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Emma Shulman is a dynamo. The veteran social worker works up to 50 hours a week recruiting people for treatment at an Alzheimer's clinic at New York University School of Medicine. Her boss, psychiatrist Steven H. Ferris, dreads the day she decides to retire: "We'd definitely have to hire two or three people to replace her," he says. Complains Shulman: "One of my problems is excess energy, which drives me nuts."
Oh, one more thing about Emma Shulman. She's nearly 93 years old.
Shulman is more than one amazing woman. She just might be a harbinger of things to come as the leading edge of the 78 million-strong Baby Boom generation approaches its golden years. Of course, nobody's predicting that boomers will routinely work into their 90s. But Shulman -- and better-known oldsters like investor Kirk Kerkorian, 87, and Federal Reserve Chairman Alan Greenspan, 79 -- are proof that productive, paying work does not have to end at 55, 60, or even 65.
Old. Smart. Productive. Rather than being an economic deadweight, the next generation of older Americans is likely to make a much bigger contribution to the economy than many of today's forecasts predict. Sure, most people slow down as they get older. But new research suggests that
boomers will have the ability -- and the desire -- to work productively and innovatively well beyond today's normal retirement age. If society can tap their talents, employers will benefit, living standards will be higher, and the financing problems of Social Security and Medicare will be easier to solve. The logic is so powerful that it is likely to sweep aside many of the legal barriers and corporate practices that today keep older workers from achieving their full productive potential.
INTERNET MEMORY TOOLS
In coming years, more Americans reaching their 60s and 70s are going to want to work, at least part-time. Researchers are finding that far from wearing people down, work can actually help keep them mentally and physically fit. Many highly educated and well-paid workers -- lawyers, physicians, architects -- already work to advanced ages because their skills are valued. Boomers, with more education than any generation in history, are likely to follow that pattern. And today's rapid obsolescence of knowledge can actually play to older workers' advantage: It used to be considered wasteful to train people near retirement. But if training has to be refreshed every year, then companies might as well retrain old employees as young ones.
Equally important, high-level work is getting easier for the old. Thanks to medical advances, people are staying healthy, enabling them to work longer than before. Fewer jobs require physically demanding tasks such as heavy lift- ing. And technology -- from memory-enhancing drugs to Internet search engines that serve as auxiliary memories -- will help senior workers compensate for the effects of aging. "Assuming that the improved health trends continue, boomers should be able to work productively into their late 70s" if they choose to, says Elizabeth Zelinski, dean of the Leonard Davis School of Gerontology at the University of Southern California.
But realizing that potential requires that government and business discard the outdated rules, practices, and prejudices that prematurely retire people who would prefer to keep working. In many corporations, there's an unspoken assumption that older workers are much less capable than their younger counterparts. So in addition to ensuring older workers get their fair share of training, CEOs may also need to directly confront unintended age discrimination.
Society will also have to grapple with the tricky question of how to change the Social Security system to suit an aging but healthier population. A balanced approach might be to increase the Social Security retirement age at a more rapid clip while beefing up the Social Security disability program -- which now covers 8 million disabled workers and dependents.
This optimistic vision of aging in America stands in sharp contrast to the conventional wisdom, which looks ahead with dread to the 60th birthday parties of the first boomers in 2006. Pessimistic pundits expect that boomers will retire in droves soon after hitting 60, as their predecessors did, while those who do keep working will dial back to less challenging and less productive jobs. The fear is that boomers will finally heed Timothy Leary's call, dropping out (of the workforce) and turning on (the TV). "This explosion in the number of elderly Americans will place an unprecedented economic burden on working-age adults," investment banker Peter G. Peterson wrote last year in his latest book, Running on Empty.
But the burden won't be nearly so heavy if people's productive careers stretch out in synch with their extended lifetimes. How much could the economy benefit from people working longer and better?
