Commentary: Proposals to Change U.S. Benefits Laws to Account for Worker Longevity Increases

John Turner, coeditor of "Work Options for Older Americans", has written an article on "Work Options for Older Americans: Employee Benefits for the Era of Living Longer" published in the Third Quarter 2008 issue of Benefits Quarterly. According to Turner, "[m]any of our social policies and employee benefit policies were designed for an era when people had shorter life expectancy," so that "[w]ith the demographic changes occurring, it is time to reexamine those policies to fit the realities of the new demographic era of living longer."

Public policy should provide older people with more choices, rather than fewer. Work effort by the elderly that is all "push" (due to financial need) and no "pull" (due to attractive jobs) is not socially acceptable. Thus, an increase in labor force participation by the elderly that is motivated mainly by a drop in their reservation wages (the minimum wage at which they are willing to work) because of decreases in pension income would not be an acceptable development. Much more acceptable is the idea that workers who may have to supplement their pensions are also induced to work because of attractive wages, employee benefits, flexible work hours or the nonpecuniary aspects of work. Some of the attractive nonpecuniary aspects of work for older people include socialization, structure to the day and self-esteem. Others include shorter hours, greater vacations and greater flexibility in work schedules.

Among other things, Turner suggests that, since it is difficult for workers to collect a pension while phasing out work, the government could take a proactive stance towards flexible employment and provide guidance to employers, who are chary of experimenting under threat of losing their tax deductions. Another suggestion, reflective of increased longevity, to help encourage defined benefit plans, is to allow employers to index initial benefits received at retirement to increases in life expectancy.

Source: Benefits Quarterly "Work Options for Older Americans: Employee Benefits for the Era of Living Longer" (July 31, 2008)

AARP Survey Explores Plans and Motivations for Michigan Seniors Working Past Retirement.

A survey of AARP residents in Michigan finds that retiring comfortably at age 62 is not a reality for many who expect to work well past the traditional retirement age due to increased longevity and rising health care costs. In particular, 36% work full-time and 9% part-time, and 49% consider it extremely (27%) or very (22%) likely that they will continue working beyond retirement. The most common reasons for continuing to work cited were;

• health insurance coverage (54%);
• enjoy working (45%);
• need for extra income (44%); and
• paying for prescription drugs (41%).

The survey also reports that 50% plan to work part-time and pursue hobbies when they reach the retirement age, while 37% intend to work at their current jobs as long as possible. With respect to when they will retire, 23% think they will retire at age 60-64, 37% at 65-69, and 20% at age 70 or older.

Sources: AARP Research Report (July 2008); Battle Creek (MI) Enquirer "Work at 50-Plus: New age of possibility and purpose" (July 1, 2008)

Survey: Employers Looking for Educated Older Workers

A report issued by the Urban Institute suggests that baby boomers looking for jobs in growth fields that welcome older workers "will want to dust off their diplomas rather than their treadmills" since most of the fastest-growing occupations that already employ above-average shares of workers age 55 and older rely on an educated workforce. The report also discusses the personal and social benefits of increased work by older adults and the reasons why boomers are likely to try to work longer than earlier generations and examines whether employers will want older workers and how changes in the nature of work, demands for different occupations, the characteristics of older workers, and overall labor force growth will affect the future demand for older workers.

According to the study--"Will Employers Want Aging Boomers?"--by Gordon B.T. Mermin, Richard W. Johnson, and Eric J. Toder, employers value older workers for their maturity, experience and work ethic, but worry about out of date skills and high costs. Future jobs will require less physical demands and more cognitive and interpersonal skills, trends that favor educated older workers, but job opportunities for less educated older workers may remain limited.

The faster growing areas that require education include personal financial advisors, veterinarians, social and community service managers, surveyors, environmental scientists and geoscientists, registered nurses, and instructional coordinators. The list also includes postsecondary teachers, archivists and curators, social workers, management analysts, pharmacists, counselors, and business operation specialists. The fastest-growing area friendly to senior workers is personal and home care aides. Other categories that depend less on academic credentials include usherers, animal trainers, locksmiths, and brokerage clerks.

