Older Workers: Some Best Practices and Strategies for Engaging and Retaining Older Workers
Published: 2007-02-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: More Americans remaining in the workforce at older ages could lead to benefits at several levels. First, working longer will allow older workers to bolster their retirement savings. Second, hiring and retaining older workers will help employers deal with projected labor shortages. Third, older workers will contribute to economic growth and increase federal revenues, helping to defray some of the anticipated costs associated with increased claims on Social Security and Medicare. Despite all of these gains to be had, there are barriers to continued employment for older workers. In addition, some employers remain reluctant to engage and retain this group. It is in the nation's interest for people to work longer, which requires that barriers to continued work be removed sooner rather than later. This testimony highlights issues discussed at a recent forum GAO convened on engaging and retaining older workers, as well as prior GAO work. Forum participants included experts representing employers, business and union groups, advocates, researchers, actuaries, and federal agencies. These highlights do not necessarily represent the views of any one participant or the organizations that these participants represent, including GAO.
section_title: What GAO Found
paragraphs: Obstacles continue to exist for older workers seeking continued or new employment and for employers who want to attract or retain older workers. The following obstacles, best practices, lessons learned, and strategies to address some of these obstacles and promote work at older ages were discussed at a recent GAO forum on older workers. Key Obstacles: (1) Some employers' perceptions about the cost of hiring and retaining older workers are a key obstacle in older workers' continued employment. (2) Workplace age discrimination, the lack of suitable job opportunities, layoffs due to changes in the economy, as well as the need to keep skills up to date, are all challenges facing older workers. (3) Strong financial incentives for workers to retire as soon as possible and some jobs that are physically demanding or have inflexible schedules provide strong disincentives to continued work. Best Practices and Lessons Learned: (1) Use nontraditional recruiting techniques such as partnerships with national organizations that focus on older Americans. (2) Employ flexible work situations and adapt job designs to meet the preferences and physical constraints of older workers. (3) Offer the right mix of benefits and incentives to attract older workers such as tuition assistance, time off for elder care, employee discounts, and pension plans that allow retirees to return to work. (4) Provide employees with financial literacy skills to ensure they have a realistic plan to provide for retirement security. (5) Treat all employees in a fair and consistent manner and employ a consistent performance management system to prevent age discrimination complaints. Strategies: (1) Conduct a national campaign to help change the national mindset about work at older ages. (2) Hold a national discussion about what "old" is to help change the culture of retirement. (3) Create a clearinghouse of best recruiting, hiring, and retention practices for older workers. (4) Strengthen financial literacy education to help workers prepare to retire.(5) Make the federal government a model employer for the nation in how it recruits and retains older workers. (6) Create a key federal role in partnerships to implement these strategies. (7) Consider specific legislation or regulations to increase flexibility for employers and employees to create new employment models.

section_title: Letter
paragraphs: I am pleased to be here today to discuss how providing additional  opportunities and incentives for older workers to continue to contribute  their considerable skills and knowledge is vitally important to the well- being of both such individuals and our national economy. By the way,  while some people talk about “older workers,” I prefer to use the term  “seasoned workers” to reflect the skills and knowledge that these workers  have. But whatever term we use, more Americans remaining in the  workforce at older ages could lead to benefits at several levels. First,  working longer will allow older workers, many of whom are not  adequately prepared for retirement, to bolster their retirement savings.  Second, hiring and retaining older workers will help employers deal with  projected labor shortages in the future. Third, older workers will  contribute to economic growth and increase federal revenues, helping to  defray some of the anticipated costs associated with increased claims on  Social Security and Medicare. Fourth, several studies show that the longer  persons remain mentally and physically active, the longer they are likely to  live.
Despite all of these gains to be had, there are barriers to continued  employment for older workers. In addition, some employers remain  reluctant to engage and retain this group. While many, including GAO,  have reported on the benefits associated with work later in life, not  enough has been done to address this issue. Many employers are still  unaware of the need to engage older workers to meet their workforce  needs, and few have implemented programs to engage or retain older  workers. Similarly, many workers are not adequately preparing for  retirement.
The number of older workers is potentially large and is a growing part of  the population. They represent a large and underutilized national resource  with the potential to improve the economic well-being of themselves and  the nation. At the same time, we must also consider those who cannot  work longer due to health limitations or disability and make proper  accommodations for them.
