July 19, 2018
July 19, 2018
The confluence of two unprecedented trends are beginning to impact organizations: aging workers, and the displacement of labor by intelligent systems. Boards need to work with management and human resources teams to factor these trends into talent planning strategies to offset potential risks and optimize the opportunities to ensure the organization has the labor force needed for the future.
Lest you think you are immune to these trends, consider these two points. First, the median average age of S&P 500 boards is 62.4. Second, some companies have already installed artificially intelligent board members to interpret vast amounts of data available to corporate boards about the company’s performance and help make better informed decisions.
Societies and workforces globally are dealing with an increase in aging populations. The UN projects that by 2050 more than a third of the entire world’s population will be above the age of 50. By contrast, just 15.7 percent of the world’s population in 1950 was aged 50 or older.
These population shifts and impacts will vary across countries. For example, China’s working age population as a percent of the total population will shrink by 5 percent by 2030 while the number of Chinese citizens aged 65 or older as a percent of the total population expands by over 7 percent into 2030. In the United Kingdom, the aging population has been masked by a long history of inward migration, but with Brexit negotiations underway and immigration from the European Union potentially slowing, the only growing labor pool in the UK is currently the over-50 population. In the United States, workers aged 55 and up are also the largest section of the USA labor force today. Over the next 10 years, women between 55–64 years of age are projected to be the fastest growing workforce segment in the USA.
There are two key factors to older workers’ increased workforce participation. On the financial side, older workers across the globe require more income in their retirement. Mercer data has shown that there is a growing worldwide retirement savings gap (between the costs of living anticipated in retirement and savings accrued for retirement). Estimated at $70 trillion globally in 2015 and projected to reach $400 trillion by 2050, the gap means that many people must keep working past traditional retirement age in order to support themselves financially. However, research also shows that many older individuals are actually working longer because they want to for personal fulfillment and satisfaction. One study showed that 60 percent of workers aged 45-plus were investing in new skills for work, and most of them reported they were positive and excited about their jobs.
Machine learning, artificial intelligence, and robotic process automation are just some of the myriad emerging technologies that will have massive impacts on labor forces. A recent World Economic Forum report estimates that between 2015 and 2020, 7.1 million jobs will be lost globally and just 2 million will be gained due to automation.
Yet, the outcome of automation is still unclear. As with previous technological revolutions, over time, increased rates of automation will hopefully raise economic productivity and spur the creation of new jobs. However, between now and the passage of the fourth industrial revolution, automation and aging will shape the workforce with varied impacts.
Overall, older workers can be more susceptible to be displaced, especially in emerging economies. For example, there are concerns about the skills gaps among older workers, as older workers are likely to find it more difficult to find appropriate new job opportunities if their skills are made redundant due to automation of certain jobs. In many countries, older workers tend to do lower-skilled and more automatable work, and so are also more vulnerable to displacement generally.
In terms of impact by gender, older women in the United States may be buffered against these trends as they tend to dominate jobs with the greatest current and projected job shortages. Those jobs tend to be those that need the human touch. For example, women make up 89.9 percent of registered nurses, 92.2 percent of nurse practitioners, and 70.9 percent of physician assistants. However, millions of administrative and service-industry jobs are held primarily by women—jobs that are all substantially threatened by the rise of automation.
So what does all this mean for your organization? The exact impacts are hard to define, but two things are clear: workforces are likely to be older and more automated, and securing younger workers will become increasingly difficult as young populations shrink.
In terms of action items for your organization, three things are important.
First, organizations must invest in levers to upgrade human abilities and skills in their operations to ensure workers can shift from lower-value work into more value-added services. For example, firms could enable plant and machine operators to become specialty technicians and robotics monitors. In the case of the service industry, waiters and order takers could become hosts or dining event-managers.
Second, recognize the labor pool potential of older workers who are increasingly willing and able to engage in and return to work around the world. With labor markets around the world aging so rapidly, it will be incumbent upon firms to utilize the unique abilities of older workers as part and parcel of their digital evolution. Older workers provide crucial abilities for firm building, knowledge consolidation, and continuity in times of flux.
Third, consider how these trends will play out across different countries and consider the impacts on your organization. Research shows the risks presented by an aging workforce are particularly high in China and Vietnam, as well as in Germany and Italy. Canada and Australia have the lowest rates of aging, and the US has older workers that are at relatively low risks of automation. But impacts on labor forces can also be affected by trends in immigration laws. As companies today are under growing scrutiny about who they hire, how they hire, and how they design their labor force practices, taking note of older worker strategies will be key in the years ahead.
Patty Sung is one of the founding members of Mercer’s Innovation Hub, based in Washington, DC.