One a high demand for labor but the

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One of the major concerns of today’s companies is the shortage of labor,
especially in management. The baby boomers are nearing retirement age in the
United States and the birth rate is dropping. These circumstances, coupled with
the booming economy are the main causes of the labor shortage. There is a high
demand for labor but the once seemingly bottomless pool of employees and
managers that companies drew from has started to dry up. What are the factors
that contributed to the problem and how are today’s corporations going to handle
this problem? The type of labor needed in today’s society has been undergoing a
constant change. There is an increase in demand for workers but there is a much
greater demand for educated white-collar workers, especially management
material. Projections state that the growth in managerial positions will
increase 20% by the year 2010 yet the population aged 35-50 will decrease nearly
10%. What these figures say is the already diminishing supply of executives is
going to dwindle even more over the next 10 years. There is a shortage of
blue-collar workers now and there will also be an even greater shortage of them
in the future. In order for employers to find people who are willing to perform
unskilled, repetitive jobs they are going to have to be willing to raise the
level of compensation offered to employees. If McDonalds needs someone to flip
hamburgers they better be prepared to pay double to triple minimum wage. There
are a wide variety of employment opportunities and today’s workforce can afford
to be selective when choosing a job. The demand for employees is high while the
supply is low. The figures on the change in average population ages and growth
in industrialized nations is beginning to make the corporate world stand up and
take notice. If the trends continue as they have been for the past thirty years,
the shortage of labor is going to continually get worse with each year that
passes. The predictions from the United States Census Bureau state that between
1990 and 2000 the increase of the American population over 60 will be 10.5% but
in 2010 to 2020, the increase will be 32.5%. The change in the 60 plus
population in the United States is projected to nearly triple in thirty years.

Compare these figures to the increase in under sixty-year-old population. From
1990 to 2000, the increase in under sixty year olds will be 6.5% and it is
projected to drop to 2.8% by 2010. If you look at the changes in the workplace
you will see that the average age of an employee is steadily rising as the
average age of retirement continues to drop. The projected increase in 55-64
year olds in the workforce from 1996 to 2006 is a staggering 54%. The projected
change in the 25-34 year old bracket is -8.8%. These trends are not only true in
the United States. Japan is also going to be coping with similar problems. Today
the people over age 65 compose 16% of Japan’s population, but by the year 2020
it is projected that percentage will soar to 26.3%. Japan, just like the United
States is going to have to attempt to retain some of this group in the workforce
to compensate for the continually falling birthrate in their country. This
problem is very true in Europe too. Since 1995 Germany, France and Italy have
experienced a continual fall in working population ages 15-64. This trend is
projected to continue into the year 2000. Our aging population is also choosing
to retire much earlier than they once did. This is a factor contributing to the
strong economy we are enjoying now. The old are growing older, living longer and
they are healthier than ever. Breakthroughs in medicine have enabled people to
live much longer. The advancements our pharmaceutical companies research and
development departments have made are staggering. Diseases that once were a
death sentence are curable. Organs that are failing in the human body can be
replaced or rebuilt. There are even some types of cancer that are considered
curable. These things were not true twenty years ago. There also is a trend in
this country towards remaining healthy. Americans are taking much better care of
themselves; there is a genuine concern towards health. People are not smoking as
much as they did in previous decades and there is a trend towards exercise. We
take vitamins, we go out for a weekend run or bike ride and we are eating
healthier. All these factors contribute to a longer life expectancy and a rising
demand for products and services. Another major contributor was the big push in
the eighties, “out with the old, in with the new” school of thought,
forcing the older management and executives into early retirement has left the
companies of today in dire need of top caliber people. This coupled with the
fact that each year more and more baby boomers decide to retire early. The gains
the baby boomers stand to receive far outweigh the costs in most cases. Their
401k plans and stock options have sky rocketed in value because of the strong
economy we have been experiencing for nearly twenty years now. Today’s older
working population has the choice to continue working or retire because for the
most part, they are financially sound. Many are choosing the retirement option.