Because of your continuing interest in older workers, today I will present  the results of a recent forum on older workers, which I convened on  December 5, 2006, as well as discuss some of our prior work on this topic.  At this forum, we brought together a diverse array of experts, including  some employers from AARP’s “Best Employers for Workers Over 50”  program; representatives from business and union groups, and federal  agencies; along with advocates, researchers, actuaries, and academics, to  address issues related to engaging and retaining older workers.  Specifically, the forum participants discussed (1) obstacles that older  workers encounter when seeking continued work, (2) best practices for  hiring and retaining older workers, and (3) general strategies to promote  opportunities for older workers.  The highlights summarized here do not  necessarily represent the views of any individual participant or the  organizations that these participants represent, including GAO.
This forum is the latest in a series that GAO has held in recent years. The  purpose of these forums is to bring together key stakeholders from diverse  groups to discuss emerging issues with the hope of identifying areas of  agreement. Such gatherings can serve as a catalyst for future actions, both  individually and collectively, on the issue being discussed. For example,  the Fiscal Wake Up Tour, a joint endeavor of GAO, the Concord Coalition,  the Brookings Institution, and the Heritage Foundation, grew out of a  forum on fiscal responsibility held in 2005 and is currently visiting cities  around the nation to promote fiscal awareness. In another example, a  consortium of not-for-profit, private, and public sector efforts, known as  the Key National Indicators Initiative, emerged from a forum on national  indicators that GAO hosted and co-sponsored with the National  Academies in 2003.
subsections: section_title: Background
paragraphs: In the 21st century, older Americans are expected to make up a larger  share of the U.S. population, live longer, and spend more years in  retirement than previous generations. The share of the U.S. population age  65 and older is projected to increase from 12.4 percent in 2000 to 19.6  percent in 2030 and continue to grow through 2050. In part this is due to  increases in life expectancy. The average number of years that men who  reach age 65 are expected to live is projected to increase from just over 13  in 1970 to 17 by 2020. Women have experienced a similar rise—from 17  years in 1970 to a projected 20 years by 2020. While life expectancy has  increased, labor force participation rates of older Americans only began to  increase slightly in recent years.   As a result, individuals are generally  spending more years in retirement. In addition to these factors, fertility  rates at about the replacement level are contributing to the increasing  share of the elderly population and a slowing in the growth of the labor  force. Also contributing to the slowing in the growth of the labor force is  the leveling off of women’s labor force participation rate. While women’s  share of the labor force increased dramatically between 1950 and 2000— from 30 percent to 47 percent—their share of the labor force is projected  to remain at around 48 percent over the next 50 years. By 2025 labor force  growth is expected to be less than a fifth of what it is today.
The aging of the baby boom generation, increased life expectancy, and  fertility rates at about the replacement level are expected to significantly  increase the elderly dependency ratio—the estimated number of people  aged 65 and over in relation to the number of people of aged 15 to 64. In  1950, there was one person age 65 or over for every eight people aged 15  to 64. The ratio increased to one to five in 2000 and is projected to further  increase to one person aged 65 and over for every three people aged 15 to  64 by 2050. As a result, there will be fewer younger workers to support a  growing number of Social Security and Medicare beneficiaries.
The aging of the population also has potential implications for the nation’s  economy. If labor force growth continues to slow as projected, fewer  workers will be available to produce goods and services. Without a major  increase in productivity or higher than projected immigration, low labor  force growth will lead to slower growth in the economy and slower growth  of federal revenues. These circumstances in turn will accentuate the  overall pressure on the federal budget, which will be encumbered with  increased claims for benefits for seniors such as Medicare and Social  Security, while relatively fewer workers are paying into the benefits  systems.
As Americans live longer and spend more years in retirement, several  factors contribute to the growing insecurity of retirement income. With  greater life expectancies, individuals need to finance more years of  retirement; however, many workers claim their Social Security benefits  prior to reaching the full retirement age, which results in lower monthly  payments. Not only do individuals need to make their money last longer;  they also bear greater risk and responsibility for their retirement savings  than in the past. About half of U.S. workers do not have a pension plan  through their employer, and those who do are less likely than in the past to  be covered by defined benefit (DB) plans. The shift from traditional DB  plans to defined contribution (DC) plans places greater responsibility on  workers to make voluntary contributions and make prudent investment  decisions. It also increases the importance of workers preserving such  savings for retirement.  Moreover, rising health care costs have also made  health insurance and anticipated medical expenses increasingly important  issues for older Americans. A long-term decline in the percentage of  employers offering retiree health coverage has leveled off in recent years,  but retirees face an increasing share of costs, eligibility restrictions, and  benefit changes that contribute to an overall erosion in the value and  availability of coverage. Finally, it is clear that Social Security, Medicare,  and Medicaid are unsustainable in their present form.  When the needed  reforms to these programs are made, one result will be that millions of  individuals will have to assume increased responsibility for their economic  security in retirement.  These trends suggest that more and more  Americans will find they have inadequate resources to finance retirement.  For many, continued work past traditional retirement age may be the  solution.
