The New Old Age

The Japanese senior citizens who founded Jeeba knew they were making history when they coined their company motto: "Of the elderly, by the elderly and for the elderly." By the time the 25 founders met one another in the mid-1990s, at a series of business-networking events hosted by the government of southern Saga prefecture, many companies were making products for the elderly, the fastest-growing demographic market in Japan. But those goods were not made by the elderly. All the Jeeba founders were older than 60 and believed they had a special insight into the needs of older consumers. In 1997, they launched Jeeba (the name means "old man and old woman") to build senior-friendly bathtubs, toilets and hammock lifts to help the infirm into wheelchairs. They do not hire young people, and the oldest of their workers is 75. Annual sales are only $272,000, but senior director Kazuhiro Noda, 67, expects revenues to start growing soon, as the company is putting more money and resources into sales development. He also believes copycats are sure to follow. Says Noda: "There will be a lot more companies like ours."

He's probably right. Firms run by senior citizens are still a rarity, in Japan and worldwide. But the elderly have numbers on their side. Thanks to the post World War II baby boom, healthier and longer-living seniors are reaching retirement age in unprecedented numbers all over the developed world. Rock-bottom birthrates in those same countries mean there are far fewer young workers to take their place. The potential consequences for industrialized economies are now clear: shrinking work forces, soaring health costs and collapsing pension systems. Nihon University demographer Naohiro Ogawa is not exaggerating much when he says: "Old people are Japan's only growing asset."

As a result, many of the rich world's notions about old age are dying. While the streamlining effects of international competition are focusing attention on the need to create and keep good jobs, those fears will eventually give way to worries about the growing shortage of young workers. One unavoidable solution: putting older people back to work, whether they like it or not. Indeed, cutting-edge European economies like those of Finland and Denmark have already raised their retirement ages, reversing the postwar trend toward ever-earlier retirement. Others are under severe pressure to follow suit, as both the European Commission and the Organization for Economic Cooperation and Development (OECD) have recently warned their members that their future prosperity depends on a growing contribution from the elderly.

This erosion of one of the cornerstones of the good life--relaxed golden years--has not gone unremarked. In the last year Belgium, Italy and France have all been hit with massive protests against pension reforms that would, among other things, have raised the retirement age. In Germany, political resistance has forced the new government of Chancellor Angela Merkel to go slow on efforts to raise the official retirement age from 65 to 67; the plan now is to increase it by one month a year between 2008 and 2032.

Alas, the global labor market won't wait for politicians or protesters to come around. The aging of the work force and the accompanying skills shortage are high on the list of challenges facing the global business elite as many of its leading lights gather at the World Economic Forum in Davos, Switzerland, this week. Many firms are already preparing for the demographic shift. In Japan, where the number of people between 15 and 64 is expected to decline by an average of 740,000 a year for the next decade, big-name corporations like Canon and Mitsubishi have already started rehiring their own retirees, as the pool of young job applicants shrinks.

As the world's most rapidly aging society, Japan is an extreme case. But the trends are the same all over the developed world. DaimlerChrysler, whose share of over-45 workers will have risen from 41 percent in 2002 to 68 percent in 2011, has set up an Aging Workers Task Force, made up of human-resources managers and health counselors whose main job is to make sure that employees stay productive longer. Personnel services like Swiss-based Adecco have introduced "demographic fitness tests" for their clients to help them judge whether they have the tools in place to attract and productively employ qualified older workers. "Age-ism in the workplace is a danger to corporate productivity," warns Adecco, which recommends replacing sudden retirement with a flexible system allowing workers to work part time into their late 60s or beyond.

The Ford Motor Co. expects that the number of workers older than 50 will double in its European plants by 2008, and has set up an "early-warning system" to deal with staff-aging issues. "With the coming shortage of young, skilled staff, we will have to live with our aging employees," says Erich Knulle, health services director and demographics point man at Ford's European headquarters in Cologne, Germany.

Whether these changes are good or bad news to workers depends on whether they anticipate retirement with eagerness or dread. In the United States, a full third of recently retired seniors now go on to pursue a second career, reports a new study by Putnam Investments. And according to a survey by AARP, the top U.S. lobbying and advocacy group for senior citizens, half of working-age Americans now expect to work into their 70s, whether by financial necessity or by lifestyle choice. In Japan, 78 percent of baby boomers between the ages of 55 and 59 say they plan to work beyond the official retirement age of 60.

These trends are forcing rich nations to rethink the long-held assumption that early retirement is a competitive advantage. Older workers were (and often still are) seen as less productive and more expensive, and thus ripe targets for corporations seeking to pare costs. OECD labor-market economist Mark Keese says governments from Germany to Ireland have long subsidized early retirement in order to free up jobs for the young, by offering generous benefits at very early retirement ages. Or they've doled out "disability" pensions to millions of still-young workers, often because of political pressure to get them off the unemployment rolls. As a result, the average retirement age in rich nations has been falling steadily from as high as 69 in 1950 to 61 or lower in many OECD nations today. In an extreme case like France, with an average life span of 83 years, the average worker retires at 59 and lives off a state pension for more than two decades--a situation Keese calls "obviously not sustainable." All across the Western world, says Keese, current retirement policies are "relics of a bygone age."