An analysis by BusinessWeek finds that increased productivity of older Americans and higher labor-force participation could add 9% to gross domestic product by 2045, on top of what it otherwise would have been. (This assumes, for example, that over the next 40 years better health and technology reduce the productivity gap between older workers and their younger counterparts.) This 9% increase in gross domestic product would add more than $3 trillion a year, in today's dollars, to economic output.
The added growth would be a pure win for government finances, since a bigger economy with more productive workers yields higher tax revenues. And there's little doubt that encouraging people to work longer in step with longer life spans would do much to guarantee the solvency of Social Security.
The idea that citizens of a wealthy nation such as the U.S. would choose to work extra years is still a little new. For most of the 20th century, retirement ages fell as life spans grew. The trend seemed unstoppable: While in 1950, 46% of men 65 and older were in the labor force, by 1985 the fraction had plummeted to 16%. An influx of women into the labor force only partially offset the overall decline.
But starting in the mid-1980s, something highly unexpected began to happen: The trend reversed, and more older Americans chose to keep working. The upsurge accelerated even in the weak labor markets of recent years. The share of men 65 and over in the labor force is back up to almost 20% -- the highest since the 1970s.
In part, of course, the latest uptick in working ages can be blamed on the stock market's drop from its 2000 peak, which dented retirement savings. Also, fewer workers have good defined-benefit pension plans, which would allow them to retire young. But financial need can't be the whole reason older Americans are working more. Federal Reserve surveys show that older families have been getting richer, not poorer. The average net worth of families headed by 55- to 64-year-olds soared by 74% from 1992 to 2001, after adjusting for inflation, and likely has gone up since then.
At least as important is that many institutional barriers to working longer have been removed. In 1986, in the name of equal rights, Congress banned mandatory retirement for all but a handful of workers, such as airline pilots. And 401(k) plans, which are gradually replacing defined-benefit plans, don't induce people to retire at a certain age.
YOUNG AS YOU FEEL
Better yet, work doesn't feel like a burden to today's fit, older Americans. Many people over 60 don't think of themselves as old. A good example is Theodora Emiko "Teddy" Yoshikami, 61, who organizes cultural programs at New York's American Museum of Natural History. In her spare time, she whacks big drums in a Japanese percussion group. "People are always surprised to hear how old I am," says the former dancer.
The Baby Boom generation is even fitter for its age and more determined to stay active. Two-thirds of the people surveyed last year by the Employee Benefit Research Institute, a company-backed organization, said they expect to work for pay in retirement. A survey of boomers by AARP in January found that two in five workers age 50 to 65 were interested in a gradual, "phased" retirement instead of an abrupt cessation of work -- and nearly 80% of those said that availability of phased retirement programs at work would encourage them to keep working longer. While it's likely that many boomers won't stick to those brave resolutions, the trend in work is clearly up.
Good health will help. The share of 65- to 69-year-olds with a disability affecting their ability to work fell from nearly 28% in 1995 to less than 22% last year. Advances in medicine are curing many of the problems that once forced older workers into retirement. For example, Genentech Inc. (DNA) announced on May 23 that a drug undergoing trials for treatment of macular generation improves eyesight in the elderly. And better health is coinciding with less strenuous work, thanks to automation and the shrinkage of manufacturing. The share of workers 55 to 60 who said their jobs did not require lots of physical effort rose from 32% in 1992 to 38% in 2002, according to an Urban Institute study.
TRIAL AND ERROR
Mental health appears to be improving as well. USC's Zelinski has discovered that heart disease, hypertension, and diabetes directly impair brain functioning -- and she sees evidence that modern medicine is getting a better handle on those diseases. As a result, memory and other functions are improving among the elderly. Emma Shulman's boss at NYU Medical Center, Steven Ferris, expects further gains for older workers from the spreading use of memory-enhancing drugs and technological aids such as personal digital assistants and search engines. Says Ferris: "I remember my father with little scraps of paper to remember things. People don't have to do that anymore."
