Senior Client Partner, Global Human Resources Center of Excellence
Staying On: Why Workers Aren’t Retiring
On the surface, it’s not news that sets off alarm bells at organizations across the country: the giant asset manager Fidelity says the percentage of its clients able to cover their retirement expenses has declined by five percentage points since before the pandemic started, to 78%.
But that stat, combined with the fact that the percentage of older Americans staying in the workforce has gradually been rising for months, is causing some consternation among corporate leaders—just as many of them are contemplating rounds of cost cutting. Many organizations have been expecting their older workforce to thin out naturally; now it looks as if an increasing number of those employees are going to stick around. “You’re in a little bit of a box if the performance of the older workers is good,” says Ron Porter, leader in Korn Ferry’s Global Human Resources Center of Expertise.
It’s a far cry from the start of the pandemic, when many companies were thrilled if their older workers wanted to stick around. “People wanted business continuity, and we wanted seniors there for continuity,” says David Vied, a Korn Ferry senior client partner and leader of the firm’s Medical Devices and Diagnostics practice. Companies in all industries grew significantly in 2021 and 2022, so those workers proved to be essential.
But today, as more companies cut costs or restructure, they’re facing a two-pronged problem. Firstly, older workers tend to be the most expensive employees. Secondly, they often block younger leadership candidates from prime roles. “The quantity of qualified candidates exceeds the quantity of opportunities,” Vied says.
During the pandemic, many older Americans decided they’d had enough of working. The labor-participation rate for people aged 65 and older fell from 26% in early 2020 to below 23% by July 2021. But that figure, which began rising late last year, was near 24% last month. One percentage point might not seem like much, but—given how numerous baby boomers are in the workforce—it means that tens of thousands of people are still drawing a paycheck.
Inflation and other money worries are even making some retirees consider returning to the workforce. Roughly one in six retired Americans say they are mulling over whether to get a job, according to a recent study from Paychex. A little more than half cite “needing more money” as a big reason.
For organizations, it’s a difficult issue to address head-on, because older Americans are a legally protected group. Age discrimination is one of the easier bias cases to prove, Porter says. This means that companies that need to cut jobs are aiming instead at middle-aged workers or younger. “They’re leaving that older cohort alone right now and hoping that it resolves itself,” Vied says.
But experts point out that certain proactive options could both trim expenses and free up roles for younger employees—without the risk of age-discrimination lawsuits. Buyouts are always an option, although they can be expensive. Employers can also help their older workers transition to another job, or even career, much in the way that they would offer outplacement services to laid-off workers.
Another possibility: Companies can create what Andrés Tapia, Korn Ferry’s global strategist for diversity, equity, and inclusion, calls a “legacy track”—a pre-retirement phase in the corporate life cycle. Older executives and other employees who want to continue working can shift into the passenger seat, where they can continue overseeing important duties and providing guidance while also allowing younger professionals to move into leadership roles. They would have fewer hours but still draw some form of salary; hopefully, they would still derive purpose and meaning from their jobs. “Make sure people have a motivation to let go without having to step off,” Tapia says.
For more information, contact Korn Ferry’s Human Resources practice.