Is It Time for Mandatory Retirement?

A recent Newsweek Magazine blog entry looked to heap a large portion of the current economic problem on to the Baby Boom generation. The blog makes a strong case that the collapse was all but an “inevitable result of demographics”. I’m not sure that is true, but it does trigger another thought, one that I’m not convinced of, that may merit some further debate and discussion in the context of workforce planning.

A lot of the discussion and research in the Human Capital space the past decade has been around the coming “retirement wave” as the baby boomers reach their golden years, and around the concept of “multi generational workforces”. The focus has almost exclusively been on: (1) managing workforces that now comprise 4 generations of workers; and, (2) slowing the retirements by shifting the alternative and flexible work schedules and strong knowledge management processes and systems. Perhaps it is time to look at an alternative approach, and an open debate if this is the correct approach?

In the United States, traditionally, the age of retirement has been 65 years of age. This is driven by when full social security benefits become available. At the same time, demographically, people are living longer, and retirement has gone from an average of 8-10 years when the Social Security system was first created to on average 25-30 years. A system never meant to be the prime driver of retirement income is now tasked with paying benefits for a longer period of time. Additionally the demise of traditional pensions and a shift to employee controlled retirement plans (401(k), 403(b), IRA, etc.) coupled with the economic collapse of 2008/2009, and ever rising national debt have cast the whole system and its flaws into the forefront.

It is no secret that the Social Security Trust fund will soon be in deficit, and as a result that dramatic changes are needed that may include reduced benefits, shifting the age to receive benefits and increases in taxes. All of these have political perils and societal impacts to numerous to discuss here. I point them out solely to set context against an unemployment rate that is now over 9% nationally, and fast approaching the point of the late 1970s which is when it reached its highest post war level. America’s economy thrives when the unemployment rate is 5% or less, and so long as the higher rate remains true economic recovery is a difficult prospect.

Now back to the Baby Boomers, and a very short history. After the end of World War II the Baby Boomers parents built the United States into the wealthiest and most powerful nation the world had ever known. The power of the US economic engine, for a variety of reasons, was unquestioned and a beacon to the world. Enter the largest generation who helped change the world. The civil rights movement, the women’s movement, etc. all changed the nature of work and the nature of the workplace, and in my opinion, all for the better. But this generation that wanted to be one with the earth at Woodstock, and to change the world somewhere along the line lost its footing.

In the 1980s this led to the moniker of “me generation” as greed took over and rampant job hunting in chase of ever higher salaries caused inequities in the labor market that eventually helped lead to waves of layoffs and downsizing, and which forever changed the Employer / Employee relationship in the US. No longer did people seek a single employer where they could build a life long career, and instead the concept of 6-8 employers and 3-4 different careers became the norm. In the 1990s the baby boomers started to hit their peak earning years and speculated in high risk technology stocks, and when the inevitable bubble burst we experienced the dot com induced recession and subsequent job loss’ again with recession and waves of layoffs. With the dawn of the millennium and the recovery of the economy the economic speculation turned to housing, and again the bubble burst, and that takes us to the present.

Before I go forward let me state unequivocally that my personal view of the workforce is very much a product of my generation (Gen X if you are curious), and that my beliefs on workforce planning and talent management are driven from a core value that the most competent and qualified person for a job should be the person placed in that job. That competence trumps all else, and that factors such as seniority and diversity, well important, are secondary to demonstrated expertise, education and experience. Diversity is about diversity of experience (which inevitably will give you the traditional diversity as well), and not about quotas and EOE reporting.

That said the workforce challenges are well documented. In industries as diversified as Government, Energy, and Manufacturing where union systems that reward seniority define the landscape the biggest challenge companies are finding is that they have very seasoned workers and very green workers and no real middle (30 and 40 something’s) who are both qualified and experienced enough to fill the leadership vacuum that a mass retirement wave would create. In large companies with graying workforces retention problems (partially muted in the short term by the economic downturn) abound from Generation X workers frustrated that there careers have hit plateaus because senior positions are all filled by workers who are not leaving or stepping aside. Even in politics as we move into our 17th straight year of Baby Boomers in the White House, and a congress that is no longer (age wise) a reflection of society at large one must ask the question of how well represented the future workforce is by the actions that are taken.

When Baby Boomers came of age the National Debt was under 2 Trillion Dollars, today it stands at 11.2 Trillion and rising (against a GDP of 10.5 Trillion). Do you know any Generation X or Generation Y people that are pleased with owing Uncle Sam more than $98,000 each? What happens in another 10 years when the Millennial Generation starts to enter the workforce?

In other countries, the majority of them in fact, mandatory retirement ages abound. Granted this is a far simpler equation in countries with true national pension plans where retirees are guaranteed by the government to have a livable income for the remainder of their lives post retirement, but that brings us back to our 9%+ unemployment rate. The question is should the US institute a mandatory retirement age? Would doing so help or hurt our economy? Would moving Baby Boomers, now in their peak earning years, out of the workforce create more opportunity for future generations while also driving down labor costs for employers and thus helping to create more jobs, or would it create a drain on the system do to the large costs of supporting this generation in retirement (since the studies show less than 40% of Baby Boomers have sufficient savings to last out their retirement years)?

The four strongest emerging economies on the planet, China, Russia, Brazil and India are all countries with mandatory retirement ages. Using China as example women must retire at 55 and men at 60. An exception exists for Senior Leaders (executive and government) and for those with a demonstrated expertise unavailable elsewhere in the workforce. Would such a system work in the US? From a workforce planning perspective would it make it easier or more difficult to predict when and where future staff is needed, and with what competencies, and from which more robust talent management practices could be deployed?

Free market economics would seem to dictate that: (1) talent follows the money; and (2) regulation such as mandatory retirement ages should be imposed by the market (i.e. when a person’s skills and experience are no longer of sufficient value the lack of jobs will force retirement) rather than by government. Let me be clear, I am not advocating for a mandatory retirement age, or the forcing of Baby Boomers from the workplace. While I do hold that generation accountable for ever rising national debts I do not believe they are the root cause of all the ills in the economy or the world.

But I do think in a time of rising unemployment and economic hardship that further debate is needed around the subject, and that it never hurts to have open and public debate around subjects long considered taboo in the workplace. There are major changes and impacts to the way we work coming. Some of these are driven by technology, and some by demographics. Not just demographics of a maturing workforce, but also shifts in thinking as Generation X and Generation Y and the ways they work and interact take hold in the leadership positions of our companies. Time will tell if these changes are for the better or the worse, but isn’t it past time for a little debate about if we should be forcing the issue or not?

We live in a time where US Labor Law is being redefined by a very activist congress. The Ledbedder Act, Card Check Act, SMLA and other pending legislation are redefining our workforce practices. Can we debate without recrimination or discrimination the generational realities we face as well? Generational realities that by the way exist in most of the industrialized nations of the world, and which whomever gets right will have a competitive advantage for decades to come.