A 1995 survey conducted by Eckerd College Human Resource Institute predicted that in 2005 the top five concerns for human resources staff will be the skill level of the available work force, managing change, information technology, an aging work force, and management issues. With the exception of rising health care costs, this forecast is nothing short of remarkably accurate. How is it that a problem predicted 10 years ago still leaves business employers with their collective back against the wall? Were such obvious signs ignored or just poorly managed?
The answer is buried in this demographic reality: aging baby boomers represent a greater segment of the general population than has ever been recorded and it is still growing.
The statistics are stunning. Twenty percent of the population, 71 million people, will be 65 or older in 2030. This means healthcare will be an even bigger challenge than a lack of skilled workers for employers in the 21st century workforce. Traditionally, lifelong healthcare and retirement for older Americans has been funded through taxes and increasing worker productivity.
Again, statistics illuminate the problem. Since 1900, the number of older adults has increased eleven-fold, from 3.1 million in 1900 to 35 million in 2000. Four of every 10 people in the work force will be older than 45 in two years. By 2010, one of every five employees will be aged 55 or older. By the middle 21st century, there will be more seniors than children. That statistical milestone is less than 50 years away. Who will pick up the tab for a growing population of dependent seniors? Can we expect that of a shrinking workforce?
Let's look at social security. When social security legislation was enacted in 1945, the ratio of contributing workers to each beneficiary was 41.9:1. That ratio dropped to 16.5:1 in 1950. The current ratio is 3.4:1. Social security trustees predict the ratio will drop to 2:1 in 2040. These numbers reduce the issue to this: how will we afford to keep an aging population healthy?
Then, there is the issue of “replacement workers.” The ratio of entry-level wage earners to retirees has dropped from 9:1 in 1955 to 4:1 in 1995, with projections that the ratio will further decline to 2:1 by 2020. The labor market, which grew at approximately 1.2 percent a year in the 1990s, is expected to decrease to 0.8 percent from 2000 to 2010, and 0.4 percent and 0.2 percent in subsequent decades. Are you beginning to get the picture?
The buzz from “Perfect Labor Storm” detractors, who call the impending crisis more hype than fact, is baby boomers won't retire. That's true. Many boomers strive to stay active and, frankly, many of them aren't financially able to retire. But, boomers will continue to work only if they receive ample compensation and benefits including flexible schedules to allow for leisure activities such as traveling and visiting grandchildren. For employers, it means dishing out mucho bucks for compensation and insurance coverage for the graying workforce. Employers who think health care costs are high now ain't seen nothin' yet.
Effective and efficient business management has never been so important. All inefficiencies will be magnified on the bottom line. That means zero tolerance for poor performing employees. This means only the “best places to work” will survive. As for health care costs, my advice is to build higher costs in the budget until there is a societal solution to caring for an unprecedented aging population.
