U.S. study suggests impact of retiring baby boomers on labour shortage overblown, inaccurate
Fears of A widespread shortage of labour in the coming years because of baby-boomer retirements are grossly oversimplified, according to a management consultancy in the United States. The actual size and growth rate of the retirement market will be much smaller than commonly believed.
“Everybody is expecting a huge surge and it’s not going to be there,” said Shawn Coyne, co-founder of Atlanta-based Coyne Partnership.
Baby boomers have made a huge difference in society at various stages of life, he said.
“The notion that every time they get to the next critical stage, the whole world changes because of the sheer mass of this group has a lot of stock in people’s minds. But that’s a little inaccurate and fuzzy.”
When people hit retirement, they don’t necessarily act the same way, said Coyne, and with multiple generations within the baby boomers, a 10-year age gap makes a big difference.
While statistics suggest the impending retirement of the boomers in 10 years will add up to 78 million retirees in the U.S., the number of “true” retirees — excluding those who never worked in the first place — will reach only 45.6 million in 2017, said the firm. And assuming the trend of delayed retirement continues, a more realistic assumption would be fewer than 36 million in 2017, which represents little growth compared to the 35.4 million “true” retirees who exist today.
There are several reasons for the lower numbers. For one, the “classic” retiree — someone who has worked full time over a career for one or more companies and has ceased working entirely, living off a combination of savings, a pension or social security — constitutes a shrinking minority of the older population, said Coyne. Classic retirees form less than one-fifth of the population of 60 year olds and only 42 per cent of 65 year olds, he said.
In addition, one-third of the older population are not career workers — they haven’t had a lifetime of full-time work, so the impact of their retirement will be lessened. And a growing portion of older workers continue to work part time (such as 15 per cent of 65-year-old career workers today) or remain in their careers after age 65, a tendency that’s been underway since the late 1990s.
Early retirement is also increasingly popular, whether full or partial. By age 55, more than one-third of workers are not working on a full-time basis. Even among career workers, almost one-quarter have retired to some degree by 55, said the report.
As a result, the annual rate of people retiring each year will be less than four per cent for the next five to 25 years, and 2.5 per cent for classic retirees, a figure barely different from the rate of 2.2 per cent from 2005 to 2007, said Coyne.
The report’s position sounds similar to commentary of 20 years ago, when experts said people weren’t having kids anymore, said David Burke, retirement practice director of Watson Wyatt’s Canadian offices.
“They did, they just had them later,” he said.
And Coyne’s prediction of a 2.5-per-cent growth rate of retirees is not that dramatic considering there are 78 million baby boomers retiring over 20 years, said Burke, who had not seen the full details of the report.
“That’s not an opinion, that’s a fact,” he said. “That’s the beauty of demographic projections. They are very different from economic forecasts, because economic forecasts, you kind of take a best guess and re-adjust every few months. But we know today what the workforce is going to look like in 20 years because those kids are already born.”
While some of the Coyne numbers do apply for Canada, there are differences because our population has a higher proportion of people in the labour market and mandatory retirement has been banned, said Roslyn Kunin, a senior fellow and director of the Vancouver office of the Canada West Foundation.
“The average age of retirement has been slowly creeping up and it will continue, especially now with the legislation,” said Kunin.
The aging baby boomers reaching traditional retirement age are still going to have a very strong impact on the labour market, she said.
“They’re still an elephant, very large and important,” she said. “And the fact we have a more educated and a healthier population than we’ve ever had means people are more likely to stay active. People know they’re likely to live decades past 65 and that’s a long time to do nothing.”
Forward-looking employers are looking to hire or retain older workers by being more flexible (with hours, location and pension entitlements), she said.
It behooves any organization to think about what the workforce needs to look like going forward, said Burke. And if it’s the type of place where people can work longer than in the past, employers need to have programs in place to support that. In Japan, the average retirement age is 69. In Canada, it’s 61, he said.
“That’s eight more additional years of productivity that we’re not getting,” said Burke.
And if the report is right, it’s good news because the sheer size of the labour pool will be greater than anticipated, with older, well-trained and experienced people, said Coyne.
“Most of our economy is knowledge-driven, the guy doesn’t turn the brain off when he reaches 65 or 70 and all those years of experience he’s built up are a huge asset.”
By the numbers
Boomer exodus not so bad
There are four key factors driving the smaller-than-anticipated size and growth rate of retirees in the U.S. as baby boomers age:
• baby boomers are spread across a 20-year age span;
• baby boomers (and pre-baby boomers) still working are likely to keep working longer;
• large number of pre-baby boomer retirees creates a large base from which growth is measured; and
• significant number of baby boomers have already retired.
Source: The Coyne Partnership
Slow growth
Looking ahead
The annual growth rate of new retirees in the United States will be less than four per cent through 2032.