Older workers who thrive tend to have skills that are prized in the workplace, even if they can't easily be measured by standard tests. What matters most, according to psychologist Regina Colonia-Willner, president of consultancy Practical Intelligence at Work Inc. in Boca Raton, Fla., is the ability to solve ill-defined business problems using rules of thumb that can't be put down on paper. Example: how to deal with a difficult boss. In a study of 200 banking executives, she found that the ones who exhibited the highest "practical intelligence" were as likely to be old as young -- and the older among them excelled even though their scores on traditional intelligence tests were no better than average for their age. "Practical intelligence stays with you," says Colonia-Willner. "You don't lose it when you get older."
The rap that older workers are inflexible and uncreative is also overstated. Research by economists David W. Galenson of the University of Chicago and Bruce A. Weinberg of Ohio State University finds that the innovations of older people are more likely to be "experimental," vs. the break-the-mold "conceptual" innovations of younger types. The conceptual types tend to have a bolt from the blue, whereas the experimenters build new ideas from a lifetime of observation, trial, and error. Among the "experimental" innovators who produced some of their best work later in life: painters Henri Matisse and Paul Cézanne, author Fyodor Dostoevsky, and architect Frank Lloyd Wright.
Some enlightened companies are catching on to all of this. They're hiring or retaining older workers with flexible work schedules and ample training. United Technologies Corp. (UTX) spends more than $60 million a year on its Employee Scholar Program, which pays the costs of workers of any age who study in their spare time. At UTC's Hamilton Sundstrand facility in Miramar, Fla., 61-year-old lead mechanic Ed Perez is working on a bachelor's degree in legal studies. He finished an associate's degree in aviation-maintenance management two years ago and hopes to go to law school. "If I don't run out of time and UTC doesn't run out of money, I'll keep going," he says.
UTC Chairman and Chief Executive George David, at 63 a candidate himself for discounted movie tickets, argues that an educated worker like Perez is a better worker, regardless of age or area of study. What's more, the free education incentive tends to appeal to UTC's most skilled and motivated employees, so it's a way for the company to retain the people it most wants. Retention rates among "employee scholars" are about 20% higher than for regular U.S. workers.
HOLDING ON TO EXPERIENCE
Consolidated Edison Inc., a New York power company with an aging workforce, is trying to hang on to its valuable older workers with benefits like an elder-care referral service and career-long training. It wants to retain the experience of workers like Frederick R. Simms, 67, an emergency field manager who has seen just about everything in his 49 years with the company, from water main breaks to the collapse of the World Trade Center. In a job where trust and rapport are vital, Simms is on a first-name basis with Fire Dept. officials and other emergency workers all over Manhattan. Con Ed recently sent him for a two-day "working people-smart" class. "I don't have the zip I used to have, but I'm good enough to work 16 hours if I had to today," says Simms, adding: "I know the company likes having me around."
It's common these days to find older workers on the sales floor of retailers like Home Depot Inc. (HD) and CVS Corp., (CVS) but what's new is the growing presence of older workers in high-pay, high-productivity careers. MITRE Corp., a research and development outfit in Bedford, Mass., is worried about losing its expertise in fields such as radar, which is something of a lost art for young engineers. So it brings back retirees on what it calls a "part-time, on-call" basis. The Energy Dept.'s National Energy Technology Laboratory in Morgantown, W. Va., also recognizes the value of older workers with technical expertise. It has clung to chemical engineer Hugh D. Guthrie, 86, as a full-time technical adviser in part because he has ideas that younger engineers might never think of. Says Guthrie: "My experience gives me a perspective on questions, which may not always be right but nearly always will be different. The greatest service I provide is in stimulating the thinking of people involved in a project."
Unfortunately, many other companies haven't gotten the message. The Society for Human Resource Management, an association of personnel execs, says 59% of members surveyed don't actively recruit older workers and 65% don't do anything specific to retain older workers. The Bureau of Labor Statistics found in 1995, the last time it looked, that workers age 55 and up got only one-third as many hours of formal training as workers 45 to 54. Marian Stoltz-Loike, CEO of SeniorThinking LLC, a consultancy, says executives often aren't even aware that older workers are getting a subtle message that training isn't for them.