We, along with others, have highlighted the need to engage and retain  older workers to address some of these challenges associated with an  aging workforce. In 2001, we recommended that the Secretary of Labor  form a broad interagency task force to develop regulatory and legislative  proposals addressing the issues raised by the aging of the labor force and  to serve as a clearinghouse of information about employer programs to  extend the work life of older workers. After strong encouragement from  this Committee, this task force, which includes representatives from the  Departments of Labor (Labor), Commerce, and Education, along with the  Social Security Administration, began meeting in 2006 and plans to focus  on three areas: employer response to the aging of the workforce;  individual opportunities for employment in later years; and legal and  regulatory issues regarding work and retirement. The task force intends to  release a report on its findings and strategies in summer 2007. In 2003, we  recommended that Labor review the Workforce Investment Act  performance measure regarding earnings to ensure that this measure does  not provide a disincentive for serving employed workers, some of whom  might be older workers. Labor has partially addressed this issue, but the  potential for existing measures to have unintended consequences remains.  In 2005, we held a series of focus groups with workers and retirees to  better understand the factors that influence the timing of retirement. We  found that health problems and layoffs were common reasons to retire and  that few focus group members saw opportunities to gradually or partially  retire. Workers also cited what they perceived as their own limited skills  and employers’ age discrimination as barriers to continued employment.  As part of this work, we also participated in a roundtable discussion with  employers to learn what they were doing to hire and retain older workers.  While these employers generally agreed that flexibility was the key feature  necessary to recruit and retain older workers, few of them had developed  programs to put this belief into practice.
Building on this body of work, we convened this forum on older workers  to address these issues.
section_title: Obstacles to Engaging and Retaining Older Workers
paragraphs: According to participants at our forum, some of the key obstacles that  hinder continued work at older ages include: first, employer perceptions  about the cost of employing older workers; second, employee perceptions  about the costs and benefits of continued work; and third, changes in  industry and job skill requirements, which may hinder older workers from  remaining employed or finding suitable new employment.
First, many employers cite both compensation—including the rising cost  of health insurance—and training costs as obstacles to hiring and retaining  older workers. In addition, forum participants reported that many  employers have not learned to place a high value on their experienced  workers, instead gearing their succession planning toward replacing older  workers with younger ones. Forum participants also cited negative  stereotypes surrounding older workers that include the belief that such  workers produce lower-quality work than their younger counterparts, and  less work overall. Also, many employers believe that older workers are  resistant to change. Finally, but not least, it was suggested that some  employers are hesitant to hire older workers for fear of age discrimination  lawsuits. While many employers express an interest in recruiting older  workers, our prior work has found that few develop programs to do so.
At the same time that there is some resistance among employers to hiring  older workers, there are also strong incentives for workers to retire.  Participants noted that a “culture of retirement” exists in this country  which encourages workers to claim retirement benefits and stop working  as early as possible. The availability of Social Security at age 62 and high  effective tax rates on earnings between age 62 and Social Security’s full  retirement age may discourage some workers from continuing to work  once they start claiming benefits. Workers who receive Social Security  benefits but have not yet reached the full retirement age will have their  benefits reduced by one dollar for every two or three dollars that they earn  above a set threshold due to the Social Security earnings test. As a result,  workers who have claimed Social Security benefits at 62 may not feel that  it is worthwhile to continue working. Also, the structure of traditional DB  pension plans may encourage retirement because pension laws have  prohibited working for the same employer while receiving benefits. While  the Pension Protection Act of 2006 does contain a provision that allows  plans the option of providing some benefits to participants who remain in  the workforce at age 62 and beyond, it is too soon to determine what the  impact of this policy change will be. In addition to these financial  incentives, jobs that are physically demanding or have inflexible schedules  that compete with family caregiving needs also provide strong  disincentives to continued work.
