The European work pool is contracting as more employees near retirement age But new research shows that people do not necessarily want to stop working. Sue Copeman writes.

In the science fiction film Soylent Green, government euthanasia centres for the elderly are the solution to the problems of an over-populated and polluted New York of 2022. The film-makers of more than 30 years ago never envisaged that the real problem facing today's developed countries would be a slowing of growth in population, and that ageing citizens would be courted rather than condemned.

The predictions are worrying. According to the United Nations, the proportion of the global population that is aged over 60 will increase to one in five by 2050, from just one in 12 in 1950. The trend toward ageing is most pronounced in Europe, which by 2025 will have eight of the 10 oldest populations - that is, with the highest percentage of people above the age of 60 - of all the countries in the world with populations of at least 10 million people. By 2050, an estimated 35% of the European population will be over the age of 60. These demographic developments will result in a decline in the supply of labour in many advanced countries over the next 50 years. Estimates by Burniaux, Duval, and Jaumotte (2003) suggest that labour supply could drop by as much as 35% in Japan, 30% in Italy, and 17% in Germany.

Economic outlook

In September 2004, the IMF World Economic Outlook included a discussion on how ongoing demographic change will affect economic performance in the years ahead. 'Some argue that there is little reason to be concerned.

Ageing in the advanced countries has been under way for a considerable time, and has coincided with a period of strong income gains. Further, older people now lead healthier lives than at any time in the past, which allows them to continue to contribute to society well beyond the official age of retirement. Others see greater risks, including the possibility of slower economic growth, less innovation, financial market instability, and difficulties in funding overly generous public pension systems.'

What can be done to meet the economic challenges posed by demographic change? The IMF reviewed a range of strategies including:

- measures to boost labour force participation rates and labour supply, particularly among women and the elderly of both genders - including reforming pension systems and providing incentives.
- measures to ensure that these workers have the skills needed, and that there is no employment discrimination against them
- permitting more immigration
- raising the retirement age, although, on average, an increase of about seven years would be needed in the advanced countries to keep the share of the working-age population at its current level.

The IMF also stressed that policymakers will need to balance economic, political, and social considerations. For example, if advanced countries allow more immigration, it would help to cushion the effect of population aging, but would have social implications, including the need to integrate large numbers of migrants into society and the impact that immigration would have on population density.

The IMF, in common with other national and international bodies, takes this issue extremely seriously. However, there has been a significant omission in much of the discussion so far - an omission that was recently highlighted by Sir John Bond, chairman of HSBC. He pointed out that the debate had concentrated almost solely upon funding. 'Actuaries have struggled with the impact of surging life expectancy on the pension funds they advise, and governments have grappled with legislation born of a different time.

Yet little has been said about what we, as individuals, want from later life.

'By 2004, it had become obvious to us that the debate about funding pensions and healthcare provision, while vital, had overshadowed an appreciation of what people around the world are actually doing with longer, and often healthier, lives.'

The people's view

It was in a bid to find out what people actually want and how they are planning their later lives that HSBC commissioned what it claims is the world's most comprehensive study of global attitudes to ageing and retirement.

The Future of Retirement research examined attitudes towards ageing and retirement planning in the 10 societies which together contain half of the world's population. The report answers some important questions:

- Will traditional retirement patterns persist, or will they be replaced by new models?
- How do different cultures perceive older people, and how positive are they about age and retirement?
- What roles do people expect governments, employers and individuals to play in planning and funding retirement?
- How is the role of the family changing, and will older people be able to rely on family support?

The answers provide insights that should inform the decisions that governments and individuals take, and the social structures that develop. They also suggest that far-sighted employers have an opportunity to alter their approach and gain a significant long-term competitive advantage.

The research shows that what most societies have in common is that people tend to retire - and plan to retire - before the age at which they say old age typically begins. Increasingly, people have a second life after they retire from their main job, but before they believe themselves to be old.

Different countries and territories have different preferences about what they do with this second life: paradoxically, people in more affluent societies want to carry on working in retirement, even though they may have less financial need to. Meanwhile, those in less affluent countries are more likely to want to give up work when they retire.