Economists have found that businesses are missing an opportunity by giving less training to their older workers. Research shows that they tend to operate information technology more slowly but with fewer errors. Research on displaced workers who got retraining in community colleges in Washington State found that the pay gains were just as big for older workers who took training as for younger ones -- indicating that the training they got took hold.
Will longer-working boomers block the advancement of younger workers? Maybe. But what worries employers more is the opposite -- labor shortages that could emerge if boomers retire en masse and there aren't enough people to take their place. The Congressional Budget Office is forecasting that labor-force growth will slow by almost half over the next 10 years.
The U.S. takes better advantage of the potential of its older citizens than does most of Europe, where extremely early retirement is routine because of rich retirement benefits. Six in 10 Americans are still working at ages 55 to 64, vs. just four in 10 in the European Union.
Smart policy choices, such as the abolition of most mandatory retirement rules, have helped put the U.S. in a position to tap the ability and energy of older people. Since 2000, Social Security recipients have been allowed to receive their full benefits no matter how much they earn from working after age 65. The Internal Revenue Service has proposed rules, starting next year, to allow people 59 1/2 and older to receive part of their pensions even while they are still working. Because people would not have to retire outright to get a pension, more are likely to remain on the job, experts predict. The proposed rules are a step in the right direction, although employer groups are complaining that there's too much red tape involved.
What more can be done to tap the productivity potential of older workers? The goal is to introduce more flexibility into pay and retirement systems, to create more options as workers age. Consultant Ken Dychtwald, author of Age Wave, recommends the example of Deloitte Consulting LLC, which lures highly valued older employees to stay by designating them "senior leaders" and giving them incentives such as flexible hours and work location, special projects, and opportunities for mentoring and research.
Another possibility is to allow companies to convert traditional defined-benefit pensions, which encourage retirement as early as age 55, to cash-balance plans, which have no built-in incentives to retire. Such conversions have been frozen since 1999 over legitimate age-discrimination concerns, though the Bush Administration has proposed legislation that would break the logjam. It's prudent to make sure that switching to cash-balance plans doesn't harm older workers, but such caution is also preserving a system that lures people into retiring when they still have much to contribute in the working world.
Perhaps the most controversial idea is to break the typical link between pay and seniority. As more people work into their late 60s and 70s, pay should be adjusted to match how much people work and what they accomplish on the job.
It's also critical to rethink the role of Social Security in an economy where incomes -- and life spans -- are rising. In theory, Social Security should provide a secure safety net for those who are truly too old to work and lack savings, while encouraging the huge boomer generation to stay employed and productive for the good of themselves and the economy.
The logical conclusion: raise Social Security's normal retirement age incrementally to 70. From then on, peg further increases to gains in longevity. It's also essential to increase the age, now 62, at which people can first choose to take early retirement. Research suggests that many take the official early retirement age as a signal that it's O.K. to drop out of the workforce, even though they will get much smaller checks for the rest of their lifetimes. Raising the early retirement age would signal that 62 is too young for most people to quit in an era of marathon-running septuagenarians.
Increasing Social Security's early retirement age would be hard on workers with health problems, or whose jobs require more physical exertion. A possible solution is to liberalize the qualifications for Social Security's disability insurance program. The extra expense of disability payments to aging laborers would be far outweighed by the savings from raising the normal and early retirement ages in tandem.
There's no dispute that America is graying. But the solution to the demographic shift is staring us in the face. As Urban Institute senior fellow C. Eugene Steuerle told the House Ways & Means Committee in May: "People in their late 50s, 60s, and 70s have now become the largest underutilized pool of human resources in the economy." By working longer -- and more productively -- boomers will help the U.S. economy thrive even as their personal odometers keep clicking forward.
By Peter Coy, with Diane Brady in New York