For some, the incentive to retire lies in the lack of suitable job  opportunities. Some employers are reluctant to offer flexible work  arrangements such as part-time work to existing employees. In addition,  layoffs due to changes in the economy, along with the lack of skills needed  to compete in the global economy, are also challenges facing older  workers. Forum participants reported that employers who downsize may  lay off older workers sooner than younger workers, in part because older  industries tend to have a disproportionate number of older workers in  their labor force. Positions of some low-skill older workers also may have  been automated, eliminated, or outsourced. At the same time, displaced  older workers may lack the necessary training to make a career change.  Our past work has found that when older workers lose a job, they are less  likely than younger workers to find other employment.
section_title: Best Practices and Lessons Learned on Engaging and Retaining Older Workers
paragraphs: We, along with others, have previously reported on the importance of  flexibility in recruiting and retaining older workers. In order to effectively  engage older workers, forum participants suggested implementing new  recruiting approaches, workplace flexibility, the right mix of benefits and  incentives, financial literary education, and consistent performance  management systems. Moreover, participants warned against designing a  “one-size-fits-all” approach, noting the significant differences among  employers and employees.
subsections: section_title: New Approaches Being Used to Engage Older Workers
paragraphs: Employers have found innovative recruiting techniques to identify and  recruit older workers. For example, some employers have established  partnerships with national organizations, such as AARP, to help advertise  themselves as employers of older workers. Other employers rehire their  own retirees for specific needs, both short-term and long-term. For  example, one employer actively retrains its employees for other distinct  roles in the organization.
section_title: Flexible Schedules and Workplaces Needed to Attract and Retain Older Workers
paragraphs: Labor force decisions of older workers are also influenced by the  availability of flexible work arrangements. Full and complete withdrawals  from the workforce are no longer as common as they once were, but  rather workers are more likely to seek out phased retirement or bridge  employment options. Employers who are creative in how they design jobs,  and who allow for flexible work locations away from the traditional office,  have an advantage in engaging older workers. One employer mentioned  three reasons older workers retire: (1) elder care responsibilities, (2)  physical constraints, and (3) a desire to pursue other interests. To address  these concerns, this employer provides workers 10 days off each year for  elder care, and flexible work schedules. Two employers have a “snow  bird” program, which allows employees who live in different places during  the year to work in both locations. Other employers have adapted job  designs to accommodate the physical constraints of older workers. One  participant mentioned a hospital that installed hydraulic systems in all of  its beds so the beds could fold into a sitting posture, a change that assisted  older staff in moving patients. In the second example, an employer  modified an assembly line so that cars on the line could be rotated to grant  easier access for mechanics who were unable to lie down to work on cars.
section_title: Benefit Packages Help to Attract and Retain Older Workers
paragraphs: Benefit packages that complement some of these new work arrangements  are also important in attracting and retaining older workers. Some forum  participants’ organizations offer benefits to both full- and part-time  workers. One employer offers medical benefits and tuition reimbursement  for employees working at least 15 hours per week, while another offers  employee discounts.
Modifying pension plans can also entice workers to work longer. One  participant’s organization offers its employees the opportunity to retire  and return to work after 1 month while still collecting pension benefits.
Another employer is considering matching a greater percentage of older  workers’ DC plan contributions, thereby appealing to older workers who  may not have been with the company for a very long time. However, not  every employer can offer such a portfolio of benefits for older workers  who work part-time, due to the costs.
section_title: Improving Employee Financial Literacy and Helping Employees Better Prepare for Retirement
paragraphs: With older Americans living longer and spending more time in retirement,  workers will have to ensure they have a realistic plan to provide for  retirement security that may include working longer. Increasing financial  literacy can help workers better prepare for retirement by giving them the  tools to assess whether or not they have sufficient funds to retire at a  particular age. With DC pension plans becoming more common, the  burden of financial management on employees is growing, thereby  increasing the importance of financial literacy. To address this issue, one  forum participant’s employer offers a retirement-planning program for  employees over 50 years old that includes individual counseling services.  Another participant mentioned automatic enrollment in retirement savings  plans as an effective way to help employees save for retirement, while also  noting that employees need ongoing education to ensure their portfolios  remain balanced. Such education should not be limited to only pension  plans, as participants highlighted the need to plan for future health care  costs as well.
To limit exposure to age discrimination litigation, one participant said a  consistent performance management system is essential for dealing with  all workers.  Besides saying that all employees should be treated in a fair  and consistent manner, participants agreed it is also important to show  older workers that they are valued.
Finally, when discussing best practices, forum participants cautioned  against designing solutions with a “one-size-fits-all” approach due to the  variety of employers’ needs and workers’ knowledge, skills, and goals.
section_title: Suggested Strategies for Policymakers and Employers
paragraphs: Given the scope and importance of this issue, participants offered a  number of strategies to encourage older workers to remain in the labor  force and to encourage employers to engage and retain older workers.  They generally agreed that a change was needed in the national mind-set  about work at older ages and that a national campaign to promote this  concept was needed. Such a campaign could highlight the different types  of work older people are engaged in, the positive attributes of older  workers, and the benefits to employers of engaging and retaining older  workers. To change the “culture of retirement” that currently exists, one  participant suggested the need for a national discussion to reconsider  what “old” is, and how we should think about retirement, or if there should  even be a retirement age.
