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The (Real) Effects of the Baby Boomers Retirement Boom

By Megan Santosus

November 15, 2003 — CIO — Trying to read the economy’s tea leaves has been an extended exercise in frustration. On any given day, leading economic indicators?be they manufacturing orders, new housing starts or retail sales?may signal an upswing only to be confounded the very next day by sluggish corporate profits and a rise in the number of layoffs. It’s enough to give the army of displaced IT workers apoplexy.

While all that the short term offers is conflicting signs, conventional wisdom holds that in the long run there’s a built-in solution to chronic unemployment: During the next five to 10 years, millions of baby boomers will be retiring, essentially heading for the exits en masse. This exodus will create a demographically driven worker shortage that will put the power back into the hands of the job seekers. That means that today’s workers will eventually be able to say good-bye to static or shrinking paychecks, and that today’s unemployed can look for an end to all that pavement pounding.

For job seekers, it will be back to a future of multiple job offers at 25 percent more than their previous salary.

For corporate managers, it will be a nightmare.

Preparing for the Hiring Frenzy?Not

The folks advancing this argument say that hiring managers better get hip to the shortage scenario. In fact, they say, those who aren’t currently planning for the coming hiring frenzy may be putting their enterprises permanently behind the proverbial eight ball.

Others think this is all a load of hooey.

Peter Cappelli, a management professor and the director of the Center for Human Resources at The Wharton School, conducted research that questioned these assumptions about the potential economic impact of an aging employee population. Cappelli found that any projected labor shortage caused by retiring boomers is, in fact, a complete fiction. True, the generation following the boomers?the so-called baby busters?is about 16 percent smaller than its predecessor, but with an average age of 30, the busters, who already have been in the workforce for a number of years, won’t be retiring anytime soon and are both willing and, more important, able to fill any voids left by the departing boomers. Add to that the fact that the generation after the busters is composed of the boomers’ offspring and is therefore relatively large, and that many members of that generation are currently in college and will be looking for work in a few years. Putting all that together, Cappelli concludes that the future pool of skilled employees?the kind most in demand by employers?promises to be more than adequate for businesses’ needs.

 

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