Across the United States, approximately ten thousand baby boomers are bidding adieu to the workforce every single day. For them, there will be no more commutes to work, no more gossipy co-workers, and no more deadlines, just kicking back and enjoying the twilight years of golf, traveling, reading, hobbies, playing with grandchildren, or doing nothing at all…
And while ten thousand seems like a small part of the total estimated U.S. population of 327,079,855, the overall impact of these thousands of mature employees leaving the workplace is already creating a shortage of skilled workers and concerns about the effects on the U.S. economy as well as the changing face of the future of work itself.
In some cases, men and women who retired at age sixty-five have been called back to work on a contract basis because they know the ins and outs of their former jobs, be it skilled labour such as welding, manufacturing, engineering, logistics, or countless other areas, and no younger employees are skilled enough or available to take their place. In just the past decade, the number of Canadian workers past the age of retirement still in the workforce has increased by more than 140 percent.
The baby boomer generation encompasses those born between 1946 and 1964, which places the oldest of the baby boomers in their early seventies and the youngest in their mid-fifties, still working but with retirement clearly on the horizon. While there has been much written about boomers who fail to save for their golden years and have barely enough income to survive to an average lifespan of almost seventy-nine years in the U.S., another issue is what the effect of the loss of about 3,650,000 workers in America will have on the economy in both the short- and long-term.
Across North America, legions of baby boomers retiring en masse will affect economies and the workforce for years to come. Hiring twenty-something replacements for older workers in their fifties, sixties, or even early seventies is no substitute for decades of experience, which will leave many industries with a severe knowledge gap. The impact of this will be felt on businesses, government, policies, and investment throughout the continent.
Some call it the aging of North America, while others refer to the transition of retiring older workers as ‘the grey shift,’ and baby boomers are not only leading the exodus from the workforce but are now spearheading another group: the long-living aged. Twenty years ago, people between fifty and sixty-nine comprised eighteen percent of Canada’s overall population; today, the same age group accounts for twenty-seven percent of the population, and the numbers are rising.
With baby boomers in their mid-fifties still in the workforce, the number of retirees still will not peak for another decade. And while immigration across North America will make up some of the shortfalls of workers, it is projected this will not come anywhere close to meeting the demand for new, younger workers as older employees enter retirement. In the U.S., health care costs will rise, as the costs of Medicaid and Medicare for baby boomers who are no longer in the workforce are expected to more than double by 2020.
From creating an additional strain on the health care system as retiring baby boomers live longer to younger people facing a steep learning curve, there will be many challenges to society in the coming years. Some economists anticipate $275,000 (U.S.) in out-of-pocket expenses for retired couples from age sixty-five until death. Others believe many of these retired people will simply not have enough funds to cover the cost of their medical needs as they age. Even government insurance such as social security, introduced in the U.S. in the mid-1930s under President Franklin D. Roosevelt’s New Deal, is expected to run out of funds by 2033, despite its massive annual budget of $1.06 trillion.
Interestingly enough, another sector of baby boomers poised for retirement are medical professionals, including doctors, pharmacists, physiotherapists, and nurses, many of whom spent their entire careers looking after older people and who will now require assistance in their own golden years. Following the retiring baby boomers, will subsequent generations such as members of Generation X – those born between 1965 and 1981 – and millennials – women and men born between 1981 and 1996 – be able to fill the enormous employment gap left by exiting workers? For these younger employees entering the workforce, the pressure to produce will be overwhelming, as people sixty-five and older will comprise one-fifth of the U.S. population in just over a decade. And as if that was not enough with which to contend, the American birth rate is at its lowest point in almost 110 years.
Individuals around the world will be affected as baby boomers enter retirement and older populations are also not good for many businesses. While some sectors, such as pharmaceutical and rehabilitation, will continue to grow as older people require additional medication and therapy, others will significantly decline because there is less need for consumerism.
As we age, many people downsize and buy less since spending decreases significantly in retirement by an average of 37.5 percent. For companies and investors alike, this decline in revenue will be challenging to manage, as baby boomers will purchase fewer of the big-ticket items they already own, such as automobiles, furniture, and appliances. For some retired baby boomers, any available funds they may have are allocated to helping their own children and grandchildren, who face the financial crunch of paying off massive student loans or rent.
The ripple effect of aging baby boomers will affect younger workers entering the market for years to come. Boomers who choose to retire at sixty-five or earlier will continue to strain the financial resources of an already overburdened healthcare system, leaving a shortfall for Gen-X and millennials when it is their turn to exit the workforce. And then there is the issue of younger workers finding employment in the first place. According to the U.S. Bureau of Labor Statistics (BLS), the federal agency producing data on the state of the American economy, about twenty percent of men and women sixty-five and over remain in their jobs. Others, such as the McKinsey Global Institute (MGI), survey showed that eighty-five percent of baby boomers are expected to work later in life.
“America’s baby boomers have dominated the U.S. economy for more than a quarter-century. MGI research shows that the nearly seventy-nine million baby boomers have earned record levels of income, generated great wealth, and spurred economic growth. But they have also spent at record levels, failed to save, and accumulated unprecedented levels of debt.” The MGI survey was first published a decade ago, and its predictions have proven to be true. “A vast majority of U.S. baby boomers are unprepared for retirement. Enabling them to work longer would benefit both individuals and the economy, but policymakers and business leaders will need to take action.”
For the generation of baby boomers who have already left the workforce or who are planning their exit strategies, life will be very different for many of them compared to previous generations. Downsizing, the process of moving from a large home to much smaller and less costly condominiums or rental apartments, will become the norm. Some will be able to draw on their pensions for their remaining years on earth, while others, who counted on old age security, will be in for an unpleasant surprise as there is not enough money to sustain their lifestyles and will find themselves once again working the 9 to 5 grind.