Participants also agreed that employers need information about the best  practices for engaging and retaining older workers. One strategy discussed  was the establishment of a national clearinghouse of best practices, such  as the different kinds of work structures, recruiting techniques, and  workplace flexibilities used by some employers to attract and retain older  workers.
Participants agreed that strategies that increase financial literacy may help  workers better plan for their futures and learn more about the benefits of  working longer. Although this is a long-term endeavor, participants  suggested that both public and private efforts may be needed to promote  financial literacy, including incorporating financial literacy into the grade  school curriculum, promoting the discussion of retirement planning much  earlier in workers’ careers, and using faith-based organizations as a  conduit for financial planning.
Finally, participants discussed a number of ways that the federal  government could be a leader in encouraging older workers to remain in  the workforce. First, as an employer of millions facing the impending  retirement of many of its workers, the federal government should “lead by  example” and be a role model in how it engages and retains older workers.  Second, it can help to foster the kinds of public/private partnerships that  would promote the national campaign, begin a national discussion, or  contribute to the national clearinghouse discussed above. In addition, the  public sector, in cooperation with the private sector, can help displaced  older workers who need new skills to remain in the workforce. And third,  through specific legislation or regulations that would increase flexibility  for employers and employees, the federal government can help create new  models of employment for older Americans. For example, some  participants discussed the need for safe harbors in the tax code and the  Employee Retirement Income Security Act that would make it easier for  people to return to work after retirement and still collect their pensions.  The related provision in the Pension Protection Act, which affords some  flexibility in this area, represents a step in the right direction. Another  participant suggested that age discrimination laws may have had some  unintended consequences, and that these laws should be reevaluated or  amended to provide safe harbors that would encourage employers to hire  older workers.
section_title: Conclusions
paragraphs: Engaging and retaining older workers is critical for promoting economic  growth, improving federal finances, and shoring up retirees’ income  security. Given the right mix of incentives, programs, and job designs, we  have an opportunity today to support those who wish to work later in life,  thereby reinventing the traditional concept of retirement, helping to  bolster individuals’ retirement security, and fostering economic growth.  With the oldest members of the baby boom generation eligible to begin  collecting early Social Security benefits next year, time is running out to  seize this opportunity. We convened this forum because of the importance  of engaging and retaining older workers, and we congratulate this  Committee for its sustained leadership on this issue.
Given existing trends in the aging of baby boomers, pressures on federal  entitlement programs, and threats to individuals’ retirement security, it is  in the nation’s interest for people to work longer. Harnessing the benefits  of this growing group of potential older workers requires that barriers to  continued work be removed sooner rather than later. At the same time, it  is important to acknowledge that not everyone can work at older ages, and  proper accommodations are needed for such persons as well.
Despite evidence indicating the future importance of older Americans to  the workforce, barriers and perceptions continue to get in the way of  making progress. Forum participants generally agreed that employers do  not place a high enough value on experienced workers, and that suitable  job opportunities are lacking for older workers. These findings echo many  of those that we heard in our 2005 focus groups and reiterate findings from  our 2001 report. While some progress is being made, in the absence of  additional change, we risk a missed opportunity to engage those workers  who wish to remain in the workforce longer.
At our forum, there was a good deal of enthusiasm among participants to  confront this issue, and I hope that by sharing some best practices and  suggested strategies today progress will continue with renewed insight  and energy. At the same time, given the national scope of the challenge,  addressing it will require not only workers and employers. Clearly, there is  also a role for government to play, whether it be through becoming a  model employer of older federal employees or helping to foster flexible  work arrangements in the private sector to meet the needs of older  workers, or by considering legislative and regulatory changes, including  those that Labor’s interagency task force may propose. Finally,  consideration of the current mix of federal policies—including Social  Security, Medicare, and pension laws—may be warranted to ensure that  their incentives are appropriate given future demographic changes and the  benefits that can be gained from work at later years for both individuals  and the nation.
Mr. Chairman, this concludes my remarks. I would be happy to answer any  questions you or the other members of the Committee may have. I am  pleased by your continued interest in this area and look forward to  working with you on this issue in the future.
section_title: Contact and Staff Acknowledgments
paragraphs: For questions regarding this testimony, please call Barbara Bovbjerg,  Director at 202-512-7215. Other individuals making key contributions to  this statement included Mindy Bowman, Alicia Puente Cackley, Jennifer  Cook, Scott Heacock, and Kevin Kumanga.
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