There is another way. Finland was facing a similar situation when recession hit in the early 1990s; at the time, only 20 percent of Finns between the ages of 60 and 64 were working. Since then Finland has introduced "bonus pensions" for people working until 68, giving them a financial incentive to continue working--and paying taxes. Employers are also now required to have occupational health and safety programs in place to monitor and prevent work injuries such as repetitive stress disorder or muscle pains produced by desktop jobs, with the ultimate goal of extending the average working life by two to three years. Already, the employment rate among those 60 to 64 has doubled. The result: lower pension costs, higher tax revenues and, Finland says, faster economic growth.

The Finnish case now stands as a potential object lesson for nations where government policy still pushes older citizens out of the work force. In part because companies in France and Germany are so used to phasing out older employees, fewer than 5 percent of workers older than 50 participate in training programs, compared with 33 percent in Sweden and 21 percent in Finland, according to a landmark study of retirement practices published in October by the OECD. In many countries, well-meaning laws designed to protect older workers--such as special prohibitions on firing, or age-based mandatory severance payments--have had the opposite effect, making companies reluctant to hire them in the first place. That's one reason that in Italy, two in five employment ads state bluntly that anyone 45 or older need not apply.

Such baldfaced discrimination against older workers is, however, on the way out at many companies. To make sure that its older workers stay productive and healthy longer, Ford Europe has beefed up health counseling and introduced "ergonomic" production. That means workers no longer have to climb into cars hanging on conveyor belts, but stand on platforms that conveniently adjust the cars' height for easier reach. --At the Cologne plant where Ford produces the Fiesta compact, Knulle says such changes helped him move 300 over-50 workers from menial jobs back into production. Now Knulle and his team have borrowed "third-age suits"--stiff, astronautlike gear that car designers wear to simulate older drivers' creaky joints and restricted movements--to test how to modify assembly-line stations for an even older group of workers.

The big picture seems to be brightening for older people who want to work. The OECD reports that employment rates for workers 55 to 64 have risen from 46 percent in 1994 to 51 percent in 2004. In the United States, hospitals struggling with staff shortages are extending the careers of older nurses by making their work easier with things like mobile "lift teams" for handling patients, or hydraulic hospital beds that cut the strain of too much stooping. In eastern Germany, where an early-1990s drop in the birthrate will halve the number of vocational-school graduates by the end of the decade, executive Reiner Storch recently hired a batch of workers in their 50s. "I need all of them, because we're not going to find enough young applicants," says Storch, the CEO of Anhalt Elektro Motor Works, a 165-employee specialty engine maker in Dessau. "Companies that still think they can just keep hiring young people out of school will very soon be in for a shock."

Contrary to still widespread stereotypes, there is very little hard evidence to suggest that companies cannot stay competitive with a rising share of older workers. When Danish retailer Netto set up three "oldie" supermarkets, where at least half the staff is over 50, absenteeism went down and customer satisfaction up. The same thing happened at British hardware chain B&Q, whose "elder worker" stores in Manchester and Exmouth were 18 percent more profitable than its regular outlets--due in part, the company says, to six times less employee turnover and 60 percent less pilfering and breakage.

To get around one of the main drawbacks of pay systems that often award workers based on seniority more than performance, some companies are introducing "peak wage" contracts that gradually reduce pay past the age of 55 or 60, often combined with fewer working hours. That kind of flexibility is becoming increasingly popular in Japan, where Nomura Securities in December became the latest company to announce such a program. Starting in April, all employees who wish to work past retirement can be rehired after 60 at more-flexible hours and pay, and often in a different job.

The surprising news to many younger workers dreaming of a life beyond the rat race is that most seniors are happy to be working. In America, two thirds of the "working retired" say they return to the job because they want to, not because they have to. When Finland raised the retirement age in the 1990s, polls showed that most Finns saw working longer as an opportunity to stay integrated in a social life often centered on the office. "When we find them a job, they really blossom and are more likely to stay healthy and motivated," says Bert Rechter, the 73-year-old headhunter at Oudstanding, an Amsterdam-based temporary-employment agency specializing in seniors. His oldest client: an 80-year-old delivery "boy."

When Rechter talks about work as a matter of lifestyle choice, then the traditional idea of "retirement" as the ultimate reward for a working life loses much of its meaning. If anything, it's surprising that we didn't challenge the popular association of old age and idleness much earlier. After all, the roots of the modern concept of retirement go all the way back to the era of Germany's "Iron Chancellor" Otto von Bismarck, who founded the first welfare state in the 1880s. At that time, the average worker toiled in a factory and lived to be 50. Retirement, for those few lucky enough to reach it, was conceived as a small recompense for physical and mental exhaustion. Happily, few of us today associate work with that kind of bodily strain. Instead, it's often a way for older people to stay active and integrated in a rewarding social network. That's the positive side to working longer and retiring later. We may also no longer have a choice.