Aging of the population – with slow adjustment of the labour legislation (nowadays – as people are normally dying at around 90 years, they should retire at 75, not at 65 years) – is causing a problem of forcefully eliminating highly productive intellectuals from the workforce. These people find themselves excluded from active, professional life – often at the peak of their creative capacity. We are wasting an important part of the valuable human capital – under the pretext that jobs must be available for the young. There are ways (like in Japan) to satisfy both requirements through a more organic process. But that still does not solve the problem.
Within the decade 2015–2025, the age structure of workers will continue to change: the share of below 30 years will drop from 17% to 11%, and the share of over 60 years will increase from 15% to 21%. No further comment is needed – the conclusion is absolutely clear: adequate shifts in policies have to follow this demographic trend.
Many countries around the globe have created senior expert pools, which systematically engage seniors as consultants or find them positions where they can utilize their knowledge and experiences, remain active, and feel being beneficial to society. This is one of the mechanisms in addressing the challenges of aging societies.
Dimensions of the problem
The social and economic implications of the aging population are becoming increasingly apparent in many industrialized nations around the globe. With populations in places such as North America, Western Europe and Japan, aging more rapidly than ever before, policymakers are confronted with several interrelated issues, including a decline in the working-age population, increased health care costs, unsustainable pension commitments, and changing demand drivers within the economy. These issues could significantly undermine the high living standard enjoyed in many advanced economies.
By 2050, there will be 10 billion people on the Earth and many of them will be living longer (expectedly dying around the age of 100 years). As a result, the number of elderly people per 100 working-age people will nearly triple - from 20 in 1980, to 58 in 2060. Without important changes, this is simply not sustainable! Populations are getting older in all OECD countries, yet there are clear differences in the pace of aging. For instance, Japan holds the title for having the oldest population, with ⅓ of its citizens already over the age of 65. By 2030, the country’s workforce is expected to fall by 8 million. South Korea currently boasts a younger than the average population, it will age rapidly and end up with the highest old-to-young ratio among developed countries.
Globally, the working-age population will see a 10% decrease by 2060. It will fall the most drastically by 35% or more in Greece, Japan, Korea, Latvia, Lithuania, and Poland. On the other end of the scale, it will increase by more than 20% in Australia, Mexico, and Israel.
There are many other social and economic risks that we can come to expect as the global population continues to age:
- the squeezed middle: with more people claiming pension benefits but less people paying income taxes, the shrinking workforce may be forced to pay higher taxes;
- rising healthcare costs: longer lives do not necessarily mean healthier lives, with those over 65 more likely to have at least one chronic disease and require expensive long-term care;
- economic slowdown: changing workforces may lead capital to flow away from rapidly aging countries to younger countries, further worsening the position of the former countries, and shifting the global distribution of economic power.
In present conditions, the rapidly aging population means there are fewer working-age people in the economy. This leads to a supply shortage of qualified workers, making it more difficult for businesses to fill in-demand roles. An economy that cannot fill in-demand occupations faces adverse consequences, including declining productivity, higher labor costs, delayed business expansion and reduced international competitiveness. In some instances, a supply shortage may push up wages, thereby causing wage inflation and creating a vicious cycle of price/wage spiral.
To compensate, many countries look to immigration to keep their labor forces well supplied. While countries such as Australia, Canada and the United Kingdom are attracting more highly skilled immigrants, integrating them into the workforce can be a challenge because domestic employers may not recognize immigrant credentials and work experience, especially if they were obtained in countries outside of North America, Western Europe and Australia.
An economy with a significant share of seniors and retirees has different demand drivers than an economy with a higher birth rate and a larger working-age population. For example, rapidly aging populations tend to have greater demands for health care services and retirement homes. Although this is not necessarily negative, economies may face challenges transitioning to markets that are increasingly driven by goods and services linked to older people.
Certain countries are making great strides towards more sustainable pension systems, and the Global Pension Index suggests initiatives that governments can take into consideration, such as:
- continuing to increase the age of retirement;
- increasing the level of savings - both inside and outside pension funds;
- increasing the coverage of private pensions across the labor force, including self-employed and contract employees, to provide improved integration between various pillars;
- preserving retirement funds by limiting the access to benefits before the retirement age;
- increasing the trust and confidence of all stakeholders by improving transparency of pension plans.