In their conclusion to the complete discussion paper, the authors recommend that, in order to promote employment at older ages, policymakers might consider the following steps to increase demand for older workers:

• make Medicare the primary payer for workers with employer-provided health insurance;
• reduce legal uncertainties surrounding formal phased retirement programs;
• allow in-service distribution of defined benefit pensions at age 59 1/2;
• better target government training and employment services to older workers; and
• take steps to increase employer awareness of the value of older workers.

Source: Urban Institute Press Release (July 23, 2008)

Research: How Older Workers Value Employee Health Insurance

An issue brief published by the Center for Retirement Research at Boston College analyzes data from the Health and Retirement Study (HRS) to compare the value that workers place on health insurance with their perceptions about the cost of coverage. In particular, in "How Much Do Older Workers Value Employee Health Insurance?", that authors--Leora Friedberg, Wei Sun, and Anthony Webb--sought to compare cost with willingness-to-pay by those without insurance and those without.

The authors' analysis revealed "substantial differences between the valuations that the currently insured place on health insurance and the amount that the currently uninsured would be willing to pay in order to obtain coverage." However, while the "average willingness to pay among the uninsured is less than the likely cost of providing coverage, moderate targeted subsidies might generate substantial take-up under a voluntary program, while reducing the number of households made worse off under a mandatory program."

Source: Center for Retirement Research at Boston College Brief IB#8-9 (July 11, 2008)

U.S. Bureau of Labor Statistics Spotlight Highlights Trends towards More Older Workers

The U.S. Bureau of Labor Statistics (BLS)has issued a spotlight on older workers, finding that between 1977 and 2007, employment of workers 65 and over increased 101%, compared to a much smaller increase of 59% for total employment. For men over 65, the increase was 75%, but for women it was 147%. In addition, BLS notes that while the number of employed people age 75 and over is relatively small (0.8% of the employed in 2007), they had the most dramatic gain--increasing 172% between 1977 and 2007.

Among other topics addressed by the BLS reports:

• This increase does not just reflect the aging of the baby-boom population, since none had yet reached age 65.
• While part-time work among older workers began trending upward from 1990 to 1995, that trend has had a marked reversal with full-time employment rising sharply, with the number of older workers on full-time work schedules nearly doubling between 1995 and 2007 and the number working part-time rising just 19%; full-timers accounted for a majority among older workers, with 56% in 2007, up from 44% in 1995.
• In 1977, about one-third of employed women 65 and older were married, but by 2007, married women accounted for nearly one-half of these workers.

BLS expects the growth in employment to continue. During the period 2006-2016, workers age 55-64 are expected to climb by 36.5% and the number of workers between the ages of 65 and 74 and those aged 75 and up are predicted to soar by more than 80%.

BLS also provides an audio file of this report.

Source: U.S. Bureau of Labor Statistics "Spotlight on Older Workers (July 2008)

Japan: Retention of Older Workers Becoming More Difficult with Changing Evaluation Systems

A Japan government white paper has been released finding increased unhappiness among Japanese workers who have complaints over pay, lack of vacations and a decline in morale. Among other things, the paper also reports that retaining older staff has been a challenge for companies trying to avert a labor crunch.

According to a Reuters story on the paper, "older workers were switching jobs because they failed to get along with colleagues or were unhappy with how they were being evaluated at companies using performance-based management."

Under Japan's traditional lifetime employment system, employees were guaranteed promotions and pay increases as they grew older, regardless of performance.

"For an effective performance-based system, efforts are needed to improve the implementation of the wage system, such as making clear the basis for evaluation and providing detailed explanations for the assessments," the white paper said.

Source: Reuters "Japanese workers more unhappy, government report says" (July 22, 2008)

Book Review: "Working Longer: The Solution to the Retirement Income Challenge"

According to a New York Times book review of Working Longer: The Solution to the Retirement Income Challenge, overworked, underpaid, aging baby boomers may have no choice but to work longer and retire later if they want to avoid a precipitous decline in our accustomed standard of living. Hunter Hurt III refers to the book by Alicia H. Munnell and Steven A. Sass as "thought-provoking" (albeit "if sometimes cloistered academic terms") and as defining "succinctly the problem faced by baby boomers, and for that matter, by all Americans who aspire to retire now or in the near future."

The authors contend that working longer and retiring later can generate powerful benefits for aging baby boomers and the workers in their wake. First, it would delay the need for people to tap into I.R.A.’s and 401(k)’s, thereby swelling their total assets and increasing the future income they can produce.

