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December 2003 — Vol. 81, No. 10
COVER STORY
Will your workforce be graying — or gone?
Start planning now for how you will fill workforce gaps
as baby boomers retire.
By Debra Susca, a free-lance writer in Portland, and
Diane Friend Edwards, the editor of CBIA News
Depending on your industry, those could be your alternatives in just
a few years — unless you have a plan in place to deal with an unavoidable
demographic fact. The baby boomers (born between 1946 and 1964), whose
76 million members make up America’s largest generation ever, are
just now beginning to reach retirement age. They’re expected to
retire at an ever-increasing rate as the economy and stock market continue
to recover.
Companies that haven’t prepared for the exodus of older, experienced
employees will face a skilled labor shortage over the next decade or two.
Certain industries — manufacturing being one — are expected
to be especially hard hit.
Connecticut bracing for retirement boom
“We have an aging workforce in Connecticut, and [in] New England
as a whole,” says John Tirinzonie, labor economist for the Connecticut
Department of Labor. He notes that the median age of the state’s
population, 37.4 years, is slightly higher than the country’s, 35.3
years.
“When the stock market crashed, a lot of workers had to postpone
their retirement,” Tirinzonie says. “But we’ll see [retirements]
accelerate at a very high rate over the next five to six years when the
economy is back on track.”
According to Tirinzonie, Connecticut will have especially high rates
of retirement in the nursing, teaching and manufacturing industries, and
the lowest rates in computer-related and financial services fields —
growing areas populated by younger workers.
A survey conducted among small and midsize companies last spring by CBIA
and the regional accounting firm Blum Shapiro does indeed show that Connecticut
has an aging workforce. More than half of the companies responding said
they expect at least 10% of their workforce to retire over the next 10
years. Of those companies, 21% said they’ll lose a quarter or more
of their workers during that time frame.
The survey showed the situation is even worse for Connecticut manufacturers:
Within the next 10 years, 69% of the manufacturing respondents will lose
10% or more of their employees to retirement.
Nationwide, “the average age of a machine-tool maker — the
heart of manufacturing — is about 60. That goes for every manufacturing
industry except electronics, which tends to be a little younger,”
says Phyllis Eisen, vice president of the National Association of Manu-facturing’s
(NAM’s) Manufacturing Institute.
The question of who will replace all of the retiring baby boomers has
many in the business community worried, but the reason is more complicated
than you might think.
It has been widely reported (incorrectly, according to the Bureau of
Labor Statistics) that the baby boomers’ retirement will result
in a huge, nationwide worker shortage. The rationale is that the generation
immediately behind the boomers, the so-called Generation X, has only about
46 million members. While that figure is accurate, says Jon Sargent, a
BLS economist, he says it does not take into account that the baby boomers’
children — the “Baby Boom Echo” — have started
entering the workforce, which will help mitigate worker shortages in the
future. “Our projections show that the overall labor force size
[will be] sufficient to meet the projected numbers of jobs,” says
Sargent.
But numbers alone don’t tell the whole story.
Not just a numbers problem
Sargent concedes that “the mix of workers and their skills may
not be matched well with the skills required [for the available jobs].
We have many employers and industry associations telling us anecdotally
that they can’t hire sufficient numbers of employees, that young
people coming out of the high schools [don’t have] the good, basic
education skills that will allow employers to train them for the jobs
they have.”
“It’s not just a numbers problem — it’s a skills
problem,” agrees Lauren Weisberg Kaufman, CBIA vice president for
education and training policy. “Many jobs in the future will require
some form of postsecondary education — certificates, two-year or
four-year degrees. But many young people entering higher education need
remedial help and drop out before completing certificate or degree requirements.
A lot of our member companies already find it very difficult to hire people
with the right skills, making it critical for business and education to
work together,” says Weisberg Kaufman.
“Manufacturers are facing a dramatic skills shortage,” confirms
the NAM’s Eisen. For one thing, younger people coming into the workforce
tend to have lower skills than the “very well-educated baby boomers,”
she says, adding that the U.S. currently ranks only 10th in the world
in math and science.
