Monday, October 29, 2007

Demographics and corporate double-speak

Lately we're getting inundated with articles about the coming demographic catastrophe in the West concerning jobs. The basic assertion is that there are plenty of great jobs but not enough workers for them.

In reality most of the newer, better types of jobs involve working with digitized data and products and so can be done anywhere in the world. The ability of the western worker to compete with workers in developing countries who currently work for some fraction of western compensation with much fewer benefits is virtually impossible.

Particularly so for older workers most of whom have climbed the payroll ladder and are more expensive than new hires in western countries.

So the real problem is not that older workers are volunteering to leave the work force because of gov't or corporate largesse , but because corporations are choosing, in order to remain competitive, to do most of their hiring overseas.

A simple question to put to an executive such as this is , 'How many people are you hiring in Europe versus how many are you hiring overseas?' .

And , 'How many involuntary layoffs have you had in the past several years here in the West, and how many people were affected'?

And 'If you need people why are you laying off thousands?'

And 'If these people have the wrong skills for this moment, then why don't you offer them re-training given that you need these valuable skills?' .

And finally , 'What is your corporation doing to retain these critical, needed employees?'

There are basically 2 broad types of rewards in working , 1) financial and 2) psychic/emotional. So, 'What kind of rewards is your corporation offering in order to retain these critical, needed employees'?

The bottom line answer is that Western companies are all pursing lower economic costs in order to remain competitive. Skipping the moral and ethical questions about this process, it is incredibly disingenuous of corporate execs to pen op-eds such as this which place the blame on the workers and rich gov't programs .

It is really not so hard to figure . These executives continue to work because of the financial and psychic rewards opportunities and so would many lower-level employees if they had some of these incentives that could compete with their retirement options.

State of the Union

When I'm 64

By Hans Ulrich Maerki
929 words
29 October 2007
The Wall Street Journal Europe
(Copyright (c) 2007, Dow Jones & Company, Inc.)

"Doing the garden, digging the weeds, who could ask for more?"

-- Paul McCartney, 1967

Falling birth rates, longer life spans and the imminent retirement of the baby boom generation have combined to cast a long shadow over Europe. Between now and 2030, the Continent will lose 20 million workers. These are demographic changes of a magnitude not seen since consecutive world wars ravaged Europe in the first half of the twentieth century. The proportion of people over 65 years of age will rise by more than 50%. Instead of four workers to support every retiree, we'll have only two, with disastrous consequences for our pension systems.

The challenges, though, are more than just fiscal. Many of today's retiring workers have critical skills that Europe will need to stay competitive in an increasingly globalized economy. Whether or not we can maintain the pension plans we have now, we simply can't afford to be without those skills and manpower. If we can't produce enough younger workers to replace the retirees, at some point Europe may find itself with an unusual problem: more good jobs than skilled workers to fill them. The threats to Europe's economic growth prospects are self-evident.

The demographic problem is exacerbated by state pension plans that encourage employees to retire early. This contrasts with the original Bismarckian pension concept, which was more concerned with work incapacity. In the 19th century, a lifetime of hard labor meant a worker would be physically unable to continue working beyond the age of 60. One answer to both sides of this dilemma -- pension affordability and skill retention -- is to increase the work force participation rate in the 55-64 age group. This is not a new idea. In 2001, the European Union Council in Stockholm set a target of 50%. How are we doing? Not too well. In 2005, Italy was at 31%, Belgium and Austria at 32%, and in France and Germany the participation rates were 38% and 45% respectively.

We still have a long way to go, and it is not just about reforms of the pension and labor markets. What's necessary is also a cultural transformation: changing the preferences for early retirement among workers, while employers overcome their bias toward hiring younger workers. The demographic changes and the resulting bottleneck of skilled workers will evolve only gradually. But smart governments and businesses better start preparing for it now.

The British retailer Asda, for example, has more than 20,000 employees who are over 50 years old, representing 19% of its work force. Asda conducts over-50 workshops at local job-recruitment centers for anyone interested in continuing to work, and not just for Asda. And there are substantial corporate benefits. Stores with a higher proportion of older workers have absenteeism rates less than a third of Asda's average rate.

At IBM, we introduced in 2005 "Transition to Teaching," a program that provides tuition assistance to employees (usually nearing retirement age) who want to prepare for switching to a new career teaching math or science. This year, we expanded that idea to cover a transition to jobs in the public or nonprofit sectors.

Among European governments, Sweden was one of the first countries to step up to the issue of pension reform. Flexibility is a key feature of the new system: There is no formal retirement age anymore and pension credits can be added at any age, even while a worker may already be drawing a pension from previous work.

In terms of labor-market reforms, Denmark is perhaps the best-known example. Its "flexicurity" approach is credited with contributing to near-full employment, including among older workers. Germany has raised the retirement age to 67, and the French government has engaged industry and unions in negotiations on career development and more flexible employment contracts. The Netherlands is providing increased incentives to employers for hiring individuals with disabilities. Normally, we might think of that as social policy, but in the context of an aging work force it is also sound economic policy to increase the participation in a segment of the population where the proportion of disability invariably rises. In the U.K. there are "New Deal" programs targeting special assistance for "harder to help" groups, which includes people over 50.

Many older workers would like to keep on working, but can't because they would lose benefits by doing so, or because of inflexible corporate policies about part-time or flex-time work. These are all opportunities for action by governments and individual businesses to raise the level of voluntary work force participation in this age group.

More people than at any time in history get not merely compensation but pleasure and a sense of identity from their work. Most of us could imagine doing something interesting and fulfilling, as well as gainfully economic, after we reach eligibility for retirement. Keeping these people in work would be a triple win: It would reduce the strain on government resources even as it provides more skilled workers for businesses and more diverse and productive careers for people so that "living longer" really does mean "living better."

At the age of 64 plus 1, Sir Paul is not exactly "digging the weeds" either, is he?

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