Employers Have An Opportunity to Press Demographic Trend: Hiring Older Workers

Plan sponsors have the opportunity to gain an advantage over their competitors by supporting flexible workplace hours and benefits for part-time workers, hiring larger numbers of older individuals from the growing pool of workers 65 and older.

Data from a Pew Charitable Trusts report shows that, currently 62% of workers 65 and older are working full-time, compared to 47% in 1987.

Employers can bolster workplace flexibility to mitigate older workers’ longevity risks of running out of money in retirement or living longer than workers have financially planned for, says Joe Coughlin, founder and director of the MIT AgeLab, a multidisciplinary research program that studies the behavior of individuals who are 50-years of age and older.

“Some of the implications for employers—and some are starting to get it now, is that older workers are not a cost—they are a resource, they are educated, they want to work,” Coughlin says. “Rather than looking at older workers, as a cost or something to move off books, [plan sponsors] may want to start thinking about ‘how do we re-slot them into different positions that may pay less but how do we train them to be continually productive?’”

Plan sponsors must prepare for these older workers who will keep working after retirement age, says Coughlin, whose work relates demographic trends to business strategy around aging. Numbering near 11 million, the older workforce has nearly quadrupled in size since the mid-1980s, according to the Pew research.  

Plan sponsors “probably need to start demanding from their product manufacturers new content [for] thinking about longevity [planning] not simply retirement planning, not simply financial security,” Coughlin adds.  

Older workers rely on the support of employers and government programs to retire, according to a 2023 panel of speakers, at the Economic Policy Institute. A 2021 study from the Boston Center for Retirement Research found that 26% of retired individuals were able to cover server care needs for at least five years using income and their financial assets.

The “classic” longevity risk is individuals will run out of money in retirement; and the second, that retired workers are likely to live longer than in the past. For plan sponsors, addressing both risks are key to successfully taking advantage of the workplace demographic trend, adds Coughlin. 

Mitigating “classic” longevity risk by “looking at the challenge of making sure that our wealth span keeps up with our lifespan,” is but one of the risks plan sponsors should help employees with Coughlin explains.

Employers that want to recruit and retain older workers, many of whom may want to work less than full-time or may be willing to accept lower compensation, may need to consider offering more benefits to part-time employees, providing flexible work hours and appealing to older workers by trading off slightly lower compensation for enhanced benefits, Coughlin says.

“For instance, the older worker might be looking less for cash income and maybe more for benefits,” he says. “[Plan sponsors may] make a trade off saying, ‘hey, we got you covered for dental or we got you covered for additional medical but that’s going to be a little less cash in your pocket’ and [older workers] may be good with that because they’ve just retired [from full-time employment], perhaps with a full 401(k) or pension plan.”

Coughlin expects that employers will bolster benefits to take advantage of this workplace demographics trend.

For plan sponsors to increase their efforts to hire older workers, “the great hope might be found in the SECURE [2.0] Act [of 2022], which is now requiring employers that if [part-time employees] have 500 hours per year for [two] consecutive years to offer them benefits,” he adds.

This legislative provision does not take effect until end of 2024.

Although self-employed workers and independent contractors were left out of the retirement legislation, the SECURE 2.0 Act prepared crucial groundwork to facilitate employers to employ greater numbers of older workers, Coughlin says, as retired workers are more likely to work part-time than their nonretired counterparts, according to Pew Research Center data. 

The December 2023 Pew Research Center report, “Older Workers Are Growing in Number and Earning Higher Wages,” was published by Pew Charitable Trusts. Data were sourced from the Federal Reserve 2022 Survey of Household Economics and Decision-making.