Most people in most countries desire a balanced lifestyle that includes periods of work, leisure and education - or a blend of all three at once, with the proportions altering to take account of the interests and demands of the moment. This new model of retirement was considered to be the best answer in seven of the 10 countries and territories HSBC researched, with younger people being particularly likely to aspire to it.

All over the world, people seem to expect very little help in achieving their chosen lifestyle, and increasingly they feel themselves responsible for achieving it. And yet, throughout the world, this attitude is not supported by governments or employers. Their policies and strategies seldom accommodate this emerging model, and in many of the countries and territories HSBC researched, various laws and company policies require employees to retire at a particular age. Opinion is shifting, but for the moment this state of affairs still persists.

Of particular significance for employers is that the research shows that people throughout the world reject age-based restrictions on working, and are opposed to a mandatory retirement age, or any government or corporate rules preventing older people from working in retirement. Indeed, four out of five respondents said that people should be able to go on working to any age, and that employers should not fix a retirement age.

A majority of people in each of the countries and territories say they would work in retirement, ranging from 55% in Hong Kong to 95% in Mexico.

In many countries and territories - India in particular - people need to continue to work in later life simply to survive. Here, opposition to companies forcing workers to retire at a specific age has little to do with discontent with a model of retirement, because most people do not retire. Many still work in subsistence farming, and few have the kind of employers who force retirement, so their answers may not reflect a prospect with which they are unhappy - as it might in France, for example.

In the US and the UK, over 90% of respondents believe that employees should be able to go on working as long as they like, whereas in India and China just over 60% of people hold this view. In France, only 23% of people think that employers should be able to force employees to retire.

There was global agreement that if changes are needed to support the pressures of an ageing population, governments should increase the retirement age first, before raising taxes or reducing pensions. This suggests a worldwide awareness of the issues arising from ageing populations, and a concern that governments should address them.

Flexibility is key

The findings of this report show that many people want their retirements to include periods of work, education and leisure. Statistics show that people are living longer and staying healthier in their later years. The two facts combined suggest that employers who can forge new ways of working that fit the blended-retirement model will be the winners.

On the face of it, the demographic trends present gloomy reading for European companies. But the right strategic approach can turn the downside into opportunity. A company which demonstrates flexibility in the way it deals with its ageing workforce is sending out a very positive message.

- Sue Copeman is editor, StrategicRISK


HSBC commissioned the research from Age Wave and Harris Interactive.

Age Wave is America's leading analyst of the new maturing market and Harris Interactive is a market research firm that combines strategic consulting with investigation, analysis and application.The research involved 11,453 adults aged 18 and over in 10 countries and territories across four continents.

In the UK, the USA, France, Brazil, Mexico, Hong Kong and Canada, sample sizes were approximately 1,000. In Japan, India and China, sample sizes were greater than 1,400, ensuring that the results are statistically significant.


- THERE IS A NEW VISION OF LATER LIFE - Later life is increasingly seen as a time of opportunity and re-invention, rather than of rest and relaxation. All over the world, more people want their retirements to include periods of work, education and leisure. Traditional definitions of old age are increasingly considered outdated and are being redefined.
- WORLDWIDE, ATTITUDES TO AGEING AND TO OLDER PEOPLE VARY DRAMATICALLY - While ageism is common in large parts of the world, many people have very positive attitudes to older people.
- THERE IS A GLOBAL REJECTION OF A MANDATORY RETIREMENT AGE - Throughout the world, people believe that employees should be able to go on working to any age - so long as they are still capable of doing their jobs well. They consider that age-based restrictions hinder the active life that they want to lead in their later years.
- MORE PREPARATION IS NEEDED - Countries and territories vary greatly in how prepared they are for demographic changes, and everyone - employers, governments, financial service providers and individuals - could do more to adapt.
- THE ROLE OF THE FAMILY IS CHANGING - Future generations of older people may not receive the care and financial support they expect from their families. In many countries and territories, people consider it increasingly important to be self-reliant in later life.