2007 1.8 million retirees
2012 2.2 million retirees
2017 2.5 million retirees
2032 2.6 million retirees
Source: The Coyne Partnership
“Everybody is expecting a huge surge and it’s not going to be there,” said Shawn Coyne, co-founder of Atlanta-based Coyne Partnership.
Baby boomers have made a huge difference in society at various stages of life, he said.
“The notion that every time they get to the next critical stage, the whole world changes because of the sheer mass of this group has a lot of stock in people’s minds. But that’s a little inaccurate and fuzzy.”
When people hit retirement, they don’t necessarily act the same way, said Coyne, and with multiple generations within the baby boomers, a 10-year age gap makes a big difference.
While statistics suggest the impending retirement of the boomers in 10 years will add up to 78 million retirees in the U.S., the number of “true” retirees — excluding those who never worked in the first place — will reach only 45.6 million in 2017, said the firm. And assuming the trend of delayed retirement continues, a more realistic assumption would be fewer than 36 million in 2017, which represents little growth compared to the 35.4 million “true” retirees who exist today.
There are several reasons for the lower numbers. For one, the “classic” retiree — someone who has worked full time over a career for one or more companies and has ceased working entirely, living off a combination of savings, a pension or social security — constitutes a shrinking minority of the older population, said Coyne. Classic retirees form less than one-fifth of the population of 60 year olds and only 42 per cent of 65 year olds, he said.
In addition, one-third of the older population are not career workers — they haven’t had a lifetime of full-time work, so the impact of their retirement will be lessened. And a growing portion of older workers continue to work part time (such as 15 per cent of 65-year-old career workers today) or remain in their careers after age 65, a tendency that’s been underway since the late 1990s.
Early retirement is also increasingly popular, whether full or partial. By age 55, more than one-third of workers are not working on a full-time basis. Even among career workers, almost one-quarter have retired to some degree by 55, said the report.
As a result, the annual rate of people retiring each year will be less than four per cent for the next five to 25 years, and 2.5 per cent for classic retirees, a figure barely different from the rate of 2.2 per cent from 2005 to 2007, said Coyne.
The report’s position sounds similar to commentary of 20 years ago, when experts said people weren’t having kids anymore, said David Burke, retirement practice director of Watson Wyatt’s Canadian offices.
“They did, they just had them later,” he said.
And Coyne’s prediction of a 2.5-per-cent growth rate of retirees is not that dramatic considering there are 78 million baby boomers retiring over 20 years, said Burke, who had not seen the full details of the report.
“That’s not an opinion, that’s a fact,” he said. “That’s the beauty of demographic projections. They are very different from economic forecasts, because economic forecasts, you kind of take a best guess and re-adjust every few months. But we know today what the workforce is going to look like in 20 years because those kids are already born.”
While some of the Coyne numbers do apply for Canada, there are differences because our population has a higher proportion of people in the labour market and mandatory retirement has been banned, said Roslyn Kunin, a senior fellow and director of the Vancouver office of the Canada West Foundation.
“The average age of retirement has been slowly creeping up and it will continue, especially now with the legislation,” said Kunin.
The aging baby boomers reaching traditional retirement age are still going to have a very strong impact on the labour market, she said.
“They’re still an elephant, very large and important,” she said. “And the fact we have a more educated and a healthier population than we’ve ever had means people are more likely to stay active. People know they’re likely to live decades past 65 and that’s a long time to do nothing.”
Forward-looking employers are looking to hire or retain older workers by being more flexible (with hours, location and pension entitlements), she said.
It behooves any organization to think about what the workforce needs to look like going forward, said Burke. And if it’s the type of place where people can work longer than in the past, employers need to have programs in place to support that. In Japan, the average retirement age is 69. In Canada, it’s 61, he said.
“That’s eight more additional years of productivity that we’re not getting,” said Burke.
And if the report is right, it’s good news because the sheer size of the labour pool will be greater than anticipated, with older, well-trained and experienced people, said Coyne.
“Most of our economy is knowledge-driven, the guy doesn’t turn the brain off when he reaches 65 or 70 and all those years of experience he’s built up are a huge asset.”
By the numbers
Boomer exodus not so bad
There are four key factors driving the smaller-than-anticipated size and growth rate of retirees in the U.S. as baby boomers age:
• baby boomers are spread across a 20-year age span;
• baby boomers (and pre-baby boomers) still working are likely to keep working longer;
• large number of pre-baby boomer retirees creates a large base from which growth is measured; and
• significant number of baby boomers have already retired.
Source: The Coyne Partnership
Slow growth
Looking ahead
The annual growth rate of new retirees in the United States will be less than four per cent through 2032.
2007 1.8 million retirees
2012 2.2 million retirees
2017 2.5 million retirees
2032 2.6 million retirees
Source: The Coyne Partnership
