1. Work requirements are changing faster than ever
As organisations are continuously adapting to many significant and transformational forces that are constantly reshaping the very competitive business landscape, individuals must also transform and prepare themselves for these unknowns and uncertainties.
Employees can no longer ignore the need for lifelong learning as they respond to changing work and business requirements. People want to access education opportunities at different stages of their lives and careers, in different personal and professional circumstances.
2. Living in times of low productivity growth
According to Axios, “there’s a broad consensus among economists that the central problem facing the US economy today is low productivity growth. It explains both slow-growing wages and the exploding costs of housing, healthcare, and education … No one knows with certainty why productivity growth has been slow since the 1970s.”
Since 2000, the Organization for Economic Co-operation and Development observed that productivity growth has declined or slowed d in many advanced countries. It has been particularly pronounced since the global financial crisis.
If economists can’t tell us with certainty the reasons for low productivity or economic growth, then we have a problem. We are living in a time when there’s so much economic uncertainty that we need to understand what it means for us. There certainly will be impacts on our finances and financial freedom.
In effect, employees will become more vulnerable when there’s economic uncertainty. They become stressed out. They worry about the future.
Pew Research found that Americans expressed widespread concern about the impact of emerging automation technologies. They are roughly twice as likely to express worry (72%) than enthusiasm (33%) about a future in which robots and computers can do many jobs that are currently done by humans.
By understanding this potential impact, we can reduce the level of stress and worry.
3. A significant impact of an aging population
The US Census Bureau stated that people aged 80 and older are expected to more than triple between 2015 and 2050. This aging population is expected to grow from 126.5 million to 446.6 million. In some Asian and Latin American countries, it is predicted to quadruple by 2050.
By 2030, McKinsey predicted that there will be at least 300 million more people aged 65 years and older than there were in 2014.
The biggest force powering the decades-long expansion of labor pools was the entry of the baby boomer generation into the workforce. Baby boomers powered worldwide labor force growth in the 1970s and 1980s, but this is slowing.
As people age, their spending patterns will shift with a pronounced increase in spending on healthcare and other personal services. This will create a significant new demand for a range of healthcare occupations. This includes not only doctors, nurses, and health technicians but also home-health aides, personal care aides, and nursing assistants in many countries. McKinsey estimated that healthcare and related jobs could grow anywhere from 50 million to 85 million by 2030.
As people get older, they consume less. Postwar consumption will be reversed. Industries will be cutting back on their production because consumer demand from Baby Boomers will be decreasing over time.
The impact of an aging population should not be underestimated. Regardless of which generation we belong to, the impact of mass retirement by Baby Boomers will have profound impacts on productivity and economic growth, both of which are required to sustain long-term employment for workers.
Countries like Australia are trying to overcome an aging population through higher immigration of younger people. It requires more immigrants with associated negative impacts on economic and social infrastructure, congestion, housing affordability, and the environment.
From a tax perspective, governments will receive reduced tax revenues from higher-paid Baby Boomers as they retire from the workforce. Baby Boomers generally have higher salaries when compared with Millennials or Generation Ys.
When taxation revenues fall, governments are forced to borrow more to fund their welfare schemes to pay retired Baby Boomers who become eligible for social security, aged pension or welfare payments. This diverts much-needed productive investment dollars to non-economic producing activities.
4. The workforce is shrinking — except for 55+ workers
It is reported by Bloomberg that by 2024 nearly one-quarter of the workforce is projected to be 55 or older. This is more than double the percentage in 1994. The fastest-growing segment of this workforce will continue to grow in the foreseeable future.
As Baby Boomers continue to head into retirement in bigger numbers, the overall workforce will be shrinking significantly. Pew Research found that the percentage of Americans who are actively looking for work or employed shrank from 66% ten years ago to 62.7% today.
The percentage of the labor force aged 55 and up has increased over the same period from 17.6% to 22.8%. This may well be a positive trend for older workers as employers are more willing to hire them. This may make it easier for them to delay retirement or continue to work part-time in retirement.
5. Unemployment lasts longer for employees
Unemployment occurs when we are out of work, actively looked for work during the past four weeks, and currently available to start working.
According to Pew Research, the average length of time that workers spend unemployed has gone up. The percentage of unemployed workers who have been out of work for a year or more has nearly doubled from 9.1% in 2007 to 16.5% in 2017. The number of workers who have simply given up on finding a job, though they aren’t officially counted as unemployed, has shot up from 363,000 to 524,000 over the past decade.
Even if workers are safely employed today, it’s important to take precautions against unemployment, given how long workers tend to be out of work. Indeed, the average reported the length of unemployment was 26 weeks as of October 2017. It is certainly a long time to live without a paycheck. That’s why it is so important to have emergency savings account with enough money in it to pay for at least six months’ worth of expenses. Such an account can be a lifesaver if your job suddenly disappears.
6. Social security and pension funds don’t have money
The US Social Policy Institute found that social security, aged pension or welfare payments are lifelines for many retirees. Social Security keeps nearly 27 million Americans above the poverty threshold. Nearly 40 million retired Americans receive an average of $1,335 a month from the social security program.
It is no surprise then that by 2034, the US Social Security Trust Fund is predicted to run out of money. Without reform, welfare benefits will need to be cut by 23% in 2033, according to the Social Security Administration. In other words, after the depletion of reserves, continuing income tax revenues are expected to only be sufficient to pay for 77% of scheduled benefits in 2033.
One solution is to reduce or cut benefits. Other solutions include raising the retirement age to shore up the welfare program or to increase taxes to bring in more revenue.
