The young people who entered the workforce shortly after the Second World War now must grapple with a modern era of individual accountability for their health and retirement needs.
This Traditionalist generation of workers, born between 1925 and 1945, were promised cradle-to-grave benefits. The laws enacted, programs implemented, and promises made during their adolescent, teenage, and early working years had a lasting impression on how they view the employer-employee relationship. Traditionalists formed certain expectations about their employment and retirement, but now we’re seeing the dynamics shift.
A growing number of people who were born in the later part of this generation, who are now in their 70s, are still working today because they find it mentally stimulating, while others simply cannot afford to retire, said Garry Adams, Talent Business Leader, Pacific at Mercer. “ ‘I’m still viable. I may not move as fast as I did when I was in my 20s, but my brain still works,’ ” Adams said in summary of why many continue working. “ ‘Can I interact with my direct peers and my younger peers and still deliver value to society, and to corporations? Yes.’ I think corporations will have to figure out how to accommodate this population. This silver talent pool can provide highly valuable contributions to the workplace.”
A Business Strategy for Traditionalists
Adams recommends that employers find ways of helping Traditionalists stay in, or re-enter, the workforce as strategic mentors for the younger generations.
“It is unlikely that a Traditionalist will re-enter or remain in the workforce at the highest levels of the organisation” Adams said. “But they can come in, share their knowledge, and mentor young people in accelerated programs and internships or apprenticeships. It’s about getting the roles right. For the right people, it might be a great opportunity.”
When the Traditionalists started their first jobs in the 1950s and 1960s, they corresponded with letters and postcards. Making a phone call required picking up a receiver and speaking to an operator at a local exchange. “People smoked cigarettes in hospitals, on airplanes and at their desks!”
Today, they’re working for socially conscious, technology-driven companies, alongside diverse co-workers, for a boss likely half their age — and they’re enjoying it, Adams said.
With changing workplace trends, the idea of retiring at age 65 seems a bit arbitrary, said Michelle Smith, Partner and Financial Advice Leader, Pacific at Mercer.
People are living deep into their 70s, 80s, and older. So now when people retire, they actually have 15, 20, or more years of life ahead of them.
“The idea of retirement is changing because industry is changing,” Smith said. “History shows that retirement was partly based on the hard labor of factory jobs. At 65, it was time to stop. But now we've moved from hard labour to industries that are conceivable to do well into their older years.”
The Price of Living Longer
The extended lives and careers of Traditionalists can have a significant impact on their personal finances, company balance sheets, and the country’s economy. If the retirement age remains fixed and life expectancy continues to increase, over time there will be relatively more people claiming government benefits and fewer people working and paying taxes.
“Living longer is a good thing – if you have enough money for the lifestyle you want and your health,” Smith pointed out.
Traditionalists were born when life expectancy at birth was only 58 for men and 62 for women, and the retirement age was 65.
Previous generations didn’t worry about how to pay for retirement because they didn’t live as long, and the combination of the age pension and superannuation were enough to meet their needs. Today things are much different — the age pension and their super may not be enough.
Traditionalists run the risk of outliving their super and may not have the personal savings to supplement those benefits. “The silver workforce is retiring at 65, but they live past 85. For some, their nest egg isn’t enough to sustain them, so they go back to work,” Adams said.
The trend toward delayed retirement has significant consequences for employers. On one hand, keeping Traditionalists in the workforce is a good thing because it boosts economic output and allows companies to preserve years of acquired knowledge and valuable experience. But their presence in the workforce can be detrimental. Highly compensated senior workers who stay put are a drain on financial resources and block younger employees from possible promotion opportunities. When talent management strategies get derailed, younger workers get discouraged, and a company’s costs add up.
Yet, on the other hand, older employees will find it frustrating to be encouraged to retire before they’re ready after building a lifetime of experience. Clearly, the issue of managing an ageing workforce needs to be handled strategically and delicately.
No More 'Cradle to Grave' Benefits
Tomorrow’s economy may depend on the health and mobility of this age group. If medical science helps people live longer, but with poor mobility, there will be less chance to work. If people live longer, it’s critical for them to remain physically active longer, said Meaghan Morberger, Business Development Manager, Mercer Marsh Benefits, Pacific, “This age group is concerned about maintaining their health so when they are finally able and want to retire they can enjoy it,” Morberger said.
Traditionalists have grown accustomed to cradle-to-grave benefits. Now, they need to assume more financial responsibility for their medical care and their retirement. Some argue that this new era of personal accountability for one’s career, health, and wealth might be too challenging for Traditionalists to accept.
But Adams says not to discredit Traditionalists’ ability to catch on.
“There’s some risk there, but as with any type of change, there’s an opportunity for education,” he said. “It will be harder for Traditionalists to adjust to a new way of managing their health, their retirement, and their career at this stage in the game, but it can be done. It’s just a matter of figuring out how to educate and motivate them to do it.”
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