ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

Welcome to the latest edition of Leading Off. We hope you find our insights useful. Let us know what you think at Alex_Panas@McKinsey.com and Axel_Karlsson@McKinsey.com.

—Alex and Axel

Of late, leaders have paid much attention to Gen Z’s entrance into the workforce, seeking to learn more about their youngest employees’ attitudes and motivations. But the future of work is not just a youth movement. Massive demographic shifts, such as increasing longevity and tightening labor markets, are expected to result in a growing share of older employees in the workforce. To account for these shifts and maintain growth, organizations will need to develop new strategies to boost productivity and increase labor intensity. This week, we look at how leaders can address the challenges of an aging workforce as the population transforms.

AN IDEA

Prepare for the new reality

With fertility rates falling and people living longer, the world’s population is growing older—and changing the face of the workforce. The share of older people in the workforce will likely increase as the traditional working-age population (ages 15 to 64) shrinks, according to a McKinsey Global Institute report from McKinsey’s Anu Madgavkar, Chris Bradley, Olivia White, Sven Smit, and coauthors. Their analysis found that the first wave of this demographic shift is already occurring in advanced economies and China, where the share of working-age people is predicted to drop to 59 percent in 2050, compared with 67 percent today. The authors say that organizations should find ways to tailor their work practices to gain a competitive advantage. “With more older people in their workforces, businesses will need to adapt career planning, reorganize teams, encourage lifelong learning, and expand and adjust retraining programs,” they observe.

A BIG NUMBER

72%

That’s the percentage of older adults (those aged 55 and older) who report being employed and also in good or very good health, according to a McKinsey Health Institute survey of more than 21,000 older adults across 21 countries. By comparison, 65 percent of respondents who are not employed (but want to be) report being in good or very good health. McKinsey senior partner Hemant Ahlawat and coauthors note that participating in social activities—such as volunteering, engaging in community programs, and furthering their education—also aligns with better-perceived health in older adults.

A QUOTE

“As hard-to-do things get automated at a macro level, people should be able to work longer. Retirement won’t be driven by the body physically breaking down but rather by a desire to do something else.”

That’s McKinsey partner Bryan Hancock on how technology can help address worker shortages in skilled trades, such as carpentry, plumbing, and building. Workers in the United States are retiring later, in part because work is less physically demanding—but not in the skilled trades. In an episode of the McKinsey Talks Talent podcast, Hancock notes that automating some tasks can help reduce the physical toll on tradespeople and keep them on the job longer. At the same time, he says, employers will also need to help older workers feel engaged and find meaning in their work.

A SPOTLIGHT INTERVIEW

An aging society presents substantial opportunities for organizations, from both the workforce and consumer perspectives, in a phenomenon that London Business School economist Andrew J. Scott calls the “evergreen economy.” In an interview with the McKinsey Health Institute, Scott says leaders risk losing valuable talent if they focus too much on their younger workers. “I think firms are often blind to the experience and knowledge that older workers have,” he says. “It’s really important to think about how you [can] retain that human capital and find ways of doing so through more age-friendly jobs while also ensuring that the firm’s workforce can exploit the benefits of intergenerational diversity.” Scott also cautions companies not to assume that older consumers focus only on “care and decline” in their spending decisions. “That’s a belief hardwired into the concept of an aging society—that is to fundamentally misunderstand an enormous potential market with an ever-growing number of people who tend to have more money than younger people,” he says.

— Edited by Eric Quiñones, senior editor, New York

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