Part II: Working Longer Solves (almost) Everything
How Older Workers Benefit Employers and Society
This is the second in a two-part series about benefits of older adults working longer. The first article looked at the benefits that accrue to older adults from working longer. This article explores the business case for older workers, or why employers should want to retain/hire older workers.
Employers benefit from both the work experience and life experience that older workers provide. Job-specific abilities may require years to acquire and develop. This is true not only of the skills required by specialists like architects, musicians, or craftspeople, but also of skills obtained through accumulated knowledge by salespeople, drivers, factory workers and others. Experience allows salespeople to communicate vast arrays of information to customers, and manufacturing workers to anticipate and avoid mistakes. Institutional knowledge accumulated by older employees as well as time-earned interpersonal skills can add value to mentoring relationships and assist in training younger workers. Additionally, older workers have established professional networks that provide access to partners, funders, and others who can benefit a business. There is some concern that older workers may burn-out or slow down, but large studies have repeatedly shown that older workers are actually more productive and make fewer errors.
Lower Turnover and More Workforce Flexibility
Employers benefit from lower turnover. Hiring and training new workers is expensive and time consuming. In fact, lowering turnover has been shown to increase customer satisfaction and increase profitability, as well. And older workers remain with an employer longer. While an average 30-35 year old remains at a job for four-and-a-half years, a similarly employed 55-60 year old stays at that job for more than twelve-and-a-half years.
Older workers also are frequently available for more flexible or short-term assignments. For example, following a natural disaster, an insurance company might have an urgent need for on-call, trained, insurance adjusters who can relocate with little notice for a short-term assignment. Or a retailer may need seasonal workers in November and December. With fewer family obligations and, perhaps, less need of a steady paycheck, older workers can provide a necessary temporary workforce.
Higher Customer Satisfaction
Longer tenured employees not only save employers the costs of training replacement workers, but have also been shown to increase customer satisfaction. Studies at big-box retailers have shown that stores with longer-tenured employees have higher rates of profit growth. Workers improve performance over time as they gain knowledge, comfort and personal relationships. A longer tenured staff will work better as a team, will develop a better understanding of customers, and will be more aware of the resources available to serve customers’ needs. Additionally, customers are more willing to seek assistance from employees with whom they are familiar. A more satisfied customer is more likely to make a return visit, resulting in additional purchases and the potential for increased profits.
Studies have consistently shown that a mixed-age workforce results in greater innovation and profitability. Additionally, employers benefit from having a workforce that mirrors their customer base. Building a diverse team that reflects the customer base supports a deeper understanding of their needs and increases opportunities to form personal connections. Promoting personal connections with older consumers is especially significant, as their purchasing power far outweighs their numbers. While older consumers represent approximately 35 percent of the population, they control more than half of the investable assets in the US.
Benefits to Society Overall
Working longer is similarly beneficial to the economy as a whole, increasing gross domestic product (GDP), providing skilled and less skilled labor in a tight labor market, reducing the cost and burden of caring for older adults, and helping to shore up the federal social security system as workers continue to make contributions through payroll taxes.
But do the Costs of Older Workers Outweigh the Benefits?
Despite the benefits of employing older adults, some of which are discussed above, there are perceived costs, as well. The size of these costs, however, may not be as large as generally thought. The theory that older workers remaining in the workforce reduces job opportunities for younger workers has been used to provide economic justification for early and mandatory retirement. But studies have shown that whether the economy is strong or in recession, increased employment of older workers does not negatively impact younger workers.
Similarly, though older workers are generally believed to be more costly in terms of wages than their younger counterparts. But in fact, research shows that among administrative and less skilled workers, 25-year-olds and 55-year-olds earn comparable amounts. And 60-year-old professionals/middle-managers earn comparable amounts to similarly employed 35-year-olds. It is no longer true that older workers are significantly more costly based on their wages.
In contrast, for most employers, healthcare continues to be more expensive for older workers. But the differential is shrinking. Though healthcare costs are increasing across age groups, they are increasing more slowly for older workers. And for a few lucky employers, healthcare costs can actually be less for older workers.
The cost to small employers for providing healthcare to older workers can actually be less than the cost of healthcare for employees under age 65. Employers with fewer than 20 employees are permitted by federal law to have not only a basic healthcare plan, but also a Medicare supplement plan. This allows older workers to file for Medicare and have an employer-sponsored supplement plan which will cost less (for both the employer and the employee) than the employer’s basic healthcare plan. This is noteworthy as about 20 million people in the US work for businesses with fewer than 20 employees. And while the Affordable Care Act requires only businesses with 50 or more employees to provide healthcare benefits to employees, more than 60% of businesses with 20 or fewer employees do so. Less expensive healthcare benefits for older workers negates one of the most significant costs cited in opposition to employing older workers. Additionally, it may even incentivize small businesses to seek out older workers.
Call to Action
The business case for employing older workers is strong. Their experience, employment tenure, and diversity of opinion all benefit employers, perhaps even increasing revenue. And the presumed cost to employers of hiring or retaining such workers is either declining or non-existent.
By facilitating continued or new employment of older workers, we not only potentially add more years to those individuals’ lives, but we also add more ‘life’ to their later years. We are increasing the number of healthy, active, and engaged years each of us has to live, rather than end-of-life years which are too frequently characterized by declining or ill health. There is a strong case to be made that people will be healthier for working longer, more engaged, with a greater sense of purpose, which in turn, will drive happiness and longevity. It is for this reason that we make the case that working longer addresses a multitude of societal needs at the same time. The gift of longevity has simultaneously produced an opportunity and a monumental challenge for our society. We call upon leaders to innovate, change attitudes, and ultimately make it easier for older adults to work and volunteer later in life. This change will keep our economies and our citizens’ quality of life growing well into the future.
Tim Driver and Amanda Henshon are President and Executive Director, respectively, of The Age Friendly Foundation. The Age Friendly Foundation works to fuel innovation that supports healthy, active and productive aging for all through advocacy, education, and promoting collaboration among thought leaders in aging services.