Second, it would help maximize the benefits of Social Security, which are about one-third higher for recipients who are 66 than for those who are 62.

Source: New York Times "Who Wants to Retire Later? (Don’t Laugh)" (July 20, 2008)

Governors Association Encouraging States To Engage Seniors in Volunteering and Employment

New York has been selected by the National Governor's Association as one of six states to participate in a Policy Academy sponsored by the Association that will address issues related to engaging the elderly in volunteering and employment opportunities in the future. According to the Center for Best Practices of the National Governors Association, the goal of the initiative is to improve the health and lives of older Americans by substantially increasing the proportion of seniors who participate in employment, education and training, or meaningful volunteer activities. Idaho, Illinois, Maryland, Massachusetts, and Pennsylvania are the other states being awarded grants.

The goals of the team appointed by New York Governor Patterson are to:

• Develop a strategic plan to increase employment and volunteer opportunities for older adults.
• Ensure that older adults can age with dignity and respect in their communities with volunteer support from their peers.
• Create a unified communication strategy and educational campaign to promote civic engagement among older New Yorkers and highlight the benefits and contributions they can make in the work force and voluntary endeavors.

Sources: New York State Office for the Aging Press Release; Watertown Daily Times "Grant to help older workers find volunteer and paid jobs" (July 21, 2008)

Survey: Older Workers Happier than Younger Workers

Vodafone UK has released survey results that older people are the happiest and most motivated workers in Great Britain, with satisfaction levels soaring above those in their twenties, thirties and early forties. According to "Working Nation 2008: The Nature of Work", 97% of those working beyond 65 feel "enabled" in their work (compared to just 61% of 31-35 year olds), seven out of ten workers of 50 and over say they are fulfilled, with just half of 25-31 year olds saying the same, and satisfaction levels peak at over 90% among the oldest age group (65 and over).

As was noted in the introduction to this report, there is a widespread assumption prevalent today, as illustrated by the CMI Management Futures report, that technology will fundamentally change the world of work over the next ten years. Attendant to this assumption is the feeling that the consequence of this change will be that young people will be handed an unprecedented advantage, allowing them to leapfrog older generations into positions of power and create hitherto undreamed of new business opportunities.

This report serves to temper that view with the perspective of older generations, bringing to the fore the human factors that in many ways cannot be substituted or replaced, regardless of technological innovations.

In addition to issuing the report, Vodafone has created a Working Nation blog for additional follow-up.

Source: Vodafone UK Press Release (July 17, 2008)

Denmark: Study Reports Growth in Employment among People 60 and Older

According to an English summary posted on eSangathan.com, a report prepared by Denmark's Economic Council of the Labour Union ("Arbejderbevægelsen Erhvervsråd") shows that, among the employed people over 60, the number of persons employed have gone up with 45.000 persons since 2004. The highest growth has been in the group of people age 60-62, while, compared to the size of the workforce, the highest percentage has been for people age 65, where the growth has been from 8.000 to 13.000 in three years.

The Council's report suggests that this growth is not only due to the higher number of people in that age group, but rather that there it represents a change in behavior among these people--they have simply chosen to stay longer at the labor market.

Full report in Danish is also available.

Source: eSangathan.com "Great growth in work frequency among elders in Denmark" (July 17, 2008)

France: Prejudice against Older Workers May Create Business Opportunities

According to a brief note in The Economist, a French employment agency (Experconnect) is attempting to take advantage of the French youth culture to place place retired people in work opportunities.

France has a poor record when it comes to keeping older people in the workforce. The retirement age is 60, not 65 as in most developed countries. In 2005 only 37.8% of people aged 55-64 had jobs, versus 56.8% in Britain and 44.9% in Germany. The main reason is that in the 1980s, when there was high unemployment, the government promoted early retirement. That entrenched the idea that older workers were less productive, says Caroline Young, Experconnect’s founder.

Unlike most employment agencies, however, Experconnect keeps its workers on its own books, so they can carry on drawing their pensions. Accordingly, they tend to work part-time on one-off projects.

Source: The Economist "Jobs for the old " (July 17, 2008)

EBRI Survey Suggests Ways Employers Can Encourage Workers To Postpone Retirement

According to results of conducted by the Employee Benefit Research Institute (EBRI), employers have a narrow window of up to two years in which they may be able to change retiring workers’ decisions by offering them incentives to remain with the company.

