photo by Sally McCay

Retirement Realities
interview by Lee Griffin

Growing lifespans, shrinking finances —
a graying workforce poses hard questions for American society

Barbara McIntosh sits in her Kalkin Hall office surrounded by tomes and articles, all neatly organized and fingertip accessible. As the School of Business Administration professor warms to the subject she’s been researching for twenty-five years — employment and older workers — she reaches for one or another report to confirm the statistics she’s already quoted, accurately as usual. On the leading edge of the so-called baby boomer generation herself, McIntosh’s interest in what she describes as “the retirement boom about to explode” wraps the personal into the professional. Boomers (now 41 to 59 years old) are only one component of the issues surrounding retirement and increasing workforce participation. But with 76 million of them in the United States, their coming exit from the workforce, McIntosh says, will leave critical gaps in the labor force, even as their generation faces an uncertain “retirement.” McIntosh, chair of the National Older Worker Employment Partnership, part of the National Council on Aging, recently was appointed to the Leadership Council of NCOA. That and similar involvement in the field will continue in her own not-too-distant retirement. She notes: “People who plan for this life event are much happier. My own retirement will probably just become a more reasonable working life.”

Why do you call retirement the ‘R’ word?

I shortened it to just an initial simply because it doesn’t fit anymore. The word has the connotation of relaxing, pulling back, stopping what you’re doing, and that just doesn’t describe how older Americans behave today. We are continuing to work — if not paid work, volunteer work — and people are incredibly active. It’s what Dave Ekerdt, of the University of Kansas, calls the “busy ethic.” So many “retired” people tell me “I don’t know how I managed to work; there is so much going on. I am so busy.”

The real problem is that we’re not ready for the retirement boom about to explode. The dramatic confluence
of pressures on the state of the workforce includes baby boomers beginning to retire, the slippery down-slope of health benefits, and rising longevity, coupled with the desire or need of older workers to continue or return to work.

The middle baby boomer generation, you’ve said, is the “most dis-saving generation ever.” Couple that with findings by the 2001 Federal Reserve Board survey that “a typical worker 55 to 64 years old had $42,000 in his 401(k) and IRAs, about enough for an annuity payment of $200 a month.” What does that portend for retiring boomers?

Forty-two thousand is not going to stretch very far. Let’s look at the total financial support system, what we used to call the three-legged stool; you had Social Security, your pension, and your personal savings, your assets, etc.

First, Social Security — it’s certainly a critical political issue we are finally confronting. The last United States General Accounting Office report said we’d be dipping into the trust fund by 2017, and by 2047 we’d be out of money, unless something happens to the system. For 20 percent of older Americans, Social Security is 100 percent of their income; it’s 50 percent of income for 65 percent of older Americans. Clearly we’re going to have to do something. The oldest baby boomers will be able to take advantage of some Social Security benefits, but they might not be in place for the youngest boomers. That’s one leg of the stool, and it’s wobbly to say the least.

Pensions are the second leg. Only 50 percent of American workers are covered by pension plans. Most employers have moved from defined benefit, where you get a portion of your salary in retirement, to defined contribution pension plans, which means you have to set up and contribute to a private account that is portable. The changing structure has put many workers who are covered in a less secure financial position. This leg of the stool has been shortened.

And the third leg revolves around private savings issues: I read a couple of years ago that middle-income workers need approximately $2 million just to maintain their standard of living. This income group has so much to make up between what Social Security will cover and their standard of living that baby boomers will have to work. There simply is not the base to enable them to retire the way their parents did.

How is the current health care crisis going to affect retirements?

Health care is the other major pressure point. Double digit increases in costs are here and are going to continue for at least the next five years, if not beyond. In 2003, health care benefits accounted for 2.6 percent of the GDP. And that’s going to increase to 3.7 percent by 2010 and 7.7 percent of the GDP by 2035. The drug benefit cost under Medicare is projected to be $85 billion in 2006; by 2013, $161.8 billion. We weren’t supposed to dip into the Medicare trust fund until 2013; we’re dipping into it now. The fund will be exhausted by 2019. We will not have this hospital insurance plan for elders.

Health care coverage is a primary motivator for older workers to stay in or return to the workforce; but, as
the costs continue to rise, many employers are reducing their coverage or increasing the premiums. Of particular concern is the number of employers who are dropping retiree coverage.

