When retirement is not an option – tectonic shift in the workplace, take note John Key

New Zealand’s Prime Minister John Key refuses to engage with a tectonic shift with major implications – Peter Drucker, one of the great Management Thinkers of the last century, sums it up well.

“Politicians still promise to save the existing pensions system, but they—and their constituents—know perfectly well that in another 25 years people will have to keep working until their mid-70s, health permitting.”

OECD pensions expert Edward Whitehouse said New Zealand’s superannuation policy “stands out” from most other OECD countries. “There are 13 OECD countries going beyond 65: Australia, the United States, Britain and Ireland going to 68; Germany, Spain, Italy and Denmark are linking their pension ages to increases in life expectancy so we project that by 2050 they will have pension ages of 69. “All the other countries are moving upwards and New Zealand is staying at 65. It stands out a bit. More than half of OECD countries are increasing pension ages over the coming decades.”

“Today in New Zealand, for every four people in working age there will be one of pension age, three by the mid 2020s and only 2.4 in 2050.”

In April last year, Treasury warned about the perils of rising pension costs. GST would have to rise to 19 per cent, or personal taxes would have to increase by $30 a week from early next decade – or the Government could slash total spending by about 7.5 per cent from the early 2020s, Treasury deputy chief executive Gabriel Makhlouf told a Wellington audience.

New Zealand’s superannuation bill last year was $8.8 billion. Fastforward four years and this bill will be about $12.3b. Instead of tackling this big rock, the government chooses to focus on much smaller items of expenditure for savings and pledges that economic growth will cover the rising bill (and that’s without getting into the related massive increase in health costs owing to the ageing population). 

So how solid is the promise of economic growth to cover rising costs?

As Labour leader David Shearer pointed out in the Budget debate “The minister of finance promised in 2009 to deliver real GDP growth of 1.5 per cent over the last three years; he delivered 0.6 per cent,” Mr Shearer told Parliament. “In 2010 National projected real GDP growth of 3.1 per cent a year, and it delivered 1.3 per cent.”In 2011 National projected real GDP growth would rise to 4 per cent per year, and it delivered just 1.1 per cent.”

Latest update: subdued investment, slow growth in the working age population, and low labour productivity growth over the last few years have reduced New Zealand’s potential growth rate to about 1.2% a year, said the Reserve Bank in its June Monetary Policy Statement.

We can conclude the following:

1) The government refuses to take on the longer term big issues that need to be addressed sooner rather than later, and has effectively put its head in the sand on the issue of superannuation and an ageing population.

2) A classic example of one of our favourite sayings: “The Definition of Insanity is Doing the Same Thing and Expecting a Different Result!”

3) And “You can’t shrink your way to greatness!”

When Retirement Is Not an Option




Peter Drucker said that in the future, people will have to work well into their 70s. Here’s how the trend might play out. (Baby boomers, take note)

By Rick Wartzman

In 2001, in a series of essays for The Economist, Peter Drucker pointed to a demographic transformation unfolding across the developed world while, poetically, he found himself at the leading edge of the trend.

“The dominant factor in the Next Society will be something to which most people are only just beginning to pay attention: the rapid growth of the older population and the rapid shrinking of the younger generation,” Drucker asserted. “Politicians still promise to save the existing pensions system, but they—and their constituents—know perfectly well that in another 25 years people will have to keep working until their mid-70s, health permitting.”

At the time, Drucker was fast approaching his 92nd birthday and still writing, teaching, and consulting. Only the most blessed among us can hope to be going so strong at that age. But there’s no denying the general phenomenon that Drucker identified as well as the important implications it holds for those leading corporations and nonprofits alike.


Indeed, just last month, RAND, a nonprofit research institution in Santa Monica, Calif., issued a study showing that more and more Americans are delaying retirement. The study also predicted that this “tectonic shift” in the workplace is bound “to continue and even accelerate over the next two decades.”

After declining for more than a century, according to RAND, the number of older men and women in the workforce began to rise modestly during the 1990s. While about 17 percent of Americans aged 65 to 75 were employed in 1990, that figure is expected to rise to 25 percent this year. RAND believes the pattern will persist until at least 2030—longer than other experts have forecast.

For government policymakers trying to ensure the health of Social Security and Medicare, the ramifications of this swing are quite substantial. But individual enterprises need to pay close attention, too.

“Employing organizations—and by no means only businesses—should start as soon as possible to experiment with new work relationships with older people and especially with older knowledge workers,” Drucker wrote in his 1999 book, Management Challenges for the 21st Century. “The organization that first succeeds in attracting and holding knowledge workers past traditional retirement age, and makes them fully productive, will have a tremendous competitive advantage.”


To get there, Drucker said, employers must learn to be more flexible. As baby boomers hit their 50s and 60s, he suggested, many of them are likely to want to serve as part-timers and consultants or to take on special assignments. “New ways of working with people at arm’s length will increasingly become the central management issue” at many different organizations, Drucker wrote.

Compared with their younger colleagues, he added, older workers with sufficient education and talent “will have much more choice and will be able to combine traditional jobs, nonconventional jobs, and leisure in whatever proportion suits them best.”

Part of the reason this group now finds itself in such a strong position boils down to supply and demand. Another recent study, released by the MetLife Foundation and the San Francisco think tank Civic Ventures, predicts that over the next eight years there could be as many as 5 million job vacancies in the U.S.—and workers 55 and older will be crucial to closing the gap.

“Not only will there be jobs for … experienced workers to fill,” says Northeastern University economist Barry Bluestone, the study’s author, “but the nation will absolutely need older workers to step up and take them.”


Bluestone projects that nearly half the labor shortages (2.4 million jobs) will be in four fields: education, health care, government, and the nonprofit arena. All of these stand to provide what many baby boomers, in particular, are looking for: a chance not only to stay active but also to make a meaningful contribution.

More than a decade ago, Drucker spotted this growing desire among knowledge workers to achieve some social purpose during the second half of their lives. “These people have substantial skills,” Drucker wrote. “They know how to work. They need a community …. They need the income, too. But above all, they need the challenge.”

To help them along, Civic Ventures launched a program last year in which Silicon Valley executives are given fellowships at area nonprofits. The idea is not only to bring these organizations much-needed expertise in marketing, finance, and human resources, but also to have the executives prepare for their eventual transition to an “encore career” in the social sector.

The irony, of course, is that all this activity and insight by Civic Ventures and RAND comes amid a brutally weak job market, especially for those 55 and older. Last month, the Pew Fiscal Analysis Initiative reported that about 30 percent of those in this age bracket have been unemployed for a year or more. “Another generation of U.S. workers, at least significant numbers of them, [is] being forced into retirement sooner than expected and without ceremony, by the bust,” economics writer David Warsh noted earlier this week.

But smart organizations are aware that every bust is invariably followed by a boom. And the next one could well be a boom driven, in large part, by a bunch of aging boomers.

Rick Wartzman is the executive director of the Drucker Institute at Claremont Graduate University.

~Bloomberg Business Week, NZ Herald, Stuff.co.nz



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