thinking of retiring? In this economy, companies are incentivizing older workers to stay.
01 Dec 2023
This article was originally published on the Forbes website. This is a repost of Sander’s regular column.
Retiring in our sixties is a ritual many look forward to, but with the population in most industrialized nations growing older, stretching our working years may be necessary. That’s because a sweeping demographic change is happening, and its fallout will have a profound effect on the labor market and society at large.
The graying of the global population and workforce is exacerbating one of the most vexing challenges for employers everywhere: ensuring access to a bountiful talent pool. With millions of Baby Boomers still retiring — the first wave began in 2008 — and some Gen Xers starting the process, fewer working-age people are supporting their local economies. This trend, along with record-low fertility in many countries and a declining workforce participation rate, is setting up a labor market reckoning.
All these developments are contributing to structural talent scarcity in the labor market. This problem will stay with us for many years to come and surely hurt economic growth if we don’t come up with practical solutions. Efforts to prop up population growth in many countries have had little success due to shifting social values. The decline in labor market participation rates also accelerated during the pandemic so fewer working-age people have stayed employed. Technology may help reduce the need for talent, but AI, automation and others may further exacerbate talent shortages due to the need for new and specialized skills.
Policymakers and employers are taking steps to encourage and require people to work longer. In France, the minimum retirement age was raised to 64 from 62 earlier this year. Japan made a similar move in March by increasing the retirement age for civil servants from 60 to 61. China, which has some of the lowest retirement thresholds in the world, will raise them gradually to combat a shrinking workforce.