Beginning with their first cries nine months after the end of World War II, the Baby Boom generation changed, and is continuing to change, the world. By 1964, demographers’ typical endpoint for the births of the Boomers, they were 76.4 million in number – the largest generation in American history prior to the Millennial generation.
Boomer children equipped with hula hoops and Barbie dolls helped to usher in an era of consumerism unlike any other. They adored The Mickey Mouse Club and danced in front of their television sets along with American Bandstand. As they came of age, many fought for the civil rights of women, gays, blacks, Hispanics, and other oppressed minorities. Some even joined the counter-culture, committed to peace and free love. As they settled into adulthood and began raising families, their sheer numbers drove economic expansion, not to mention the footprint they made on the workforce.
The oldest Boomers are now in their early 70’s – past typical retirement age – and the youngest boomers are in their 50’s. Economists have long understood that an aging population dampens economic growth due to lower workforce participation. However, a recently released study by the National Bureau of Economic Research entitled “The Effect of Population Aging on Economic Growth, the Labor Force and Productivity” uncovered some new findings that offer additional causes for concern.
The study found that, as economists have long concluded, an aging population lowers workforce productivity and is a drag on economic growth. However, only one third of the economic slowdown is actually caused by the workforce not growing as quickly. Two thirds of the economic slowdown related to an aging population is attributed to the lost productivity of the workers left behind after older workers leave the workplace.
With approximately 10,000 Americans turning 65 each day, the impact on engineering organizations and the macro economy should be a cause for considerable concern, but, as with so many macro trends, the story is neither a simple nor necessarily straightforward one.
Actual Boomer Retirement Behaviors
While the data relative to Baby Boomers delaying retirement and working past the typical retirement age, is conflicting, in aggregate, boomers are formally retiring at about the same age as the generation before them. In short, Boomers are retiring “on time.” There are, however, some marked differences in Boomers’ retirement behaviors.
About 28 percent of formally retired Baby Boomers have worked or are working for pay during their retirement. Of formally retired Boomers working for pay, 61 percent state they are working because they want to work, not because they have to. However, about seven in ten Boomers who have not yet retired are still working because they have to.
Two primary factors are causing these retirement behaviors. First, many Boomers did not manage their finances well over the course of their adult lives. Compared to previous generations, more Baby Boomers are entering retirement with debt, and many have not saved enough. According to the Employee Benefit Research Institute, approximately 43% of Boomers are facing significant shortfalls in their retirement savings.
Second, the dramatic stock market decline of 2008–2009 scared some Boomers out of the market, and they ended up missing the market rebound. Those who instead put their money into savings accounts and other savings instruments have achieved essentially no gains, as interest rates have hovered around 0% since The Great Recession.
Although quite a number of Baby Boomers are delaying formal retirement, on average they are retiring as expected. However, due to underfunded retirement accounts, debt, financial damage caused by the recession, and the simple desire to keep working, many Boomers are working part-time in consulting, contract positions, and other flexible arrangements.
Interestingly, the National Bureau of Economic Research study found that two thirds of the productivity loss caused by retiring boomers is related to declining productivity among the workers left behind. Younger workers who were working under Boomers experience declining productivity without the experience and leadership of their senior Baby Boomer colleagues. Experienced workers are simply more productive, and they help direct younger, less experienced workers either in formal management capacities or via colleague-to-colleague coaching capacities. For instance, an experienced engineer does not just work faster, he or she helps less experienced engineers in the department learn the tricks of the trade.
As we lose these senior mentors due to retirement, organizations must find ways for less experienced workers to rise to the occasion, or productivity will suffer. Some fields have been particularly unsuccessful in recruiting young workers and need to have an even more thorough plan for managing the Baby Boomer exodus. Manufacturing is a great example of an industry in this situation. Despite automation and sophisticated technology, workers still think of manufacturing as dirty, lower skilled work; by and large, the sector has not been attractive to young professionals. The limited number of younger professionals who have joined manufacturing organizations increasingly face a workplace with fewer experienced mentors and coaches.
Boomers’ Current Experience in the Workforce is a Paradox
As Boomers have reached or are approaching retirement age, their experience in the workplace is an interesting contrast. On one hand, especially in engineering and technology-based companies, firms realize the value of these veteran team members. Many corporate leaders acknowledge that their organizations are not well prepared for the Boomers’ retirement.
In fact, 180 recruiting + consulting conducted a poll in July and August of 2016 and asked engineering and technical professionals, “Do you believe the industry is proactively preparing for the knowledge and skill gaps left by Baby Boomers leaving the workforce?” Almost all respondents – 89.7% – said, “No, the industry is not proactively preparing for this transition.”
While most companies are not proactively addressing this challenge, some are. Abbott Labs created its Freedom to Work program for employees 55+ with at least 10 years of service. The program offers these employees the opportunity to scale back their hours and to change their responsibilities without affecting their benefits. For example, many Abbott Labs employees have begun working four days per week and have moved from management positions to individual contributor positions.
Chevron instituted its Chevron Building Bridges Program. Chevron retirees can register on an alumni community website and are offered opportunities to consult on a part-time basis when their specific skills and experience are needed. Through this program, there are also ongoing opportunities to consult and mentor as needed.
In addition to programs similar to those described above, many companies are now turning to retiree restaffing. In short, they are bringing retired workers back on a contract basis.
Now, we should consider the other side of the coin. Boomers’ decades of experience make them valuable, but they also make Boomers expensive. Given today’s corporate climates, which often are pressured towards short-term cost containment, the challenge is obvious. In addition, U.S. culture often values youth. Boomers are unquestionably facing ageism. The 180 poll asked, “Do you believe Baby Boomers experience age discrimination during the hiring process for engineering and technical positions?” An overwhelming majority of respondents, 83.2 percent, answered “Yes.”
In possession of desperately needed experience, high compensation levels that can lead to exposure during corporate cost-cutting measures, and ageism, Baby Boomers’ current professional experience is definitely a mixed bag.
Action Steps for Organizations
Given the size of the Baby Boom generation and their propensity for deep levels of experience with an organization, appropriate action steps must be taken. High volumes of professionals with high levels of experience and institutional knowledge are leaving the workforce on a daily basis. What action steps can organizations take?
Some companies are encouraging Baby Boomers to delay retirement. While this approach may be the best short-term approach for companies in a bind, the approach only delays the inevitable unless it is simultaneously moving forward with consulting, mentoring, or restaffing programs.
Consulting and mentoring programs started by Abbott Labs, Chevron, and are great parallel steps. These programs allow all involved (including the younger workers left behind) the opportunity for formal knowledge transfer, on-the-job mentoring, and continued access to the specialized skills and knowledge base Baby Boomers possess.
Likewise, restaffing programs are a great solution for many companies. These provide the opportunity for retired Baby Boomers to come back in a contract capacity, often working fewer hours and typically focused on individual contributions, rather than formal management. This approach is working for many engineering companies, and 180 recruiting + consulting has had success working with companies to execute approaches of this nature.
The impact Baby Boomers have made as they have moved through each phase of their lives is without dispute. The experience and skill sets leaving the engineering world as they retire are not exceptions. As the National Bureau of Economic Research study discovered, the challenge is not just to preserve the skills and productivity that Boomers take with them as they retire; the even greater challenge is addressing the lowered productivity of the workers left behind.
180 recruiting + consulting thrives on helping engineering organizations with challenges of this nature, and has found that restaffing programs are one highly effective solution. Let us know if we can help.