Insurance should be reformed to promote work by recipients, many of whom are older Americans, while maintaining an adequate safety net of benefits. Social Security Disability Insurance should be reformed to promote work by recipients, many of whom are older Americans, while maintaining an adequate safety net of benefits. The reforms of social security should illustrate how public safety net programs can serve their intended populations while also promoting work. The reforms of social security should illustrate how public safety net programs can serve their intended populations while also promoting work.

36. Foreign Studies Singapore Singapore In 1998, 14% of our resident population or about 451,900 were aged 55 and above. The figure will increase to 27% or some 1,124,200 by the year 2020. In 1998, 14% of our resident population or about 451,900 were aged 55 and above. The figure will increase to 27% or some 1,124,200 by the year 2020. The older workers in Singapore are generally less educated compared with the younger cohorts because many of them have missed out on the limited educational opportunities available in the earlier years. The older workers in Singapore are generally less educated compared with the younger cohorts because many of them have missed out on the limited educational opportunities available in the earlier years.

37. Foreign Studies Singapore (cont.) Singapore (cont.) Although older workers have lower turnover and unemployment compared with their younger counterparts, they are more vulnerable to job loss and longer unemployment spells. Although older workers have lower turnover and unemployment compared with their younger counterparts, they are more vulnerable to job loss and longer unemployment spells. As Singapore moves towards a Knowledge- Based Economy, age may become less important than skills in sustaining employment. As Singapore moves towards a Knowledge- Based Economy, age may become less important than skills in sustaining employment.

38. Foreign Studies Singapore (cont.) Singapore (cont.) The employment of older workers is protected through legislations and non-statutory anti- discriminatory guidelines by the government of Singapore. The employment of older workers is protected through legislations and non-statutory anti- discriminatory guidelines by the government of Singapore. Currently, flexible working arrangements such as flextime, job sharing, part-time work and tele-working are not commonly practiced in Singapore. Currently, flexible working arrangements such as flextime, job sharing, part-time work and tele-working are not commonly practiced in Singapore.

39. Foreign Studies Japan Japan Retirement income for the majority of Japanese is mainly derived from the national pension system. The Japanese national old-age pension system consists of two tiers, both of which are financed on a pay-as-you-go basis. The Japanese national old-age pension system consists of two tiers, both of which are financed on a pay-as-you-go basis.

40. Foreign Studies Japan Japan Employer-Provided Pension Employer-Provided Pension Employer-provided pensions are primarily defined benefit in nature and may be received as (a) lump sums, (b) annuities, or (c) a combination of the two. Employer-provided pensions are primarily defined benefit in nature and may be received as (a) lump sums, (b) annuities, or (c) a combination of the two. Disability Insurance Plan Disability Insurance Plan The Disability Employees Pension benefits, like the Old-Age Employees’ Pension benefits, are based on earnings and months of contributions with additional benefits when a spouse is present. The Disability Employees Pension benefits, like the Old-Age Employees’ Pension benefits, are based on earnings and months of contributions with additional benefits when a spouse is present.

41. Foreign Studies Japan Japan Labor Market Policies Labor Market Policies Lifetime Employment Lifetime Employment Seniority System Seniority System Employment Training Employment Training Age Discrimination and Mandatory Retirement Age Discrimination and Mandatory Retirement

42. Foreign Studies Sweden Sweden Old age and disability pensions Old age and disability pensions New National old age system pension New National old age system pension Earnings related pension Earnings related pension Notional defined contribution pension Notional defined contribution pension Premium pension Premium pension Guarantee pension Guarantee pension

43. Foreign Studies Sweden Sweden Employer provided old age pension Employer provided old age pension Private individual old age pension Private individual old age pension Disability pension Disability pension

44. Foreign Studies Sweden Sweden Labor Market Policies Labor Market Policies Mandatory retirement Mandatory retirement Seniority Rules Sweden  Seniority Rules Sweden  Age Discrimination Age Discrimination Training Training Quality of Work Life

45. Foreign Studies United Kingdom United Kingdom Old Age and Disability Pension Old Age and Disability Pension National old age and pension system National old age and pension system Basic State Pension Means-tested Benefits Earnings-related pension Discretionary savings vehicles

46. Foreign Studies United Kingdom United Kingdom Other Features of the national old age pension system Other Features of the national old age pension system Eligibility age Eligibility age Deferral of Pension Benefits Deferral of Pension Benefits Funding Funding Employer provided pension plans Employer provided pension plans Disability Insurance Disability Insurance

47. Foreign Studies United Kingdom United Kingdom Labor Market Policies Labor Market Policies Mandatory retirement and Age Discrimination Mandatory retirement and Age Discrimination Employment Assistance Employment Assistance Quality of work life Quality of work life

48. Questions?