The Flight of the Baby Boomers

Retirement Costs and Labor Shortages

Presented By

Jack Szczepaniuk

July 29, 2008

Summary What is a Baby Boomer? It’s a matter of Generation The Baby Boomer Exodus The Gap Labor Shortages Bridging the Gap Retirement Costs for the employer Baby Boomer Plans Retirement Costs Conclusion

What is a Baby Boomer? Someone who was born between 1946 and 1964 Sudden rise in birthrate following World War II Shared Events

• Vietnam War• Civil Rights Movement

Idealistic personality Not a homogeneous group (Gerosimplification) Two distinct Baby Boomer Groups 77 Million born during the generation

It’s a matter of GenerationThe Silent Generation (GI) [1925-1945]Slow progress, step-by-step, low risk, trust government, work hard• “children are to be seen and not heard”• The Great Depression• Social Security and the GI Bill were enacted

Generation X [1965-1981]Reactive, values tangible rewards, skill development, crave feedback• Cold War era• Fall of the Soviet Union• Ronald Reagan era

Generation Y (Millennials) [1982-present]Civic, technologically saavy, inexperienced in dealing with difficult social issues• the internet•9/11 and the War on Terror

Year-to-Year Births in the U.S. [1946-1994]

Baby Boomers Generation X Generation Y

The Baby Boomer Exodus A person may begin collecting Social Security at age 62 First Baby Boomers are turning 62 this year (2008);

7,918 people turn 62 each day, or 330 every hour <http://www.census.gov/ipc/www/usinterimproj/>

Situation About 40% of U.S. workers will be over 55

y/o by 2010 About 75% of Baby Boomers plan to work

beyond retirement age Many are choosing to gradually leave the

workforce, rather than in one step A third of workers will be forced to retire early

due to lay-offs, downsizing or illness 60% of new jobs in this century will require

skills that are today possessed by only 20% of workers

Workforce Make-up

The Gap

Significant generational differences between Baby Boomers and X/Y workforce

Technological differences Cultural and Political differences

Generational Gap (Online Use)

Labor Shortages Five Industries face acute shortages of skilled

workers aerospace and defense health care insurance and financial services public education

There will be “wars” for attracting labor within the next 5 to 6 years

Labor shortages may occur in specific geographic areas

Age discrimination may prevent older people from re-entering the labor market

Labor Shortages (cont) The future workforce will need to:

Make up for the knowledge and skills that were lost through the retirement of the Baby Boomers

Be able to succeed in a more globalized environment, full of technology

Little is taught about Foreign economies to children and teens

Math and Science levels of American students are a step behind

Future Labor ShortageThe shortage of skilled and unskilled labor will besetting in within the next couple years

Labor Growth Rate

The labor force grew 1.6% per year from 1950 to 2000

Growth in the labor force has slowed to 1.1% this decade

Overall growth in the labor force from 2000-2050 is expected to be 0.6%

Bridging the Gap Companies (HR departments) must

plan for an approach on two fronts Relations between soon-to-be

retirees and new Gen X/Y employees

Rising immigrant workforce Companies must support older

worker employment Companies must recruit highly

skilled immigrant workers in order to be competitive

Must uphold diversity programs in order to retain highly skilled immigrant workers

The Elderly Proportion

Growth in the proportion is due to: Retirement of the Baby Boomers An increase in health and life expectancy Changing fertility patterns

Possible Plans for Baby Boomers Extension of employment beyond retirement

age Voluntarily Official change in retirement age

Gradual Retirement Phased Retirement – Reduced commitment to

work before full retirement Cyclical Life Plan – periods of work/leisure over

long period Functional and Schedule Flexibility

Retirement Costs for the Employer Legacy Costs – costs handed down from

predecessor or past Legacy Costs may include retirement packages,

which threaten older, established companies Newer, smaller companies won’t feel as much of

the brunt Costs incurred to replace a retired worker’s

knowledge and skills

Strain on Public Employers

The longer Baby Boomers live, the costlier retirement benefits become

Taxpayers will not be able to cover the increasing cost of retiree benefits

State governments signed a 30-year bill in promise of spending $2.73 Trillion on retiree benefits

Governmental plans are lightly regulated As of 2006, $370 Billion has been left unfunded

Retirement Cost Woes Social Security is the largest source of income for about 50% of

retirees Today, there are 3.3 workers paying into the system for every 1

receiving benefits Within the next few years, the ratio will be 2:1 By 2017, taxes will not be enough to pay for Social Security

Benefits for all retirees

The Future of Medicare Baby Boomer account for the surge in enrollment beyond 2010

Conclusion

Over 77 Million people were born in the Baby Boom generation

The first Baby Boomers are retiring this year Exit of the Baby Boomers leaves a void in

experience and knowledge Companies must “bridge the gap” between Gen X/Y

and Baby Boomers, and recruit highly-skilled immigrant workers

Some alternative options for Boomers Costs for companies and the government will be

unavoidable

The Flight of the Baby Boomers

Presentation by Jack Szczepaniuk

Information, data and graphs are referred from the following sources:

Baker, James P., Lui, Elwood, Poirier-Whitley, Kirstin, Griffin, Sarah Heck (Summer 2008) Everything You Always Wanted to Know About a Public Employer’s Ability to Modify Retiree Benefits but Were Too Afraid to Ask. Benefits Law Journal, 21(2), 83-98

Giancola, Frank (Summer 2008) Should Generation Profiles Influence Rewards Strategy? Employee Relations Law Journal, 34(1), 56-66

Hines, Andy (July-August 2008) Consumer Trends in the Three Different “Worlds”. The Futurist, 18-23

Lee, Shelley A. (May 2008) Sandra Timmermann on Boomers Ready to Launch—and What That Means for the Rest of Us. Journal of Financial Planning, 16-20

Nguyen, Bao Q. (Summer 2008) Tomorrow’s Workforce: The Needs for Immigrant Workers and Strategies to Retain Them. Public Personnel Management, 37(2), 175-184

Rappaport, Anna (Third Quarter 2008) The Future of Retirement: An Exploration and Comparison of Different Scenarios. Benefits Quarterly, 40-61

Walker, Lewis J. (June 2008) Capturing the Boomer-Care Flag: The Misalignment of Compensation and Consumer Need. Journal of Financial Planning, 28-31.

Year-to-year births (1946-1994) and Future Labor Shortage from the Bureau of Labor Statistics

Pre-retirement and Retirement Population (2002-2020), and General Labor force Composition from the U.S. Census Bureau

“Can’t Live Without it” and U.S.-who participates (online users) from Forrester Research

Medical Enrollment Soars from the Health Care Financing Administration

Presented for MBA 568 – Diversity in Management and MarketingUniversity of Detroit Mercy

College of Business

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