How does demographic change affect companies? Dr. Thomas Fent, an expert on population economics at the Vienna Institute of Demography, explains how companies can prepare for a radically different future labor market.
 | Dr. Thomas Fent, Demographer, Vienna Institute of Demography, Austrian Academy of Sciences"It is not very promising in the long run for a company to exclusively hire very young employees." (photo: Allianz) |
How will demographic change affect the labor market in western industrialized countries?
The proportion of persons of employable age will drop significantly. Furthermore, the number of young workers will steadily decrease, while the number of older workers will steadily increase.
How can companies prepare for this scenario?
Human resources managers will be forced to adopt creative strategies for recruiting as well as for further training. For instance, it is not very promising in the long run for a company to exclusively hire very young employees.
Why is it necessary to account for the age structure?
Employees’ physical and intellectual performance changes with age. A professional career is always linked to the employee’s biography. For example, in Austria salaries comply with the rule of seniority, and the future composition of staff will be based on the current age structure.
Does it make sense to invest into professional development up to old age?
Of course this not only makes sense, it is absolutely necessary! While physical performance reaches its climax at a relatively early age, intellectual performance comprises two components: fluid intelligence and crystallized intelligence.
What is meant by these terms?
Fluid intelligence is the ability to process new information quickly. Like physical performance it starts to decrease very early. Crystallized intelligence is based upon facts and rooted in experiences. It helps to maintain an overview in complex situations and to solve problems.
Moreover, fluid intelligence is essential for linguistic development and social competence such as is needed for leading teams or solving conflicts. Crystallized intelligence increases during employable age and reaches its climax at the end of a professional career.
So should a company focus on younger or older workers?
In many cases a mix of the strengths of the younger and the older workers is superior to an exclusively youth-focused age structure.
How does demographic change impact on individual career planning?
We have always viewed a successful career in terms of a steady advancement within the organizational hierarchy. Such career paths, however, cannot be kept up in the long run in an aging society.
A country with a growing population features a classical age pyramid: a wide base of many young people and much fewer old people at the summit. That also corresponds very well with the typical organization charts in hierarchically structured companies. In such a setting, one can hold out the prospect of a promotion to team leader, manager or head of department to young professionals.
If the age pyramid resembles the shape of a mushroom, as in an aging population, this is no longer possible. There will either be no free posts on the next level for the young, or because young professionals will still be needed at the level they have reached so far.
What will this mean for companies and workers?
At the age of 50 a worker will possibly still fulfill the same tasks as at the age of 20. For this reason companies will have to come up with new ideas on how to keep up workers’ motivation. One option is to differentiate between executive, expert, and project careers. In Austria, salaries are relatively low at the beginning of a career and increase significantly as the employee gets older. With an aging population it will be necessary to flatten out salary structures.
What dangers emerge from the currently prevailing rule of seniority?
It impedes the hiring of senior staff from outside. The high salaries of older workers are being cross-subsidized by younger employees. If the proportion of senior staff is increased, this in-house balance will not function anymore. Older workers are too expensive and will thus lose their jobs, while younger, underpaid employees will leave the company. If we retain the current salary structure, we increase labor costs significantly without any rise in productivity.
How can we ensure our employees will be fit in the long run?
Undertake detailed analysis of your manpower’s current age structure: a demographic inventory, a demographic outlook, and an anticipatory and sustainable human resources strategy.
The ideal of the young and dynamic team that is looking for new staff will stick in our minds for some time. If we insist on this schema, however, we will aggravate the competition for young employees. If businesses are prepared to align their staff with the demographic development, they can help to mitigate the competition for manpower.
What do these insights mean for the Human Resources Department?
Human resources managers who act strategically not only plan for the current demand but act with foresight and based on the principles of sustainability. Thus, it is not enough to rely on specific priority programs focusing on the requirements of older workers. All generations must be addressed in equal measure.
What else needs to be considered regarding generation management?
Generation management should be understood not as a project, but as a program. While a project has a start and an end date, generation management is an ongoing management and organizational system.
Businesses that prepare in due time for demographic change will gain a competitive advantage in the race for the best brains. In the process, the young and the old should be in the same boat, and row in the same direction. In this way companies stay on course for sustained success.
Editor: Manfred Rapolter
publishing date:August 20, 2009
Do you have something interesting to add? Write a comment and discuss this topic with other readers. Comments should be on-topic, non-commercial, and not contain abuse of any kind.
Comment Policy