“But,” Eisen says, “the problem is doubled by the fact
that no one wants to go into manufacturing” because of outdated
perceptions of the industry. “They don’t see manufacturing
as being technology-driven — because no one has told them. That’s
why we’re launching a careers awareness campaign,” she says.
CBIA will be working with the NAM on the campaign here in Connecticut.
“People have been hearing so many negative messages in the news
media about manufacturing job losses, that many young people will not
pursue the many exciting career opportunities open to them in advanced
technology manufacturing settings,” says CBIA’s Weisberg Kaufman.
“So manufacturers will be facing both a numbers and a skills shortage
over the coming decade.”
Stacey Wagner, director of workforce initiatives for the NAM’s
Center for Workforce Success, says, “We have to make people understand
that we’re faced with this shortage and that if we don’t do
something about it, we’re going to be in real trouble.”
“We definitely see [a skilled worker shortage] in neon lights,”
adds Bill Canis, executive director of the NAM’s Manufacturing Institute.
“A lot of companies are already doing something in their local schools
and elsewhere to make sure they’re not caught in this problem.”
That’s true at Trumpf Inc. in Farmington, a machine tool and laser
technology business, and the largest manufacturer of fabricating machinery
in the U.S. “The average age of our workforce is 46 — old
enough to be a concern, but young enough for us to plan for it,”
says Karen Lang, human resources director. The company is doing outreach
to universities, vocational schools and high schools. “We always
try to stay ahead of the curve. Now, in 2003, we’re starting to
get students interested in manufacturing careers. And that’s not
just going to help Trumpf; its going to help America,” says Lang.
Suzanne Wargo, HR manager for the Somers-based Conval Inc., is also well
aware of the issue and doing what she can to mitigate any future problems.
Her firm is adamant about cross-training employees and being as flexible
with scheduling as possible for those who want to retire and work part-time
hours.
“There are probably five of our 73 employees who could come in
tomorrow and tell me they were retiring,” says Wargo. She says her
biggest concern is in filling the position of a 35-year veteran toolmaker
who is an experimental machinist. “No one else can do his job,”
she says. “If he retires, a lot of knowledge and history retires
with him.”
The difficulty in filling his position is twofold, she says. First, there
aren’t many applicants interested in that kind of work. And second,
Conval, a manufacturer of customized high-pressure, high-temperature valves
for power plant applications, finds itself in the same boat as many other
manufacturers: “We’re running so lean that we can’t
just go out and find a toolmaker to work day-to-day with the specialist
to be trained, nor do we have the luxury of having extra people on board
so we can apprentice someone from the inside. We do see this as a potential
problem and are doing what we can.”
Many employers not preparing
Yet many employers across all industries are doing little or nothing
yet.
“We’ve been talking about this as an impending crisis in
recent years,” says Debra Cohen, vice president of knowledge development
for the Society for Human Resource Management.
SHRM conducted an older-worker survey to identify organizations’
readiness to respond to the demographic changes in the workforce and respondents’
perceptions of the advantages and disadvantages of hiring older workers
— one strategy being recommended to offset the problem. “Organizations
don’t seem to be preparing for this with as much concern as I would
have expected,” says Cohen. “The part that’s surprising
to me is that the majority don’t appear to be saying, ‘This
is an issue I need to deal with now.’ It’s understandable
that they’re dealing with their day-to-day issues and don’t
have time to look down the road, but the fact is, there’s going
to be a shortage [of experienced workers] and they need to prepare.”
“There is a real question as to how many companies are prepared
for the retirement tsunami already under way,” notes Howard Muson,
who authored a report for The Conference Board that was based on a survey
of 150 human resource executives in manufacturing, utilities and service
companies. The report shows that while companies devote significant time
and money to find replacements for outgoing CEOs and other top officers,
they are expending far fewer resources to groom successors for highly
skilled professionals and making sure that invaluable knowledge is passed
on to younger workers.