When the Supreme Court made filing age discrimination suits easier, a lower federal court ruled that it is discriminatory toward older retirees for employers to pay more toward the health insurance of younger retirees
until Medicare kicks in at age 65. That’s going to play out in the courts.

How will the expected surge of boomer retirees affect the economy, the culture, and the workforce?

Economically, we will need to keep working, in all likelihood, and that makes sense. When Social Security was enacted, people lived only another few years in retirement. Now, if you live to be 60, you can expect to live into your mid-80s, and we all know people well into their 90s. We’re looking at 20 or 30 years in “retirement.” But that conflicts with remaining involved and contributing. We are living longer, healthier lives, and there is no reason not to work. The vast majority of boomers report they would like to work after retirement, but only part-time.

I think we can expect that most of us will keep working in more flexible work arrangements because of predicted labor shortages. According to the Bureau of Labor Statistics, the pool of workers ages 35 to 44 will shrink by 7 percent between 2002 and 2012. Employers will need to make a much greater effort to retain their older, experienced workers.

Culturally, we are changing dramatically. Psychologists talk about social cognition, how we interpret the environment around us and internalize those attitudes in terms of our own behaviors. For example, when I’m watching a marathon, I’m thinking, “My goodness, this person is almost half again as old as I am and they’re out there running.” We see examples of successful aging around us, and we change our view of ourselves and our roles.

Whether or not we continue to fight aging on the physical appearance front is going to be interesting. I suspect there are a lot of people who are going to say, “I’m not having a facelift. I like my gray hair, there are a lot of other people with gray hair, so who cares. A few wrinkles are interesting.”

Attitudes toward the balance of work and leisure seem to have changed with the boomer generation. How will that affect the labor supply?

We’re going through a transition period here, not only in terms of the role of work but also in what’s happening to compensation and leisure consumption. We older boomers have been attached to our toys, and a lot of that’s leisure related. We’re talking obviously about the middle class, but we have been very affluent.

Younger workers can expect to have seven to ten jobs and three different careers in their lifetime. Now, if you’re interrupting your jobs more frequently, you have the opportunity for more and extended leisure. At the same time, we’re going to have dramatic labor shortages. It will enable older workers to keep working, because their experience is going to be needed.

Working retirements seem to have arrived. Are employers reacting to that fact, and will the recent Supreme Court ruling on age discrimination in the workplace help to reshape their practices?

Eighty-two percent of Americans in the latest AARP study agreed there was age discrimination in the labor market; around 50 percent had personal experience with it — not getting the promotion, the training, the upgrading, not being challenged — basically being sidelined in their jobs.

Employers are going to have to change their practices in every area of human resource management. The recent Supreme Court ruling on age discrimination in the workforce will make the issue more visible. And, with the pressure of baby boomers demanding their rights, employers will not be able to engage in cookie-cutter practices. You can’t, for example, put everyone in the same room for computer training. Younger workers have grown up with computers and can intimidate older workers, who will take longer to grasp the training. Once they’ve got it, however, they usually work more error-free than younger workers.

Anecdotal evidence tells us, however, that older and younger workers get along very well. Employers should be looking at the use of mentors, in both directions, and promoting respect and supportive environments for all ages.

You’ve noted some areas in our workforce already seeing critical shortages, particularly nursing. What’s happening in that field?

I call nursing my canary in the coalmine, because what happens with this field is going to be predictive about what happens across many other occupations. In Vermont, there’s a 13 percent shortfall, pretty much the national average, and we are looking at a 20 percent shortfall in the next ten to 15 years — just when the oldest boomers are going to need more services. There’s a real bottleneck in the education system. Because we do not have enough PhD-qualified nurses to teach, there are schools around the country turning away the young women and men they’re actively recruiting.

In the research we’ve been doing with the Office of Nursing Workforce, we found that older nurses are more committed to their jobs and not dissatisfied overall. They still want to be nurses — and this is a critical occupation where hospital administrators and doctors can work on retention. Nurses deserve respect, and they report wanting challenging work and career change. Rather than losing them, we should work with 40-year-olds, helping them to explore their options within the setting or within the profession. One option is to help them transition into jobs in geriatrics, where there is a huge shortfall. We need to create part-time positions and stop putting them into double shifts. With the predicted shortages, we’ll be burning them out faster than ever if we don’t start changing our management practices.