Cover Story: Invest in Older Workers

Employees age 50 and older represent almost a third of the U.S. workforce. They’re your brain trust.

By Robert J. Grossman August 1, 2013

During a 37-year career with Michelin North America, Wayne Culbertson worked his way up line and staff positions on three continents. In 2008, he moved to the C-suite as executive vice president of personnel and chief human resources officer for the tire manufacturer. Five years later, as he approaches 61, Culbertson is moving on.

Surely he’s earned the right to sit on the beach, play golf and spend time with his family. But Culbertson has other plans—and so does Michelin: Corporate leaders promoted him to director of the division serving the United Kingdom and Ireland. He begins the new gig this month.

"Age is not a factor," Culbertson says. "What counts is whether you can do the job."

Culbertson fits the corporate profile: 37 percent of the company’s 22,000 workers and 80 percent of its senior managers are over age 50. "Older workers are essential to our employment mix" and "part of our business strategy," he says.

Michelin workers have high levels of job satisfaction. Equally notable, Michelin has one of the highest net profit margins in the tire industry. And in June, the company was the only major manufacturer to receive an AARP 2013 Best Employers for Workers Over 50 award. The awards are co-sponsored by the Society for Human Resource Management (SHRM).

Many other employers seem to have lost sight of older workers. Perhaps it’s because recruitment and retention became less of a problem in the wake of the Great Recession. Yet older workers have grown even more integral to human capital planning and to business: When the recession struck in 2007, 29.3 percent of the workforce was age 50 or older; today, almost one-third of the workforce falls into that category. And by 2019, the Urban Institute predicts that the number will rise to 35 percent. As the economy brightens, insightful employers such as Michelin will reap rewards while others try to catch up.

The idea that older workers add value to organizations was gaining traction before the economy tanked in 2007. Employers like Borders led the way. It found that older employees delivered superior customer service and registered much lower turnover.

But the recession prompted changes. Saddled with business models that were no longer viable, some companies folded, including Borders. Others, like General Motors and A&P, filed for bankruptcy and reorganized. Survivors moved to austerity mode, leading to an estimated loss of 7.9 million jobs. Unemployment peaked at 10 percent in 2009.

In a weak labor market, "some employers lull themselves into complacency," says Rutgers University professor Carl Van Horn, author of Working Scared (Or Not at All): The Lost Decade, Great Recession, and Restoring the Shattered American Dream (Rowman & Littlefield, 2013). "They should have a strategy." For companies with older employees, "it’s wise to have employees who understand that population."

The recession shocked many older workers. By 2010, people ages 55 to 64 saw the value of their 401(k)s decline by one-third. Many put off retirement for a year or two. Then, with the stock market recovery under way in 2012-13, they took the plunge. As a result, HR directors now report a return to the usual numbers of annual retirements.

According to Gallup’s newly released annual economic and personal finance survey, the upward creep in retirement age may not have that much to do with recent economic woes. Instead, it may be an indication of a larger, more fundamental shift in how Americans live, work and age.

Gallup’s mid-April survey shows that the average age when U.S. workers retire has increased by four years, from 57 in 1993 to 61 today. Three-quarters of that upward shift occurred in the 1990s and early 2000s.

Gallup researchers found that workers’ predictions of their own retirement age shifted even more dramatically: In 1995, 49 percent of Americans who were not retiredsaid they would retire before age 65, 32 percent expected to retire at 65, and just 14 percent anticipated having to wait past 65. Today, 37 percent of workers say they will retire at age 65, while another 26 percent think they will work beyond that age. Only 26 percent think they will retire before they reach age 65.

Despite the return to the usual number of annual retirements, many olderworkers still lack the resources to retire. They must continue working or re-enter the workforce. In almost every demographic, Americans earn less than they did in June 2009 when the recovery started. Households led by workers ages 55 to 64 have taken the biggest hit, with their mean income falling by 7.2 percent.

In a 2012 AARP and SHRM survey of 1,004 workers age 50 and older, nearly eight in 10 said their primary reason for working or looking for work was money or health insurance. Only one in five was mainly motivated by nonfinancial reasons such as enjoyment or desire to be productive.

Whatever the reason, more people in the U.S. who are age 65 and older are still working. In 1990, there were 3.8 million still working—about 12.1 percent of the over-65 population. By 2012, that was the case for 7.7 million, or 17.3 percent of that group. Many are professionals—lawyers, professors, nurses, doctors and top executives.

Discrimination remains all too common. In Staying Ahead of the Curve 2013, AARP reports that 64 percent of workers ages 45 to 74 have seen or experienced age discrimination at work. Of those, 93 percent say it is very or somewhat common. Workers are most likely to experience it in their 50s. The Age Discrimination in Employment Act applies to workers 40 and older.