They no longer have to deal with the day-to-day grind, the high pressure and
rigorous schedules that are demanded of senior executives in today’s world. They
have worked hard for many years and now have the option to retire and enjoy the
remainder of their lives. It’s a choice that is hard to say no to. It’s a choice
that has proven to be very costly to today’s businesses. The companies of today
are rapidly losing their think pools. The older executives possess a great deal
of knowledge and diplomacy that is priceless to many organizations. These people
could be mentors to the future stars of the company but they can’t do that if
they are no longer employed in some capacity by their respective firm. What the
forward thinkers of today’s companies are trying to do is lure these valuable
assets into staying in the work force. In order to do that, human resource
departments must be very flexible with their offers. Some companies are offering
what they refer to as “dream jobs” to their execs who are considering
retirement. What a “dream job” consists of is the opportunity for the
‘would be retiree’ to work in whatever location and department of the
corporation they prefer, doing what they choose to do. They also are able to
work part time verses full time. This gives the person a new job and a fresh
outlook on work, which can be extremely beneficial to the individual while it
also allows the company to hold on to a key player in their organization.

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Employers are being forced to offer options similar to this because if they are
not available where a person is currently employed, they will choose an early
retirement and seek more flexible working conditions elsewhere. There are many
companies willing to be more flexible and understanding to the older executive’s
wants and needs in order to take advantage of their years of knowledge and
experience. Placing this category of employee in a position to guide and advise
the management of tomorrow, forming a stronger base and filling in some of the
gaps formed as people retire is very smart strategy. One example of how
companies are handling the situation is utilizing their aging managers as
consultants. Chevron became aware of the problem three years ago and this is an
example of how they have handled it. One of their well-respected executive
chemical engineers, Jesse Krider announced his retirement from Chevron but he
now works as a consultant overseas. This enables Chevron to hold on to his 30
plus years of expertise and allows Krider to see the world doing something he
enjoys. It is a mutually beneficial situation. Another solution is already up
and running at IBM in Belgium. IBM needed to cut lower labor costs and they
concentrated on offering an early retirement package to the 55-60 year olds.

What they did next was to set up another company called Skill Team and offered a
job to any of the former IBM employees affected by the forced retirement. The
rewards to the employee at Skill Team are working 58% of the time they worked
before for 88% of the last salary received at IBM. Skill Team offers its
services to IBM allowing IBM to maintain a fair percentage of its “think
pool” while the former big blue employees can ease their way into
retirement. A third example is corporations inviting the retired executives to
sit on the boards of their companies and subsidiaries. John Castle, chairman of
the leveraged-buyout firm Castle Harlen Inc, exercises this philosophy. He taps
into the resource of the retired executives by asking them to serve on the
boards of the companies his firm takes over. This arrangement is perfect for all
involved. The retiree is looking at a short-term commitment because Castle
Harlen usually sells off the companies it acquires in less than seven years and
Castle Harlen has the services of a qualified director without the worries of
what the director will do when they sell off or dissolve the company. These are
a few examples of the creative approach some of today’s companies are taking to
cope with the economic obstacles caused by an aging workforce. The companies of
today are aware of the constantly growing problem and are working towards a
solution. I think that they are moving in the right direction. Offering
flexibility in what was once a very rigid structured hierarchy is certainly a
step in the right direction. People in today’s world lead very different lives
than they did 4o years ago. A rewarding profession is not exclusively defined by
the income generated anymore, rewarding can also mean personally rewarding. A
good employee doesn’t necessarily work 40 hours each and every week, some work
part time or are involved in a job-sharing program. In order to keep the
workforce meeting the needs of the economy, the employer must continue to become
more flexible and remain open to suggestions. Today’s companies are on the right
track. I believe that with proper management and forward thinking, we will be
able to cope with the ever-increasing shortage of labor.

“Grey Dawn” by Peter Peterson Center for Strategic and
International Studies Newsweek magazine Business Week magazine The Economist
magazine St Petersburg Times Newspaper The United States Census Bureau

Categories: Management


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