AGEING WORKFORCE Issues for Government, Organisations and Individuals Pat McCarthy, Graduate School of Business RMIT University, 11 May 2006

The importance of demographic change lies in its impact on Australia’s GDP prospects. Growth in GDP is driven by three factors : population, participation and productivity (Australian National Treasury, 2003) NATIONAL WELL-BEING

Ageing will reduce global wealth- McKinsey forecast that household financial wealth in the world’s major economies will be roughly $31 trillion less in 20 years time than if historical trends had persisted

POPULATION PROJECTIONS AustraliaItalyJapan m57.5 m127 m m43 m109 m SOURCE:Population Div of Department of Economic and Social Affairs of United Nations Secretariat (2001)

PARTICIPATION IN THE WORKFORCE OF PEOPLE AUSTRALIA SWEDEN, SWITZERLAND, NORWAY 49%Averaged over 70% [1]OECD (2002) OECD Statistical and Analytical Information on Ageing, Summer 2000

 Skilled labour shortages increasingly critical - declining birth rate, low participation rate in work by people over 55 and poor skill currency  Current number of new workforce entrants each year - 175,000  Between average 12,500 per year Source: Access Economics

Australia faces potential shortfall of 195,000 workers over next 5 years….Centre for policy studies Monash University “ Workforce Tomorrow Report (2006)

Reserve Bank of Aust. Statement on Monetary Policy Feb ‘06 “Skilled and unskilled labour shortages are broad based and have become an increasing constraint on business growth”

Current shortages of skilled people Source: Kevin Chandler and Andrew Murrowood, Chandler MacLeod 1/3/ 04 Mining- engineers Apprentices/ tradespeople “ across the board from chefs, boilermakers, plumbers etc- have been leaving Victoria for booms in WA and Qld”. Accountants Finance and banking- extremely competitive- spiralling salaries Hospitality- casual people very difficult

Skilled Migration Migration intakes over recent years- 120,000 ( but >50,000 emigrated from Australia in ) “Widely acknowledged that population policies will have a limited role in maintaining and improving the living standards of Australian because migrants age like the rest of us and because other countries will be competing for migrants- Kevin Andrews” (20 Feb 06)

A Drake Study (1999) of 500 employers and HRMs found that they considered the optimum age for new management recruits to be: 62% %-in 40s 0%-in 50s Note: This situation is changing- RSA has been funded by government to encourage recruiters to avoid age based discrimination

 “Productivity declines little with age, and in many applications (notably work including intellectual skills) productivity may rise with age”  “Verbal intelligence remains the same or increases with age”  “The distribution of management and learning skills among active 65 year olds is more like the distribution among active, healthy 25 year olds” Research Contradicts Popular Beliefs About Older Workers

 “Chronological age is not a good predictor of the competence of the older adult”  “Work methods and strategies resulting from older person’s experience may so adequately compensate for any other age related limitations…. That their effectiveness is greater than it was in their earlier years” Research Contradicts Popular Beliefs About Older Workers

 “A review of case studies and anecdotal evidence concluded that the high variation of manual labour performance within age groups suggests that individual differences are much more important than age group differences. The need to evaluate potential on an individual basis, and not by age group has been convincingly established in these studies.” Research Contradicts Popular Beliefs About Older Workers References: Reid (1989), McNaught and Henderson (1990), Encel (1992) Salthouse (1994) and Waldman and Avolio (1986), Levic (1988) Access Economics (2001)

There appears to be a lot of pop culture around generational differences Today’s new managers (compared with managers 20 years earlier) are enthusiastic, aggressive, ambitious, and well trained: but some also tend to be brash, weak in human relations, and shy on team play and corporate loyalty » S.A.M Advanced Management Journal 1976

“My experience in Silicon Valley is that the older workers are their own cause of replacement to the extent they don’t update themselves. Ultimately, its their own career and they have to take responsibility for that. The bottom line is the individual has to pay the mortgage, not the firm.” Personal Communication Gary R. Oddou, Ph.D Department Head College of Business Utah State University