Flexible schedules and other changes may be needed to head off a national labor shortage

By Jonathan Peterson, Los Angeles Times

March 1, 2007

Javon R. Bea values the older employees at his network of medical facilities in Wisconsin and Illinois. To keep them on the job, he champions a program at his firm called Work to Retire that allows employees over 50 to put in fewer hours, pool jobs or work from home.

"I think the mature workers can actually relate to the patients better than our more impatient younger workers," Bea, president of Mercy Health System in Janesville, Wis., said at a U.S. Senate hearing Wednesday. "As a business we really think that we benefit, as well as the older workers benefit."

More employers need to follow Bea's example, according to testimony at the hearing of the Senate's special committee on aging.

A wave of retiring workers will weigh down economic growth in the coming years unless Americans save more and employers take steps to hang on to more of their older employees, experts said.

How the nation responds is a "critical question," said Donald L. Kohn, vice chairman of the Federal Reserve, warning that the costs could "fall entirely on future generations."

A study by Fed economists projected that economic growth would slip toward the 2% range after 2010, about a point lower than the rate of the last decade, largely the result of meager growth in the future labor force, Kohn testified.

Sen. Herb Kohl (D-Wis.), chairman of the aging panel, introduced legislation Wednesday that would give employers a tax credit for establishing flexible work schedules that enabled older employees to stay on the job without losing healthcare or pension benefits.

"We can't afford to wait until the retirement wave is upon us," Kohl said. "We must encourage businesses to adopt policies now to attract and retain older workers as they are confronted with the coming labor force shortage."

Soaring costs for Social Security and Medicare are commonly cited as the biggest economic worries arising from the retirement of 76 million baby boomers, the generation born between 1946 and 1964.

But on Wednesday, lawmakers focused on a different side of the topic — the toll all the retirements will take on the rest of the economy. The oldest of the post-World War II babies are now 61 and the rush to retirement will speed up dramatically in the next several years, draining population and skills from the workplace.

"We must find ways to help older Americans who want to remain in the labor force longer," said Sen. Gordon H. Smith (R-Ore.). The aging of the baby boom combined with longer life spans and lower birthrates, he maintained, amounted to a "demographic tsunami."

It remains uncertain whether boomers will cling to their working lives in sufficient numbers to alter the forecasts.

In surveys, many members of the generation have expressed the desire to postpone retirement, for reasons that include financial need and social engagement. At the same time, they may face obstacles such as rigid work schedules and restricted retirement benefits for those who continue to work.

Older workers are widely viewed as less technologically savvy than their younger counterparts, and many claim to have been victims of age discrimination.

But studies suggest these workers will become more crucial to the economy. Nationally, the number of workers aged 55 to 64 will soar by 48% in the next five years. In contrast, the group aged 20 to 24 will grow barely 1%, said Marcie Pitt-Catsouphes, co-director of the Center on Aging & Work/Workplace Flexibility at Boston College.

"But here is the rub," she said. "Only a minority of U.S. workers has the access to the flexible work options that they want and need."

Increasingly, advocates for older workers are urging an approach known as phased retirement, which would enable employees to scale down their working hours as they age without sacrificing the pension and health benefits they count on.

In addition to employer resistance, federal law can set barriers. For example, the law "generally precludes qualified retirement plans from making payments to current employees, effectively causing some older employees to retire completely" to get an early-retirement subsidy, a large lump sum or supplemental income, according to the American Benefits Council and the HR Policy Assn.

To start changing that picture, Kohl and other legislators proposed a range of measures. They include giving older workers more access to job training and COBRA supplemental health insurance, establishing a national clearinghouse for information on hiring and retaining older workers and the tax credit to encourage employers to offer flexible schedules.

"We need to begin a national discussion to change the way we think about retirement," Kohl said.

The Fed's Kohn cautioned that even with some success in getting older Americans to work longer, sluggish growth in the labor force could mean that gains in living standards wouldn't measure up to the past unless Americans began to save more.

"If people expect their recent gains to continue, they're going to be disappointed," Kohn said. "We need to take steps to share the burden."

Comptroller General David M. Walker said the nation's low savings rate might be addressed by requiring that a certain percentage of a worker's pay be deposited into a special savings account.

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jonathan.peterson@latimes.com

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