Capitalising on the twin trends of ageing and automation

About the Author

Puneet Swani is the Career Business leader for the International Region at Mercer.

Workforces around the world have experienced a number of serious challenges in recent years—from rapid globalisation, to significant business cycle troughs, to fights for gender equality.

Two trends, however, are today unprecedented in their scope: widespread societal aging, and the automation of work by intelligent technologies.

The confluence of these two trends raises one crucial question: What effect will increased workplace automation have on older worker populations?

In an environment where the demand for particular kinds of labour is diminishing, older workers skilled in the work of yesterday might be at risk of being excluded from the economies of tomorrow.

Countries with higher rates of projected aging tend to also have larger proportions of older workers at risk of automation.

The risks are particularly pronounced across Asia, as well as in parts of Europe such as Germany and Italy.

Older workers tend to face unique difficulties in the labour market—such as high long-term unemployment and age discrimination—and so are prone to particularly harsh fallouts from displacement by new technologies.

Concerted efforts on the part of governments and companies to devise strategies for encouraging and accommodating the older worker will be crucial in the coming decades.

As aging quickens around the developed world, shrinking supplies of young labour will push firms to seek alternative sources of productivity.

Older people are indeed becoming more willing and able to engage in meaningful work, and companies would do well to incorporate an older worker angle into their workforce of the future strategies.

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What to know about older workers

There are four key themes to explain the variations in older worker occupations:

Education

A nation with higher education expenditure as a percentage of gross national income may face lower risks of automation amongst older workers.

Similarly, a nation with more highly educated older people is, unsurprisingly, likely to have lower level of automation risk.

Education and re-education are evidently important tools in ensuring older workers stay job-relevant and skilled.

Firms in particular will benefit from re-investing the productivity gains made from automation into ensuring an upskilled workforce.

Industrial structures

 In countries with large manufacturing sectors, older workers tend to be in low-skill work, as these countries are likely to be engaged in relatively basic work overall.

These results tell us that as economies grow, it is easy for older workers to find their skills becoming obsolete.

Manufacturing-heavy economies in particular will need to be mindful of these dynamics as new technologies force labour forces to evolve.

Public spending and welfare

In countries with more government consumption spending and higher pension replacement rates, older workers tend to be doing higher-skilled work.

While this may have been because richer countries tend to have better public spending systems on welfare and pensions, this relationship holds even after removing the effect of GDP per capita.

This shows that public sector spending and pensions clearly have a part to play in the skill composition of older workers.

Legal rights in financial systems

In countries with better legal protections for borrowers and lenders, older workers are less likely to be at risk of automation and more likely to be in higher-skilled work on average.

This could be because older workers are more likely to be able to start their own businesses. In countries with better access to new company financing, older workers are more likely to start small businesses in their old age, and therefore maintain ‘manager’ or ‘professional’ status as an older worker in a high-skill, less automatable profession.

In the digital age, what in the past was considered “premium” will now be considered “standard”: a phenomenon that will necessarily push human workers out from lower-value work into more value-added services.

According to the World Economic Forum, a widening skills gap is one of the biggest challenges in the fourth industrial revolution, and a robust assessment platform is fundamental to the development of a skills-focused talent strategy.

Companies have much to benefit from investing the productivity gains from automation into their human workers—particularly older ones, who are more and more willing and able to remain in or re-enter workplaces around the world.

Investing in older workers through retraining programmes would help older workers reskill and be redeployed in the workplace, and provide firms with a fresh source of vitality in a world of shrinking young labour forces.

Contrary to conventional opinion, older workers can actually be a reliable treasure throve of experience, adaptability, and productivity given the right environment and opportunities.

Researchers have found, for example, that older workers tend to outperform younger workers in semantic memory and language and speech skills. Older workers also provide crucial abilities for firm building, knowledge consolidation and continuity in times of flux.

With more and more older persons re-entering and remaining in the workforce around the world, businesses would do well to devise strategies for harnessing the many benefits they have to offer.