As 2020 marks the beginning of the Decade of Healthy Ageing, the world is undoubtedly entering a pivotal period. Countries all over the world face tremendous pressure to effectively manage their aging populations, and preparing for this demographic shift early will contribute to the economic advancement of countries concerned, and allow their populations to live long and prosper.
Some successful models (Germany, Austria, USA)
An important mechanism to keep senior intellectuals and experts active is to organise schemes through which they can on a voluntary basis and not motivated by remuneration offer their knowledge and experience at national and international levels. Here are some interesting experiences from some countries:
The Austrian Senior Experts Pool (ASEP) is committed to personal responsibility, entrepreneurship and business-promoting framework conditions and forms of organization that consolidate Austria's position at home and abroad. ASEP contributes to the maintenance, start-up and placement of companies and jobs with specific programs. Senior Experts - retired specialists and executives - work within the framework of the Austrian Senior Experts Pool ASEP, a non-profit association for the Austrian and also developing economies. Senior Experts are professionally experienced people who focus on business and administration issues, follow the principle of helping people to help themselves and work for a limited time on behalf of and on the responsibility of third parties. Many years of experience and successful practice in all industries and corporate functions qualify the senior experts to offer objective and competent support and coaching.
PUM Netherlands senior experts is a non-profit organisation, which has been advising businesses in developing countries and emerging markets already for 35 years. To this end, PUM links these businesses, at their own request, to Dutch professionals who voluntarily devote their considerable experience to creating a better world. PUM, therefore, promotes entrepreneurship, self-sufficiency and the sustainable development of small and medium-sized enterprises locally. By allowing these professionals (senior experts) to execute short-term, solid consultancy projects on the work floor, businesses can establish sufficient knowledge to develop into a growth engine for the local economy. This benefits both employment and the sustainable economic development of the region. Furthermore, as the contacts established in this manner regularly develop into major trade relations, the Dutch economy also benefits. Their 3,200 volunteers advise 2,000 entrepreneurs annually in almost every field imaginable: from logistics to welding techniques, and from the hotel & catering trade to carpentry.
The Confederation of European Senior Expert Services – CESES, is an international not-for-profit association of 17 organisations from the member states of the European Union. The first of such legal entity of its kind in Europe, it encompasses the skills of over 25,000 volunteers. Combining the vast resources of these organisations, CESES offers professional, voluntary, short-term assistance and advice to enterprises and institutions.
The SES is Germany’s leading volunteering organisation for experts and executives who are either retired or taking some time off work. The SES has been helping people to help themselves since 1983 – all around the world, in every industry and sector. At present, the SES has access to the knowledge and experience of 12,000 experts from all professional spheres. Since 1983, the SES has completed about 60,000 voluntary expert assignments in over 160 countries, with approximately a third of the placements being in Germany. The SES is based in Bonn. It has some 200 representatives in 93 different countries around the world. In the context of an aging society, company Bosch is facing a major challenge. As a company that files thousands of patents every year, Bosch cannot afford to lose valuable knowledge when experienced associates retire. But demographic change can also be a source of opportunity: knowledge sharing across generations promotes creativity and contributes to innovative solutions. This is why Bosch Diversity Management has focused on mixed-age teams. Former associates can register as senior experts and share the knowledge they have gained over the course of their careers with their younger colleagues. Bosch Management Support GmbH (BMS) then hires them for consulting or project contracts at Bosch.
Evaluation of good experiences and the lessons learnt
Work is a pivotal element of one’s well-being. Paid work contributes not only to material well-being but also to psychological well-being through social interactions and opportunities for personal and professional growth. And unpaid work, like volunteering, care work, and artistic work, can provide these same psychological benefits. Given these positive effects, encouraging and rewarding paid and unpaid work among the elderly could be a pivotal part of the solution to the aging-related fiscal and social challenges. To enact such a strategy, policy-makers could consider:
- a gradual retirement scheme;
- furnishing options for and rewarding volunteering, care, and artistic activities among older society members.
Encouraging older workers to remain longer in the labor force is often cited as the most viable solution to fiscal pressures and macroeconomic challenges related to population aging. Phased-in retirement entails a scheme whereby older workers could choose to work fewer hours yet remain longer in the labor force, including after they retire.
