Demographic changes are having a sweeping effect across the US economy. For a few sectors and industries, the changes are creating high-levels of age and retirement risks. These risks will impact not only the number of workers that companies have to attract but also the efficiency and effectiveness of those workers.
As of December, 2007, the US had 153 million workers. This figure includes both the employed and unemployed. Now, depending on your college economic professor, you’ll recall that an economy is composed of either three or five sectors. This analysis uses the less common, but more detailed, five sectors:
· Primary Sector. Produces raw materials and basic goods, such as: agriculture (both subsistence and commercial), mining, forestry.
· Secondary Sector. Manufactures finished goods, such as: automobiles, chemical and industries, energy utilities and construction.
· Tertiary Sector. Provides services, such as: retail sales, transportation and distribution, entertainment, restaurants, insurance, banking, healthcare, and law.
· Quaternary Sector. Provides intellectual services, such as: libraries, education, and information technology.
· Quinary Sector. Provides high-level analytics and decisions, including, science, universities, healthcare. The distribution of US workers using December 2007, by sector is:
- Primary: 2%
- Secondary: 20%
- Tertiary: 38%
- Quaternary: 17%
- Quinary: 23%
What you generally find is that countries with developing economies have a higher percentage of their workforce in Primary sector jobs. As a country’s economy matures, like the US, the percentage shift to other sectors with higher economic outputs.. Within each sector are specific industries, categorized by outcome or output. This analysis uses twenty-two industry classifications.
Age and Retirement Risks Overview
Changing demographics are creating higher levels of workforce age and retirement risks. These risks are a result of two trends: higher life expectancies and lower fertility rates. Age and retirement risks each reflect an aging workforce but generate different outcomes. Age risk is the potential productivity loss associated with an older worker while retirement risk is the potential loss of an employee. Comparing the two risks, retirement risks is more prevalent than age. Age risk really depends on a combination of the job and worker Without question, aging workers in some jobs will become less productive but the same aging worker in a different job could display an increase in productivity. While age risk is less certain and in some instances, difficult to measure, its threat is real.
This analysis established 55 years of age and older as the criterion for age and retirement risks. This criterion was applied to workforce demographic data to determine the workforce percentage that is 55 or older. This percentage reflects the workforce population with age and retirement risks. Here are the findings:
- Three of our five economic sectors are exposed to above average levels of age and retirement risks (Primary [25%], Quaternary [21%], Quinary [19%]). These sectors are responsible for raw materials, intellectual activities and analytics and decision making.
- The historical US workforce benchmark for 55 and older was 15%. The current US workforce benchmark is 18%.
The above average risks for three sectors are a function of age and retirements risks in key industries:
- The Primary sector is above average because of the Agricultural industry [27%]
- The Quaternary sector is above average because of the age and retirement risks with Educational Services [23%] and Public Administration [22%] industries.
- The Quinary sector is above average because of the age and retirements risks with the Healthcare & Social Assistance [20%] industry
While the Secondary and Tertiary sectors do not have age and retirement risks, each is composed of industries that do.
- The Secondary sector has one industry at risk: Utilities [18%]
- The Tertiary sector has four industries at risk: Real Estate [25%], Other Services [24%], Wholesale Trade[20%] and Transportation & Warehousing [20%]
All data used for this analysis is found in the attached table.
Here are some thoughts on what these sectors will need to do to address their talent crisis.
- Primary sector
- Agriculture. Growers will most likely continue to rely on automation and technology to continue reducing their dependence on workers
- Quaternary sector
- Education. Administrators have at least three interventions, including:
- Increased usage of internet based learning
- Demand reduction initiatives to reduce the number of teachers needed. For example, high school students will have more opportunities to test out of classes.
- Rural and urban schools will use video-conferencing so a single teacher can instruct multiple classrooms of students in different locations, simultaneously.
- Public Administration. Government Leaders will reply on automation and technology improvements to fill workforce gaps. When that fails, services will be reduced
- Quinary sector.
- Healthcare. Executives and Administrators will explore these options:
- Home healthcare services in South American (Mexico, Costa Rica) for US citizens
- Off-shore ambulatory care facilities and medical and diagnostics laboratories
- Social Assistance. Similar to Public Administration, when Administrators determine that automation and technology are not filling the workforce gaps, services will be reduced
Demographic changes are sweeping through the economy. While having less broccoli and soy patties might appear to some to be part of the solution, I don’t think most of us will view “less as more.” Sector and industry leaders will need to depend on more of their right-brain to invent new solutions to the aging phenomenon.
All data is courtesy of the Department of Labor, Bureau of Labor and Statistics
Filed under: Demographics, US Labor Market | Tagged: Demographic, Demographics, Eric Seubert, Labor, Labor Market, Workforce Planning | 2 Comments »