Let's start with a sobering thought: According to the Bureau of Labor Statistics, nearly 50 percent of the United States workforce will become eligible for retirement by 2012.
Now, it's easy to read that and think about how far away 2012 is. And then you realize that 2012 is only three years away. It's been seven years since 9/11, but the memory is still fresh, current and topical. Imagine how quickly 2012 will actually be here.
Every company in the United States will face the reality that 50 percent of their entire employee base may retire. Not every available retiree will do so, but a funny thing happens to people when they have the option to leave. Suddenly, they have the ability to look at their current station in life and make a more credible decision about what, if anything, they should do for the rest of their lives. The ability to assess an “early” retirement (62), presents them with an entirely different outlook.
The current financial crash has certainly added a new variable into the early retirement equation, as many of those planning to retire have seen their nest eggs shrink. That has a big impact on Boomers, and on their dreams of early retirement. At this point, it may be more apt to suggest that the “boom” years for Boomer retirement may well peak in 2014, still only five years away.
Let's look at the broader implications. If 50 percent of the workforce retires, what is the impact to Social Security and Medicaid? With these programs already assumed to be under-funded, the tax burden on existing employees who must shoulder that surge of benefit recipients will be overwhelming.
The added load of employees within Social Security and Medicaid departments to simply handle and process claims would add significant labor expenses to the government. If we think we have budget deficits now, imagine what will happen when this surge starts.
The near-term loss of that tenured expertise is a profound brain drain. Unfortunately, Gen X, the generation immediately following the Boomers, has over 10 million fewer members who can step into the shoes of the Boomers. And in a lot of critical positions Generation Y may not have the experience to handle responsibilities of critical importance to most companies.
The cultural transition of our employment pool will change dramatically. As they assume more and more of the labor force, Gen Y'ers have shown a propensity to view work as a necessary means to enjoy life. They don't live to work; they work to live. The cultural changes in the older companies where work ethics were born from the Boomer and pre-World War II stalwarts will become obsolete. Competitiveness, in a macro-world perspective, will change. The United States currently ranks 17th in the world in total graduates in science and engineering degrees. China and India, with huge, developing middle classes and strong emphasis on science and engineering skills, will become even more competitive in the global business community.
How many companies have a detailed census of their employees and understand the potential risk to the company should their near-term retirees actually retire? U.S. companies will have to develop detailed bench-strength development plans, with stepped-up coaching and mentoring plans to assure a steady succession of talent to replace the potential flight of their emerging retirees. We see very, very little “bench” recruitment activities within our clients. Is two-to-three years enough time to accomplish this plan? I doubt it, but I would not wait any longer to initiate it.
The surge of retirees has already begun to redefine retirement. With a fair amount of affluence and newly found free time, retirees will add a significant boost to industries that cater to their needs: travel, hospitality, upscale retirement homes, second and third homes, entertainment venues and assisted-living environments.
And for our industry, which has historically not been a highly ranked destination industry for college graduates, the talent is already very thin. With the added loss of the tenured work force, the need to replace retiring employees will have an even more dramatic impact on the electrical business than on than more desirable industries like electronics, consumer products and software.
All in all, the fact that our labor force is rapidly withering is just that, a fact. The real issue is how the current senior executive staff at most companies will address the issue — proactively to ensure an easy transition, or reactively with concomitant stress to their companies. In this current economic market, with hiring freezes and head-count reductions, those companies that develop a plan to attract talent will have a rare chance to find quality people, without having to offer some of the special considerations common during the past few years, such as extravagant signing bonuses, significant increases in earnings or special exceptions to company policy.
My company's clients range from very large companies to small firms. We've found the mid-size companies tend to become far more proactive in economic times like these. They add star employees, train “B” employees to become “A” players, add bench strength and attract talent from those companies that are downsizing.
The talent market has edged just slightly toward a buyer's market. That won't last long as those Boomers march into the sunset.
Ted Konnerth is president/CEO of Egret Consulting Group, Mundelein, Ill., a retained search firm with specialties in electrical manufacturing, distribution, consulting services (architectural and engineering) and mergers and acquisitions consulting. Prior to founding Egret Consulting in 1999, Konnerth was with Cooper Industries. He was vice president of sales for 4.5 years for a $1 billion division of Cooper before starting his search firm. Contact info: (847) 307-7125; or e-mail: [email protected]; website: www.egretconsulting.com.