The "EBRI 2008 Recent Retirees Survey: Report of Findings" surveyed 4,981 workers in aerospace and defense industry companies who retired in 2003 or later and are currently between the ages of 55 and 65. Among other things, EBRI reports that many retirees would have been open to an approach from their employer asking them to stay longer with the company: 61% would have viewed the experience positively, while only 10% indicated they would have reacted negatively to an approach asking them to delay their retirement.

With respect to 19 possible incentives that might encourage retiring workers to postpone retirement, EBRI found that three appeared especially likely to be successful:

• feeling truly needed for an assignment;
• for retirees with a defined benefit pension, receiving a full pension while working part;
• being able to work seasonally or on a contract basis.

Source: EBRI Press Release (July 10, 2008); Issue Brief #319 (July 2008)

Kentucky: Census Bureau Issues Profile of the Older Worker

In a continuation of its partnership with 31 states on a series of reports on workers 55 and older, the Census Bureau has released its report on Kentucky, the 12th state to be released in the series.Among the highlights of the report--"The Geographic Distribution and Characteristics of Older Workers in Kentucky: 2004":

• 12.8% of workers were 55 and older, while 2.7% were 65 and older;
• statewide, the educational services industry had the highest proportion of or workers 55 and older, but no industry had more than 20% of its workers in that age group; and
• the state's manufacturing industry employed the greatest number of older workers, with about 19.3% of the workers 55 and older being in that sector.

Source: U.S. Census Bureau Longitudinal Employer-Household Dynamics What's New (July 14, 2008)

Survey: Age Discrimination Leading Form of Workplace Discrimination

A survey of what U.S. workers think of diversity has found that, while 61% of workers agree that having a diverse workforce makes their organization more successful, 47% of employees have felt discriminated against at the office, with age cited as the top form of workplace discrimination. According to Adecco USA, 52% of those workers who have experienced discrimination at the office reported age as the basis for discrimination, followed by gender (43%), race (32%), religion (9%), and disability (7%).

With respect to diversity generally, the survey found that only 34% of U.S. workers believe that corporate America has achieved total workforce diversity, and 78% feel that having a diverse workforce is something that most companies publicize more than they actually implement. For employers looking to further strengthen their diverse workforce, Adecco suggests (1) giving senior management commitment, (2) engaging employees in the process, (3) supporting local/community diversity groups, (4) providing diversity training, and (5) promoting open communication.

Source: Adecco News Release (July 10, 2008)

Survey: Corporations Falling Down on Knowledge Transfer Practices

According to the Institute for Corporate Productivity (i4cp), only 29% of responding organizations report that they incorporate retirement forecasts into their knowledge transfer practices. Furthermore, i4cp found that only a third add "skills gap analysis" into those forecasts, less than half say they train their managers to identify critical skills, only 23% are educated in critical skills transfer, and most companies admit they do not formally measure the effectiveness of their knowledge transfer practices.

"For all the public gnashing of teeth about the impending retirement of all those knowledgeable, hard-working Baby Boomers, relatively few organizations are doing much about it," says Jay Jamrog, SVP of research at i4cp. "They're going to wind up in a mad bar-the-doors scramble in the near future if they don't start trying to tap the knowledge of their most knowledgeable Boomers."

The i4cp survey--"Taking the Pulse: Productivity/Efficiency" (available to i4cp members only)--reports that training is the most conventional way to transfer knowledge in organizations (82% reporting it as an ongoing practice), followed by coaching (55%), and mentoring programs (44%). In addition, there was little consensus about which part of the organization handles the management of knowledge transfer initiatives with 41% saying the initiatives are "managed individually by different business sectors," 39% reporting that initiatives are handled by corporate, and 20% using a combination of corporate and business-sector options.

Looking to the future, the study found that there are a number of up-and-coming practices in use and being considered. "Communities of Practice" are utilized by a third of all responding companies to transfer knowledge, and the use of Webcasts and services such as "Lunch and Learn" and "SharePoint" are on the rise.

