The impending retirement of the baby boom generation combined with slow labor force growth poses potential problems for employers and the economy, according to a General Accounting Office report released Nov. 16. The study said the possible loss of many experienced workers could create shortages in skilled workers and managers and have adverse effects on productivity and growth.

The GAO report, Older Workers: Demographic Trends Pose Challenges for Employers and Workers (GAO-02-85), said workers age 55 and older deciding to work longer could mitigate the slowing growth of the labor force and its attendant fiscal and economic problems.

According to Census Bureau estimates, in 2019, when the last of the baby boomers--individuals born between 1946 and 1964--reach age 55, nearly 29 percent of the total U.S. population will be age 55 and older, compared with 21 percent today. Meanwhile, the Bureau of Labor Statistics projects that total labor force growth will slow from an average annual rate of 1.1 percent between 1990 and 2000 to an annual rate of 0.7 percent between 2000 and 2025.

Older workers play a key role in the labor market and their importance only will grow in the years to come, the report said. By 2008, one out of every six workers in the American labor force will be over age 55.

Older workers will comprise a progressively larger share of the nation's managers, supervisors, and executives, the report said. Employers will have to rely more heavily on this segment of the labor force, as their experience and "institutional knowledge" become an increasingly valuable resource, it said.

Employers have taken little action so far to prepare for this demographic transition, according to the report. It cited few employers with formalized programs, such as part-time and part-year schedules or job-sharing arrangements, to encourage older employees to work longer.

Some private employers have indicated an awareness of the need to retain older workers and are experimenting with different options to do so, the report said. However, it added, these programs remain small and often are administered on an ad hoc basis.

Reasons given by employers for not having such programs include pension regulations, corporate culture, and employment costs, the report said. For example, it said, current tax law governing at what age pension payments can be made and whether employees earning a broad range of incomes are participating in a companies' worker retention program can discourage both employers and older workers from extending work beyond retirement eligibility.

Public employer efforts to retain or rehire older workers have been broader and somewhat more common, largely in response to localized labor shortages in skilled occupations, such as teaching, the report said.

Part of this employer inaction may be because these demographic changes, while inevitable, remain largely on the horizon, the report said. Most employers are not yet facing labor shortages or other economic pressures requiring them to consider phased retirement or related programs.

For this reason, time is needed to develop sound policies, programs, and practices to respond to this demographic challenge, the report said. Some public discussion on this matter already is taking place, the report said.

For example, the Labor Department's ERISA Advisory Council has received testimony from employers and other interested parties as to how federal policy and laws should be changed to address phased retirement, and older worker issues in general. From this testimony, the advisory council has made recommendations to the secretary of labor, particularly with regard to current pension law and policy.

However, many of the recommendations suggested by the advisory council are beyond the purview of the Labor Department and would require action by other agencies or the Congress for implementation, the report said.

To address the potentially serious implications of the aging of the U.S. labor force and avoid possibly acute occupational labor shortages in the future, the relevant government agencies should work together to identify sound policies and legal remedies to extend the work life of older Americans, the report said.

Specifically, the report recommended that the labor secretary convene an interagency task force to develop legislative and regulatory proposals addressing the issues raised by the aging of the labor force, the report said.

This task force would include representatives from DOL, and other agencies that either have regulatory jurisdiction or a clear policy interest, bringing together the expertise necessary to consider fully the implications of each proposal, the report said.

The task force would solicit input from employers, unions, and other interested parties and carefully balance the concerns of older workers, employers, and the general public, the report said. The task force also would serve as a clearinghouse of information about employers or collectively bargained programs that extend the work life of older workers.

The General Accounting Office report is available on the World Wide Web. ERISA Advisory Council reports also are available on the Web.

"HR News Home". The Bureau of National Affairs, Inc. Retirement of Baby Boom Generation Poses
Potential Problems for Employers, GAO Says.

Retrieved November 21, 2001.