The silver tsunami

Martin Amis and Christopher Buckley are writers who are entering their silver years and are worried about the costs of an ageing popula­tion. Mr Amis recently compared the growing army of the elderly to “an invasion of terrible immigrants”. Mr Buckley devoted a novel to the im­pending war of the generations. They have both touted the benefits of mass euthanasia, though Mr Amis favours giving volunteers “a martini and a medal” whereas Mr Buckley supports more sophisticated incentives such as tax breaks.

Messrs Amis and Buckley are right to warn about the threat of the “silver tsunami”. Most people under­stand about the ageing of society in the abstract. But few have grasped ei­ther the size of the tsunami or the ex­tent of its consequences. This is par­ticularly true of the corporate world.

Companies in the rich world are confronted with a rapidly ageing workforce. Nearly one in three American workers will be over 50 by 2012, and America is a young coun­try compared with Japan and Germany. China is also ageing rapidly, thanks to its one-child policy. This means that companies will have to learn how to manage older workers better. It also means that they will be confronted with a wave of retire­ments.

Most companies are remarkably ill-prepared. The management litera­ture on older workers is a mere molehill compared with the mountain devoted to recruiting and retaining the young.

Companies are still stuck with an antiquated model for dealing with ageing, which assumes that people should get pay rises and promotions on the basis of age and then disappear when they reach retirement. They have dealt with the burdens of this model by periodically “downsizing” older workers or encouraging them to take early retirement. This has created a dual labour market for older work­ers, of cosseted insiders on the one hand and unemployed or retired out­siders on the other.

But this model cannot last. The number of young people, particularly those with valuable science and en­gineering skills, is shrinking. And governments are raising retirement ages and making it more difficult for companies to shed older workers, in a desperate attempt to cope with their underfunded pension systems. Even litigation-averse Japan has intro­duced tough age-discrimination laws.

Companies will have no choice but to face the difficult problem of managing older workers. How do you encourage older people to adapt to new practices and technologies? How do they get senior people to take or­ders from young whippersnappers? Happily a few companies have started to think seriously about these prob­lems — and generate insights that their more stick-in-the-mud peers can imitate. The leaders in this area are re­tail companies, for example, Asda, Britain’s biggest employer of over- 50s. Another company, Netto, a Dan­ish supermarket group, has experi­mented with shops that employ only people aged 45 and over.

Many industrial companies are also catching the silver wave. Some are rejigging processes to accom­modate older workers. BMW decided to staff one of its production lines with workers of an age likely to be typical at the firm in 2017. At first ‘the pensioners’ line” was less pro­ductive. But the firm brought it up to the level of the rest of the factory by introducing 70 relatively small changes, such as new chairs, comfier shoes, magnifying lenses and adjustible tables.

Some companies are also lealis ing that they could face a debilitating loss of skills when the baby-boomers retire en masse. Bosch asks all retirees to sit down for a formal interview in an attempt to “capture” their wisdom for younger workers. Construction companies have introduced mentoring systems that encourage prospective retirees to train their replacements.

Companies will have to do more than this if they are to survive the sil­ver tsunami. They will have to rethink the traditional model of the career. This will mean breaking the time-honoured link between age and pay — a link which ensures that workers get ever more expensive even as their faculties decline. It will also mean treating retirement as a phased process rather than a sudden event.

There are signs that this is be­ginning to happen. A few firms have introduced formal programmes of “phased retirement”, though they usually single out white-collar work­ers for the privilege. Some, notably consultancies and energy companies, have developed pools of retired or semi-retired workers who can be called upon to work on individual projects. Asda allows employees to work only during busy periods or take several months off in winter. A large American health-care company, allows veteran staff to work for four days a week or take up to 25 extra days of holiday a year.

But there is one big problem with such seemingly neat arrange­ments: the plethora of age-discrimination laws that have been passed over the past few years make it harder for companies to experiment and easier for a handful of malcon­tents to sue. It would be an irony worthy of Messrs Amis and Buckley if laws that were passed to encourage companies to adapt to the demo­graphic revolution ended up having the opposite effect.

Adaptedfrom Schumpeter, the Economist

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