There are a number of persistent myths and negative stereotypes that surround older workers. Among them are the misconceptions that older workers are less engaged and less productive, much more expensive in terms of healthcare costs, and unwilling to learn new skills, especially technology-related ones. But there’s a new narrative of aging in America. People are not only living longer; they are remaining healthier and more active along the way, and bring valuable skills and experience when they stay in the workforce.
One especially pernicious misconception is that employees who ‘fail to retire on time’ can cost an employer as much as $50,000 for every year the employee continues to work. That estimate is based solely on actuarial data, and has no real-world evidence to support it. In fact, while the costs associated with workers over 50 do tend to increase somewhat with age (particularly healthcare costs), the impact on the employer is minimal. According to Aon Hewitt and AARP, recent trends in compensation and benefits have reduced the relationship between age and labor costs to the point where age is not a significant factor in the costs of hiring and retaining workers.
While the rapid increases in healthcare costs continue to make headlines, the share of large employers’ annual rewards costs—wages and salaries plus benefits plus any additional compensation—allocated to employee benefits has remained similar over time, while continuing to be the biggest drivers of labor costs. Based on an analysis of compensation data maintained by Aon Hewitt, AARP has concluded that cash compensation, healthcare, retirement, and paid time off benefits comprise 98% of total compensation costs in large U.S. companies.
Their analysis goes on to show that compensation packages have evolved toward a more age-neutral distribution of rewards costs for three reasons. One is that 90% of large companies now use performance-based compensation rather than compensation based on the length of employment. Instead of pensions, defined contribution plans have largely replaced defined benefit plans, and are not specifically tied to age or length of employment. And healthcare costs have risen more slowly for workers over 50 (4-6%) compared to younger workers (7-8%). This slower pace of increases for older workers is shrinking the effect of age on employer-paid healthcare costs. Combined, the three trends listed here have weakened the relationship between age and labor costs. The result is that an experienced professional age 50+ doesn’t automatically cost more than a younger employee.
Older workers offer other advantages as well. Employees over 50 have been demonstrated to be the most engaged generation, averaging 65% compared to 60% for younger workers in an Aon Hewitt survey. In the same study, researchers noted that even small increases in the level of engagement have large implications for business results: a 5% increase in engagement can increase revenue growth by 3%. For a Fortune 1000 company with $5 billion in revenue, a 5% increase in employee engagement equals a $150 million revenue increase. In addition, a 2016 SHRM survey of HR professionals cites several advantages of older workers, including greater professionalism, a stronger work ethic, greater reliability, and lower unplanned turnover, the latter of which helps reduce employers’ costs. Their experience, knowledge, and quick decision-making skills are additional advantages that can offset any small increase in healthcare costs.
Despite the image portrayed in popular media of the older office worker who can’t figure out how to send a tweet, a recent survey by Dropbox showed that workers over 55 used 4.9 forms of technology per week, compared to the overall average of 4.7 per week. Only 13% of respondents aged 55 and older reported having trouble working with multiple devices, compared to 37% of 18-to-34-year olds. Yet the younger cohort is more likely (59%) to assume that older workers are slow to adopt technology skills.
“It’s dangerous for companies to assume that if you’re under 35, you’re tech savvy,” says executive coach Paul Bernard, in an article published in TechRepublic. “In many cases, I’ve seen that many older people are able to combine tech-savvy with communication skills—almost without exception, it’s easier for older workers to pick up more tech skills than younger workers, who are tech savvy, to pick up communication skills.”
In addition to being productive employees, seniors are also driving the economy. In 2015, for example, people over the age of 50 made up 35% of the US population, but contributed 43% of the total Gross Domestic Product (GDP), and spent $750 billion more than those under 50. Living longer while remaining healthier means that for many people, retirement can be a new chapter in their life. People over 55 who have the financial resources to do so are starting businesses at record rates, often in response to workplace age discrimination, to give back to their community and to pursue a passion doing something they enjoy.