Since the recession,U.S. Equal Employment Opportunity Commission (EEOC) age discrimination claims have increased 30 percent. The percentage of claimants who receive merit resolutions is about 17 percent, the prerecession rate. Cash awards, however, have increased: Annual awards averaged about $60 million from 2002 to 2006, then jumped to $87 million from 2008 to 2012.

Winning a case is challenging, especially when plaintiffs allege disparate impact—discriminatory action against an entire group of older workers. In these federal cases, "the standard of proof is higher than in other discrimination cases like those based on race," says Daniel Kohrman, senior attorney at the AARP Foundation.

A 2009 U.S. Supreme Court decision, Gross v. FBL Financial Services Inc., made it easier for employers to justify disparate treatment based on age. And, in 2011, Wal-Mart v. Dukes made it harder for "similarly situated individuals" to be certified for a class-action federal lawsuit.

With the trend moving against them, plaintiffs’ lawyers are looking to state courts. Although changes in the law make it more difficult to win age discrimination cases, Kohrman cautions employers not to be cavalier in their treatment of older workers. "Recent decisions may have shifted the balance," he says, but "blatant ageism will still give you a problem."

Furthermore, the EEOC’s 2012 amended regulations clarify when disparate impact becomes discriminatory. An employer "that has made a concerted effort to be fair and has taken logical steps can justify disparate impacts," Kohrman says. The regulations "provide guidance for employers about how to make their decisions litigation-proof. Employers in jeopardy are those who, out of carelessness or based on stereotypes, disproportionately impose layoffs that can’t be explained by a legitimate business reason."

Some employers revere older workers. The Best Employers for Workers Over 50 awards recognize such "progressive employers," says AARPsenior advisor Deborah Banda. A panel of judges examines factors such as:

  • Is the culture welcoming to older workers?
  • Are there opportunities for them to advance?
  • What kinds of benefits are available to them?

The contest is open to U.S. employers with 50 or more workers; it costs them nothing except the time required to complete a detailed application. AARP and SHRM accept the veracity of the data on "the honor system." Participants receive a benchmark report that enables them to see how they stack up. "By showcasing best-practice employers, we hope to set an example for others," Banda says.

This year, 130 companies applied; 40 of them were previous winners. A large number of nonprofit, government, education and health care organizations were among the honorees. Absent or rare were representatives from sectors such as manufacturing and retail.

Only three companies on another well-known list—the 2013 Fortune 100 Best Companies to Work Forearned recognition from AARP and SHRM: Atlantic Health System, Scripps Health and law firm Perkins Coie LLP.

Given the huge number of U.S. employers eligible to enter, AARP and SHRM would like to see many more applicants. "Companies are not coming to grips with the reality of the aging of the workforce," Banda says. She suspects the detailed application and time commitment may discourage some organizations, especially first-timers, from participating. In subsequent years, employers have the groundwork in place and data are easier to produce.

Older Workers and Unemployment

Throughout the recession, the U.S. unemployment rate for older workers was lower than the overall rate. They continue, however, to make up a larger percentage of the long-term unemployed. In March, the average duration of unemployment for people age 55 and older was 50.2 weeks, compared with 36.9 weeks for those younger than 55.

In addition, older workers accept steeper cuts in pay when they do get hired. For example, a U.S. Government Accountability Office report found that 70 percent of workers age 55 and older who were laid off in 2007-09 found new jobs at less pay compared with 53 percent of workers ages 25 to 54.

Out-of-work seniors make up a small part of the overall labor force—about 2 million people in 2012. But being in that category can be devastating, says Rutgers University professor Carl Van Horn. “They were in the last years of their prime earning years and hoped for a good retirement. Now their resources are depleted. People who had little started using their resources to pay the bills. They didn’t keep money in the stock market waiting for a recovery. They started selling what they had, got a second mortgage on their home.”

Overall, Americans in their 50s and early 60s—those who are near retirement but without access to Medicare and Social Security—lost the most earning power of any age group. Their average household incomes are still 10 percent below what they were when the recovery began three years ago, according to Sentier Research.

Wellesley College economists found that people who lost their jobs in the few years before becoming eligible for Social Security reduced their life expectancy by up to three years, largely because they no longer had access to health care.

Thirty-seven percent of older workers who lost their jobs in 2008-11 and did not return to work ended up filing early for Social Security when they turned 62. By not waiting, they stand to lose substantial amounts during the remainder of their lives: Early filers receive about 25 percent less than those who wait until age 66.

"It wasn’t hard," says Carolyn Hatt, employment manager at Swarthmore College. "It was about one week’s work."

At the National Institutes of Health (NIH), Philip Lenowitz, deputy director of the Office of Human Resources, delegated the task to an intern.

"It’s a mystery to us why others don’t compete," says Dale Sweere, HR director at Stanley Consultants, an engineering services company in Muscatine, Iowa, with 1,000 employees. "The designation gives us an advantage in recruitment. We target seasoned individuals with 20, 25 or 30 years’ experience."

