It’s no secret that the 76 million Americans born between 1946 and 1964 — the baby boomers — have been driving cultural trends since their infancy, from rock ‘n’ roll to Rogaine to real estate. But the next boomer trend will likely have the biggest impact on Corporate America yet: retirement.
With one-fifth of American workers reaching retirement age by 2020, an estimated 25 million people are poised to leave the workforce. The mass exodus will not only create a shortage of workers to fill jobs — one Bureau of Labor Statistics estimate put the shortfall at 2.3 million by 2014 — but it will precipitate a “boomer brain drain” that will be felt for decades.
The loss will hit some harder than others. In fact, sectors with higher concentrations of older employees, such as retail, utilities, manufacturing, and health care, could suffer a shortage of skills large enough to have a dramatic impact on their global competitiveness. “This can be viewed as a crisis,” says Stacey Wagner, managing director of the research and education arm of the National Association of Manufacturers. “But it’s a skills crisis versus a simple loss of bodies.” She says that many manufacturers have done a poor job of filling the pipeline behind retiring experts with workers who have the education and skills to master increasingly complex manufacturing technologies and processes.
A CFO survey of senior financial executives (see “Hard Choices“) found that 63 percent of respondents are concerned about the loss of human capital due to impending retirements. Given the potential loss of workers, many companies are starting to make an effort to protect against such a skills drain. They are offering more training to younger workers, developing formal mentoring programs, and enticing older workers to stay on the job past retirement age by embracing partial retirement, telecommuting, and job-sharing arrangements. “Those who aren’t on top of this issue are taking a big risk,” says Daniel Weinfurter, CEO of Capital H Group, an HR consulting firm based in Chicago. “The bottom line is that there aren’t going to be enough highly skilled people to go around.”
It’s not entirely bad news. Some industries could actually benefit from mass retirements. Charles Fay, a professor at the Rutgers University School of Management and Labor Relations, says that the government sector, higher education, and highly unionized industries that still operate on seniority could see some benefits from large-scale retirements, because their older workers are more costly. In general, they use more health care and earn more, and in labor-intensive jobs, they are less productive. However, those benefits could be a long time in coming. The impending retirement wave will inaugurate a protracted graying of the workforce that will increase the average age in most industries for some years before it starts to drop again. The youngest baby boomers won’t generally start retiring until 2026. “The average worker age is not likely to go down for a long time,” says Fay.