Unlocking the hidden workforce of the longevity economy

Falling birthrates over the past couple of decades have pre-programmed a drop in the number of employees entering the workforce in most developed countries.

For example, the latest statistics from the Organization for Economic Co-operation and Development (OECD) show that across all the OECD countries, the fertility rate by 2022 had already fallen to 28% below the 2.1 births per woman required to maintain a stable population size.

This trend may not seem immediate; however, over a quarter of the population already lives in one of the 63 countries where the population is decreasing.

At the same time, an ageing population is creating greater demands on healthcare, care systems and unfunded retirement plans.

The newly published white paper, Futureproofing the Longevity Economy – Innovations and Trends, highlights some of the key areas that need to be addressed to ensure that the opportunities available in the longevity economy are realized.

To maintain and upgrade existing infrastructure without increasing the overall tax burden on individuals and companies, it is imperative that gross domestic product (GDP) growth is sustained. The size of the workforce and the productivity per worker are key factors in determining the GDP.

Fortunately, current developments provide potentially effective ways of enhancing productivity per worker, especially with the rise of artificial intelligence and other process improvements.

Also, as many companies adjust their organizational structure to become more skills-based, this could allow available talent to be deployed even more efficiently.

Beyond optimizing productivity per worker, increasing overall productivity will require increasing the size of the workforce. Apart from (controlled) immigration, this will require the activation of more potential workers in the existing population.

Incentives and legislation from governments could drive this, but employers will likely need to lead the bulk of the heavy lifting.

Why would employers do this? In short, increasing the size of the available workforce allows access to a larger talent pool, which in turn could reduce employment costs and improve the suitability of candidates overall, as there will be more potential recruits to choose from. This could reduce the opportunity cost of unfilled positions.

So what are the biggest opportunities to increase the size of the workforce?

Ageism in recruitment remains a big barrier for older people out of work to re-enter the workforce. Cliff-edge eligibility conditions for state subsistence benefits can act as a disincentive to work or increase the number of hours worked. A small increase in earnings can sometimes lead to a big fall in benefits received for means-tested benefits.

Organizational flexibility can enable workers with skills needed in one part of a company to be identified effectively and move easily internally between teams.

Recruitment can be more flexible, enabling applicants with the right core skills, attitude, and relevant adjacent experience to take on roles, even if they do not have the specific qualifications or job-specific experience normally expected.

Many companies still push an “up-or-out” corporate culture. The reason for this is usually to enable only the very best talent to take senior roles, thus maintaining talent velocity at the lower levels.

Nevertheless, there may still be opportunities to add value by having more roles served by less cost-intensive yet long-serving, reliable, seasoned performers who can feel comfortable remaining in their positions for the long term, even if they are operating in more advisory capacities or less traditional senior roles.

While governments could do more to ensure that schools and higher education establishments are providing the education and skills that the next generation of workers will need, companies could also invest more in the skills required in the future, especially for employees in roles where demand is expected to fall.

Although the pandemic changed many companies’ views on the potential of home- or hybrid working, many companies are re-imposing restrictions on flexible working, which will lead to some potential employees effectively being excluded from the market.

Instilling a culture of flexibility to support employees that require reduced working hours, care or sabbatical leave can help keep workers productive for longer. As we have fewer children and live longer, the number of people with caregiving roles for older relatives is rising quickly.

Many companies and countries, especially in Asia, still have a culture that brands those working part-time, taking time out, or working from home as not pulling their weight.

Evolving the mindset around retirement from being a single event to a longer journey that might include taking a step down or sideways, such as reducing working hours or potentially moving to a contract basis, could extend many employees’ working lives if appropriately managed.

This could help employers keep key skills, experience and valuable networks productive in their organization for longer.

At the very least, removing mandatory retirement ages and retirement plan rules that preclude or disincentivize employees from working for a company once they have begun drawing benefits from their retirement plan would be a good first step.

Employers who are first movers can gain a competitive advantage by having more choices, increasing the speed and quality of recruitment, and accessing talent at a lower cost.

By being more forward-looking in these ways, organizations can boost their reputation as an employer of choice while simultaneously expanding the economy and creating opportunities for people of all ages to thrive.