Employers that don’t apply "are missing out on access to a huge labor pool," says Lenowitz, who provides HR services to 19,000 employees.

"The branding is invaluable," adds Mike Bennett, SPHR, vice president of HR at Cianbro Corp. in Pittsfield, Maine. The employee-owned contractor has 4,000 workers. "It shows we care about our people."

The honor similarly helps Securian Financial Group in St. Paul, Minn., advertise its commitment to older workers. "It makes our employees proud to work here," says Kathleen Pinkett, SPHR, senior vice president of human resources and corporate services for the 2,468-employee company. "Our turnover rate is only 5 percent compared to 18 percent in the insurance industry overall. Employee enthusiasm also shows in the referrals they make for open jobs. Forty-five percent of our new hires come from them."

Benchmarking was one of the reasons Swarthmore chose to participate. "We wanted to see what others are doing to see what might make us more attractive," says Pamela Prescod-Caesar, vice president for human resources. Forty-eight percent of her 1,000-person workforce is age 50 or older; 200 are faculty members.

Older workers serve as mentors, historians and knowledge-transfer agents. They also make excellent cross-generational role models. "The maturity and work ethic that they bring cascades," Prescod-Caesar says.

They are loyal—with the highest retention rate of all age groups. More than 77 percent of the respondents to the AARP/SHRM survey said they planned to remain in their current jobs until they stop working completely.

They score high on satisfaction surveys. "As you age, you get wiser and begin to understand the context of life," says Karen Mathews, director of WorkLife Services at Marietta, Ga.-based WellStar Health System, which made AARP’s 2013 best employers list. By 50, "Your expectations adjust appropriately."

Mathews adds that workers hone their critical-thinking skills over time. "The more experience someone has, the more valuable they are to us and our clients," Sweere adds.

Yet misconceptions abound about older workers. Experts claim employers’ reluctance to give older workers a chance may be based on factual inaccuracies. The following are among frequently cited concerns:

Higher health care costs. Employers are hesitant to hire older people because they fear higher health care costs. National data show that older workers have more health problems and are more likely to be on Social Security disability benefits. For example, The Health Care Cost Institute reports that U.S. health care expenditures per capita for 2011 were $8,776 for workers ages 55 to 64, compared with $5,927 for those ages 45 to 55.

A number of winners of the 2013 Best Employers for Workers Over 50 awards point out that older workers tend to be healthier than unemployed people in that age group. They say the costs are worth it on balance or that older workers really don’t cost more.

Someone who is working at age 70 is bound to be active and healthy, observes Patricia Carroll, SPHR, CEBS, senior director of benefits and corporate development at Solix Inc. in Parsippany, N.J. "When we analyze our costs and look at the real drivers, older workers are not costing more," Carroll says. The 382-employeecompany screens for benefits eligibility and processes claims. Thirty-nine percent of the employees are over age 50.

At WellStar, which has 12,000 employees,costs for older workers "are offset by the costs of the healthy," Mathews says.

Stanley Consultants reports lower health care costs for older workers. "Our 30-to-45 age cohort costs us more than the 60 and above," Sweere says. "Children, family and medical conditions are significant drivers."

More discrimination claims and litigation. In 2012, of more than 50 million workers age 50 and older, about 23,000 filed EEOC claims—that’s only 0.05 percent of older workers.

When people aren’t producing at Solix, a progressive-discipline policy is followed. "We give them a performance improvement plan," Carroll says. "If they still don’t measure up, we ask them to leave, and [we] pay severance. Everyone has a case now and then, but we’ve had very few. When it’s happened, we’ve never lost."

Little return on investment. Winners of the 2013 Best Employers for Workers Over 50 awards say the return on investment from older workers contributes to the companies’ top standings in their industries. Their older workers are loyal and remain with the company longer than younger workers. They also have lower absentee rates.

At Stanley Consultants, where the oldest employee is 79 and 30 percent of workers are over age 50, the average tenure of 12 years makes the company the retention leader among competitors.

Last year, WellStar, where 32 percent of workers are over age 50, had an operating margin of 6 percent, a top-tier score of nonprofit performance.

Worsening performance. Studies show that the falloff in performance in most jobs is minimal and that when some abilities decline, older workers compensate with counterbalancing ones that enable them to continue to perform at high levels. Like younger workers, some falter, but breakdowns are case-specific.

"People change as they get older; they gain knowledge and experience but may slow down in terms of energy," concludes Dr. William Gahl, clinical director at the National Human Genome Research Institute, which is part of NIH. "For every employee, there’s a balancing point that determines whether it’s worthwhile for him or her to be here. We deal with these situations in an ad hoc way—no matter the person’s age."

Robert J. Grossman, a contributing editor of HR Magazine, is a lawyer and a professor of management studies at Marist College in Poughkeepsie, N.Y.


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