In cases where individuals are unable to take advantage of phased-in retirement - due to health issues, family obligations, or skills mismatch - governments could promote and reward volunteering, care work, and artistic work among the elderly. Such unpaid activities improve the quality of the social fabric, help the well-being of those engaging in them, contribute to the economy, and reduce healthcare and welfare costs (M. Nikolova, 2016).
“Providing opportunities for the elderly to remain in the workforce longer as well as engage in volunteering, care, and artistic activities can provide both social and economic benefits and relieve some of the fiscal pressures related to aging societies. However, work activities for the elderly do not automatically translate into social welfare gains. Policies should be arranged in a way that recognizes the dignity and autonomy of older individuals as opposed to providing them with meaningless or degrading tasks merely to keep them occupied. In addition to furnishing meaningful and rewarding opportunities, activities should be adapted to the physical and mental aptness of older individuals. And while paid and unpaid work activities are beneficial to society and the elderly, allowing for choice and autonomy is key.”
Aging adults are a talent pool that can power businesses and enhance the communities of the future. And they are ready, willing and able to be deployed. Today’s older adults seek meaning and purpose, disrupting retirement norms and expressing increasing interest in lifelong work and volunteering. This profile defies outmoded stereotypes of geriatric citizens weighing down the economy. In fact, when older people actively participate, the benefits flow in all directions. Older employees provide emotional stability, complex problem-solving skills, nuanced thinking and institutional know-how. Their talents complement those of their younger counterparts.
As a widely recognized BMW experiment has shown, productivity improves when work teams are inter-generational. Older workers can be mentors and serve as role models to younger colleagues. Age-diverse teams do better at problem-solving and generating ideas than same-age groups.
“It’s also important to recognize that implementing these programs and schemes may have short-term costs. Employers and older workers may face bargaining costs related to negotiating phased-in retirement options. Employers could also incur expenses related to restructuring or adapting tasks, while local governments may need to open community centers to accommodate volunteering and other activities for the elderly. Nonetheless, the long-run welfare benefits to society will likely exceed these short-run costs and improve fiscal and macroeconomic health.”
Generally speaking, most countries around the world have paid so far insufficient attention to the impact of quick population aging. Why governments behaved that way is pretty clear: because politicians don’t like introducing changes affecting many people who may feel that their traditional rights (like to retire at 65) are being taken away. And secondly, because politicians – some perhaps not even being fully aware of the urgency of the matter – preferred that these reforms should be tackled by the next government. And this is the main reason we are in serious delay and have to tackle the accumulated problems in a rather short time – in order to prevent a total collapse of the public pension systems, which have quietly reduced pensions in many countries by 30-50% in purchasing power.
Some countries are reducing the gap in their labour age structure by importing highly qualified young people from developing countries, which is not a fair solution, as it deprives the latter without compensation for precious human capital for which they have invested important financial resources.
An important instrument for reactivating at least a part of retired human capital are the programmes for senior experts. As we have seen, several countries in Europe, as well as in US use this instrument rather effectively – not only to respond to the needs at national but also at the international level. Undoubtedly, this brings multiple benefits to the country, to the economy, as well as makes seniors’ life more satisfactory. The achievements of Germany, Austria and Switzerland in this domain are quite remarkable, and it is good that 17 organisations in Europe are active in the European Confederation of Senior Expert Services.
An important virtue of these schemes is recognised also by some companies (like Bosch and BMW) who appreciate the benefits of intergenerational teams. Consequently, it is not about denying jobs to the young but encouraging them to collaborate productively with seniors.
(Article prepared by the KEN Secretariat: prof. dr. Ajda Fošner and prof. dr. Boris Cizelj).
Sources used and further reading:
H. S. Bjori, 4 Global Economic Issues of an Aging Population, 25 July 2021.
K. Jones, The Problem of an Aging Global Population, Shown by Country, 15 January 2020.
P. Irving, Aging Populations: A Blessing for Business, 23 February 2018.
M. Nikolova, Two solutions to the challenges of population aging, 2 May 2016.
Austrian Senior Experts Pool.
The Real Population Problem: Too Few Working, Too Many Retired.
A Compilation of Innovative Good Practices.
A changing world: Adapting to an ageing population in the workplace.
40,000 years of experience.
PUM Netherlands senior experts.
Confederation of European Senior Expert Services.