With cuts to company tax rates and the retirement of Baby Boomers in large numbers, governments will find it difficult to balance their books without relying on financial borrowing soon. Future generations will be burdened to pay off these liability borrowings. It is then a question of fairness.
According to Gallup, if the Social Security system is not fixed, many of today’s employees will be in for a shock. This problem will be replicated in many countries.
7. Organisational restructures disadvantaged workers
Organisational restructures, mergers, and acquisitions will become more common as organisations adapt to the environment of low productivity growth and intense business competition.
These companies restructure to save money or reduce expenses (especially payroll or salary costs) to gain more profitability for their shareholders.
As these restructurings become more prevalent, workers will naturally become more insecure about their jobs, incomes, and employment. They will worry more about job security and future income. Unfortunately, workers do not have control over these external activities that will impact their income.
Here are some recent restructure we have read about in the news.
The Star reported that because Coca-Cola’s sales declined, it will restructure the business and cut 1,200 jobs to reduce costs.
It was reported by Nasdaq that Hewlett Packard Enterprise plans to slash 5,000 jobs or almost 10% of its workforce in a desperate bid to contain costs.
According to BioPharma, Genocea plans to lay off 40% of its workforce to save around $6.5 million a year.
It is reported by FierceBiotech that Alexion is slashing its workforce by around 20% in a bid to save $250 million a year.
With the speed of digitisation, organisations that don’t reinvent themselves quickly and constantly will not last long. Take for example Kodak, Blockbuster, Blackberry, and Nokia.
8. Employees pay the price for poor management decisions
Organisations terminate or retrench excess employees just to save money and make their business bottom-line look good to investors or shareholders.
However, it is the management’s decision in the first place that has resulted in the hiring of additional people and having poor workforce planning.
Consequently, employees will have to pay the price for poor management decisions. They must sacrifice their jobs and incomes while the CEO is still employed!
9. Age discrimination occurs in workplaces
It was reported by the Sydney Morning Herald that discrimination against older workers will intensify in the coming years as three powerful trends collide: a weaker-than-expected economy, automation of more jobs, and an aging population.
According to CV Library, a staggering 70.8% of U.K. employees have revealed that age discrimination is common in their workplace, rising to 85.3% amongst those aged 55 to 64.
In Australia, Nestegg reported that people as young as 45 have been subjected to ageism in the workplace and 28% have experienced discrimination. They experienced “less favorable treatment” at work or had difficulty finding work due to their age.
Age discrimination is very real in workplaces. It will become more prevalent as organisations search for ways to cut costs in the coming years through organisational restructures and mergers and acquisitions.
The unfortunate reality for many older workers is that they aren’t considered a lucrative or favorable hire. Even though age discrimination is illegal, the above 55-year-olds can’t seem to get their feet back in the door.
While the overall US unemployment rate is expected to hover around 4% in 2018, Fortune reported that the unemployment rate for 55 to 64-year-olds is predicted to be much higher at 12%.
Job security will no longer exist. Older workers will be more at risk.
Whether we like it or not, the Australian Human Rights Commission noted that workers will increasingly face four types of age discrimination as they get older:
(1) Unable to get an interview or secure a job.
(2) Becoming stuck or constrained in their job.
(3) Being targeted for redundancy or restructure.
(4) Subject to discriminatory culture or management.
When organisations must prioritise who will be the first to leave, the obvious choice will be the ones who are paid the highest. This will inevitably include older workers who have worked hard to move up the corporate ladder. As they move up the corporate ladder, they are paid more.
Here are some concerns from older employees.
“Older women are often the first out of the door when an organisation restructure. Strangely, none of the men in my team were let go when I was made redundant for the first time, at 53, from a senior management position in a heritage organisation undergoing public sector cuts.” (DailyMail)
“But it turns out the labor market views people in their mid-40s as old because when we start to work, we plan on a wage increase. And that’s not a bad plan, from 25 to 30 to 40, you do see people getting wage increases. But this new Federal Reserve Bank study has shown that wages start to decrease after that … The Federal Reserve study has shown that wages stop increasing at about the age of 45. And so, from 45 to 55, wages decrease by 9%.”(PBS Newshour)
“I simply hadn’t realized that in the modern workplace, 50 is considered old. This is not a unique story. The tentacles of age discrimination reach into every facet of Australian society and nothing we are now doing is working.” (Sydney Morning Herald)
“I have become ‘overqualified’ for many jobs, ‘too experienced in a niche field’ for others, and ‘too old’ for younger team members to be comfortable working with, in almost all cases. In other words, it’s all over for me because I am of a certain age.” (Sydney Morning Herald)
10. Employees don’t physically function well over time
Let’s face it. As we get older, our bodies simply don’t function as well. In fact, the DailyMail reported that our brain, lungs, and skin start aging at 20, our muscles, hair, and bones start aging at 30, our heart, eyes, and teeth start aging at 40, our kidneys, hearing, gut, and prostate start aging at 50, our taste and smell start aging at 60, our bladder and voice start aging at 65, and our liver starts aging at 70.
When we do not perform well over time due to natural aging, the harsh reality is that employers will want to find someone younger who can perform at their peak. This natural selection process will inevitably mean that younger job seekers will always take preference over older workers. What’s more, they are cheaper too.
Older workers must stay fit and healthy to keep up with younger workers if they want to stay in employment longer.
Technically, employers cannot fire an employee for taking too much sick leave. They can only terminate an employee if they cannot fulfill the inherent requirements of the job. It is difficult to demonstrate whether a person can fulfill the inherent requirements of the position.