Among the companies covered in the report, 66% do not keep age profiles
of their workers, 63% do not maintain inventory banks listing the firm’s
available skills, and 49% do not assess their company’s training
needs.
Retaining, retraining workers
One thing that may help employers get through the crisis is that baby
boomers are redefining retirement, with many planning to continue working
in their later years.
“People aren’t thinking about retirement in the same way
as past generations,” says SHRM’s Cohen. “HR people
need to think about how they can capitalize on that new thinking. They
need to think in terms of ‘How do we retain the workers we have?
How do we retrain them or at least maintain the skill level we have now?
And if people are choosing not to retire, do they still have the skill
mix that will be needed?’”
Cohen says companies hoping to retain older workers and the knowledge
they possess should also examine their workplace policies and practices.
One finding in her survey showed that while HR managers weren’t
hesitant to hire older workers, the actual hiring managers were.
There’s also a need for better understanding of why people might
be likely to return to work. “Is it money, enjoyment, social interaction,
the benefits?” she asks. “You need to find out so you can
tailor your recruiting and benefits packages. How are jobs designed? And
what is the reward structure? Is it different [for] the older and younger
workers?”
“Studies show that workers 50 and above expect to work beyond retirement
age, but on their own terms,” says The Conference Board’s
Muson. “They want more flexibility in their schedules to pursue
other interests. And they’ll keep working if they can keep their
health and pension benefits at the same time. HR people need to be aware
of this.”
He adds, “What this impending crisis has done is thrown a spotlight
on the treatment of older workers.” He says there is a gap between
the perceptions of employees and those of employers. “Employees
perceive that there is ageism in the workplace and that older workers
are the first to go when downsizing is necessary. Employers disagree.
Older employees perceive that management is thinking they are not contributing
much anymore and are just ‘marking time,’ and so, give them
fewer opportunities, fewer challenging assignments and less pay. Most
HR managers disagreed with that perception.”
One company where older workers are clearly valued is Lincoln Financial
Group. The company was recently named by the AARP as one of the 25 “Best
Employers for Workers Over 50.” AARP evaluated companies on their
recruitment practices, continuing opportunities for advancement, flexible
work schedules, and benefits for current and retired employees.
Liz Gagne, vice president of communications and chief communications
officer at Lincoln Financial Group in Hartford, says, “In our business,
we’re focused on this older demographic.” The Hartford branch
of the company sells life and annuity products to older individuals who
are shifting from the wealth-accumulation phase of their lives to the
income-payout phase, Gagne explains. “We value employees with lots
of experience and technical skills. That’s usually an older worker
who has demonstrated their ability to work with this rather sophisticated
market and product.”
Softening the impact
Trying to retain and retrain older workers isn’t the only way companies
can cope with the skilled worker shortage.
Taking a long-range view, CBIA’s Weisberg Kaufman says it’s
critical to improve the quality of education, especially in urban schools,
where student performance often falls short. “Employers need to
get involved in efforts to improve their local schools,” she says.
Meanwhile, several economic factors may soften the impact of baby boomers’
retirement. “One thing that may occur as businesses run up against
a skills shortage is that they’ll ramp up spending on labor-saving
equipment. If interest rates stay low, it will make equipment purchases
an attractive alternative in many industries,” says CBIA Economist
Peter Gioia. “Labor shortages will also lead some firms to focus
more and more on core activities, outsourcing others.”
Immigration may also partially offset the loss of older workers. Connecticut
has seen a slight increase in immigration even during the recession.
And efforts to boost productivity — something at which Connecticut
companies already excel — should help ease the problem as well.
“From 1990 to 2000, the U.S. was a world leader in productivity
gains, and Connecticut outperformed the U.S. average by 50% during that
period,” Gioia notes. “We’ve been seeing continued productivity
gains in every quarterly survey we do. Through the adoption of ‘lean’
techniques, for example, some companies now find that 30 workers can do
what 40 used to.
“The situation certainly isn’t bleak,” he adds, “but
companies definitely can’t afford to ignore it.”
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