The aging population is one
of the most powerful forces now affecting employers in Asia-Pacific. The number
of employees eligible for retirement is rising each year, and fewer young workers
are entering the market in the more developed countries.
In 2004, more than 9 percent of Asia-Pacific’s population
was 60 or older. By 2050, that figure will reach 23.5 percent. The business
implications of this demographic shift are now a priority in many companies
and government-linked enterprises. Preserving the knowledge and experience of
the senior workforce while creating and implementing talent management programs
for the next generation of workers has become the focus of many HR executives.
As a result, adapting clients’ HR programs to the new reality is becoming
an integral part of Watson Wyatt’s work in Asia.
* Japan – In perhaps the most dramatic example of the
demographic shift, Japan’s birth rate is 1.29 and falling, while its own
baby boomers will reach the retirement age of 60 in 2007. If organizations fail
to transfer employee skills to the new generation, their global competitive
ability will be compromised. With longer life expectancy in Japan, employers
are extending employment to 65 and possibly even 70. In addition, the number
of women in the workforce has risen sharply in recent years and continues as
a trend.
* Korea – The government recognizes the seriousness of the aging issue
and has implemented a new pension law and new programs supporting birth benefits.
On the corporate side, organizations also are taking action: They are preparing
for new retirement systems that encompass the new pension law. They are working
to change the HRM system to one based on job value rather than seniority. (Under
the current system, older workers receive automatic compensation increases,
making them too expensive to keep on the job.) Finally, companies are turning
to Work-Life Balance (WLB) benefit programs, which help women stay in the workforce.
Watson Wyatt is working with Korean enterprises to creatively integrate these
policies into their legacy systems.
* Australia – Since the government introduced the AU$3,000 baby bonus,
the birth rate has increased from 1.73 to 1.77 and may even exceed 1.8 as the
bonus increases to AU$4,000 this year. However, this is still well below the
generally accepted replacement rate of 2.1. Although mandatory occupational
superannuation — and tightening of the social security means test —
will help the government control costs, health care costs could soon escalate.
Australia now spends 9.3 percent of GDP on health care, which could dramatically
increase during the next 30 years, when the retirement-age population is expected
to double to more than 24 percent of the population. In the same period, growth
in the working-age population (15–64) is set to slow from 1.3 percent
annually to 0.6 percent. As the labor supply contracts and older workers retire,
this will slow productivity growth. Participation rates have increased in recent
years, but mainly through the increased number of women in the workforce, which
is now reaching its limit.
All governments and employers facing this issue should review
migration and guest worker schemes as a labor supply solution and consider more
flexible working arrangements, including working from home. They must also focus
on “transition to retirement” programs and on educating and retraining
older employees.
Pensions play a critical role in the effort to retain these
workers. To help manage the financial impact of our clients’ retirement
plans, Watson Wyatt’s Pension Risk Management solution quantifies the
risk that pension schemes face now, and helps each client determine the right
amount of risk to take going forward. Our Phased Retirement research provides
insights and strategies to help companies adapt and align their programs with
worker preferences. We are helping companies in the region to develop re-recruit
policies for the highly skilled workforce reaching retirement age. And we are
working with clients to revamp their HR systems to cope with dramatic changes
in retirement policy.
Retaining the senior workforce is important in the short run,
but companies must position their workforce for the future. Watson Wyatt is
helping clients implement HR programs to find top talent, through competency
frameworks and talent assessments, and avoid costly mistakes. By analyzing compensation
and benefits packages, Watson Wyatt can determine the most cost-effective way
to hire the right people in such a competitive arena. As the leader in actuarial
and benefits consulting and strategic human capital solutions, Watson Wyatt
is uniquely positioned to guide employers in Asia-Pacific and beyond.