Source: Institute for Corporate Productivity Press Release (July 9, 2008)

Australia: "Mature Workers Mean Business" Campaign Launched

Australia's Human Rights and Equal Opportunity Commission (HREOC) has launched a new community education campaign aimed at busting the myths and stereotypes about mature age workers. Under the rubric of "Mature workers mean business," the HREOC will use a range of print advertisements and web-based material to highlight the benefits of mature age workers and to address discrimination in this area.

According to Federal Commissioner responsible for Age Discrimination Elizabeth Broderick, many older participants in a recent national tour raised age discrimination as a barrier to full and equal participation in the workplace and many other aspects of life.

"Some people told me that ageist assumptions and attitudes heavily impacted on their ability to find meaningful work, including misconceptions about being able adapt to change or wanting work at senior levels," said Ms Broderick. "Others recounted the barriers they faced in other areas of life, such as accessing public spaces or being awarded driver’s licences."

HREOC has created a Mature Workers Mean Business website, which, among other things, showcases stories from the workplace featuring older workers and their employers, debunks common myths about older workers, and offers strategies to attract and retain mature workers.

Source: Human Rights and Equal Opportunity Commission Media Release (July 7, 2008)

France: Government Announces New Measures on Employment of Older Workers

Christine Lagarde, Minister of Economy, Industry and Employment, Xavier Bertrand, Minister of Labour, social relations, family and solidarity, and Laurent Wauquiez, Secretary of State for Employment, have announced a series of measures adopted at the end of the consultation with social partners on the employment of older workers. The main objectives are to:

• encourage businesses and industries to conclude agreements to keep or recruit older workers,
• encourage older people to extend their work beyond 60, and
• promote the return of seniors to work.

One of the principal means of pushing the agenda will be to require businesses and industries that have not concluded agreements on age management and employment of older workers by December 31, 2009 to begin paying additional retirement contributions in 2010. In addition, the ministers stated that age should no longer be a reason for an employer to terminate the employment contract.

To encourage workers to stay in the workforce, the measures call for allowing
cumulative employment and retirement without restriction at age 60 if on full retirement and at age 65 in all cases and for the elimination of the six-month waiting period for resuming work with the same employer.

Source: Ministère de l'Économie, de l'Industrie et de l'Emploi Press Release (June 26, 2008)0

United States: Economic Downturn, Labor Market, and Older Workers

In an RGE Analysts' EconoMonitor written by Arpitha Bykere about what labor market numbers are showing about the United States as the economy is slowing, some attention if focused on older workers and their labor participation rates. The unemployment rate started rising for older workers since December 2007, and Bykere suggests that during the recovery many older skilled workers may not return to the labor market.

Labor participation rates (LRP) for older workers have been somewhat of a surprise is recent years. "Due to the rising share of 55+ age group in the labor force and population, their LPR and total LPR in the economy was expected to decline." Instead the LRP for the 55+ group has been increasing since 2001. Among possible reasons, Bykere cites rising life expectancy, improved health condition, ability to get higher Social Security benefits by deferring retirement, ability to work after 65 without losing benefits, and need to maintain employer health insurance.

With respect to future labor market implications, Byykere writes:

Like the last recovery, many jobs may again disappear, LPR for teens and women may decline further while older workers depending on their skill level may or may not return to the labor force. There are also concerns that if the current recession is prolonged or subject to a slow recovery, it might lead to significant job losses, pushing up the unemployment rate to higher than expected levels. These factors along with retiring baby boomers will have important implications for the future growth in labor force, job creation and productivity growth as well as the long-term potential output, natural rate of unemployment. This is especially true as the recent recovery failed to take the economy to full-employment.

Source: Roubini Global Economics, LLC. (RGE) "U.S. Labor Market Dynamics Amid a Slowing Economy" (July 3, 2008)

France: Boomers Want To Retire at Normal Retirement Age

A survey commissioned by the Union Mutualiste Retraite (UMR) focusing on how employees aged 45 and over are thinking about their retirement, these baby boomers are seen asworried and not necessarily very well organized or informed: 80% say they feel worried about their retirement and 27% said they were very worried. However, regardless of how ready they are financially, most employees aged 45 and over do not want to work more to earn more after retirement.

According to UMR, the majority of boomers (60%) would continue to work for the minimum number of years required by law to receive a full pension. And many of the others, want to work less than that, even if it means getting less that a full pension.

Source: Union Mutualiste Retraite Press Release (June 17, 2008)