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Extra costs of employing those 50 and older are ‘minimal,’ AARP study finds
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Workers who are age 50 or older are more engaged in their jobs than younger employees, while their employment causes “only minimal increases in labor costs,” according to a
new AARP study.
The AARP report, released in April 2015, comes as older workers are playing an increasing role in the workplace, but also as companies are under scrutiny for advertising jobs with language that suggests only younger people need apply.
Companies like Apple, Yahoo and Dropbox have advertised for “digital natives”—a term that some lawyers say is code for “young worker,” according to a May 2015
Fortune magazine article. In May 2015, a 64-year-old engineer filed an age-discrimination lawsuit against Google in federal court, seeking to form a class action of workers age 40 and over who allege they were denied a chance to work at the tech company because of their age.
“Older workers and younger workers both have a lot to offer employers, so we don’t see this survey as validating one group over another,” said Nancy LeaMond, executive vice president at AARP. “That said, when businesses talk about the value of hiring and retaining older workers, they often emphasize that this is a very loyal and committed cohort. It may be that, having spent years in the workforce, older workers are in jobs that are well-suited to their talents and have developed a sense of identity with their work and their employer.”
AARP’s original report on this topic was published in 2005. Following the multiyear recession, AARP wanted to examine what changes, if any, have affected the business case for older workers. It discovered, with the help of global services firm Aon Hewitt, that the business case for hiring and retaining workers age 50 and older has actually strengthened during the past decade.
The study analyzed the costs and value of older workers based largely on Aon Hewitt’s data on large organizations of 500 or more employees, which include thousands of employers and millions of U.S. workers. The report also relied on an extensive literature review and interviews with 18 large employers who provided anecdotal information about how they approach older workers.
More Older Workers
The U.S. Bureau of Labor Statistics forecasts that by 2016, one-third of the U.S. labor force will be in the 50-plus age category, compared with 27 percent in 2007, according to
January 2015 research by the Society for Human Resource Management (SHRM) and the SHRM Foundation. The AARP study asserted that by 2022, this group is projected to represent 35.4 percent of the workforce.
LeaMond said the reasons for this include improved longevity among older Americans and an increase in their retirement age. The latter, she said, could be attributed to financial setbacks from the recession and changes in employer benefits, such as the shift toward contribution retirement savings plans that place more of the burden for retirement financial security on the employee.
LeaMond said the study addresses what she called the misconception that older workers cost companies significantly more than younger workers. A 2006 Boston College Center for Retirement Research survey found that approximately 40 percent of employers viewed older workers as more costly than younger ones, she noted.
But the AARP study concluded that recruiting more workers age 50 or older only increase a company’s total annual labor costs by 1 percent or less, and that retaining them can increase those labor costs by 1 percent to 2 percent. The report pointed out that 90 percent of large employers now base pay in part on performance, rather than exclusively on tenure. In addition, in terms of retirement costs, only 22 percent of large companies now offer a defined benefit pension plan, down dramatically from 68 percent in 2004.
“This shows that the incremental costs of hiring and retaining more older workers are minimal and that most employers will find that the value of older workers far exceeds these incremental costs,” AARP said in a press release.
The report did find that employers’ health care costs for older workers are, on average, higher than for younger workers. However, these costs are growing more slowly for older workers; from 2003 to 2011, employer claims costs rose by 8 percent for workers ages 35-39, but by only 5.7 percent for workers ages 55-59.
Older Worker Engagement
The study found that 65 percent of workers age 55 and older are considered “engaged,” while 58 percent to 60 percent of younger workers are.
“Although the generational differences in engagement might not seem large, it takes only a 5 percent increase in engagement to achieve 3 percent incremental revenue growth,” the press release stated. “That translates into a large company with $5 billion in revenue achieving a $150 million revenue increase as a result of even a 5 percent engagement improvement.”
The study also examined the notion that older workers aren’t interested in—nor are adept at—learning new things, such as technology. Nearly 80 percent of older workers indicated that they would be interested in taking training related to computers and information or communication technology, the report found.
“The majority of [these] workers are interested in training opportunities to stay abreast of technological advances and do
not feel that they have trouble keeping up with the new technology needed for their job,” the press release said.
“Other advantages of workers ages 50 [and older] include their experience, professionalism, work ethic, lower turnover and knowledge. Although current and future financial needs are a top reason that employees stay in the workforce past age 50, psychological and social fulfillment also play a role.”
Dana Wilkie is an online editor/manager for SHRM.
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